SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended January 28, 2000
Commission file number 0-7536
CBRL GROUP, INC.
A Tennessee Corporation I.R.S. EIN: 62-1749513
Hartmann Drive, P. O. Box 787
Lebanon, Tennessee 37088-0787
615-444-5533
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
58,369,162 Shares of Common Stock
Outstanding as of February 25, 2000
<PAGE>
PART I
Item 1. Financial Statements
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
January 28, July 30,
2000 1999*
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,517 $ 18,262
Property held for sale 1,575 --
Receivables 7,585 8,935
Inventories 91,760 100,455
Prepaid expenses 10,950 8,041
Deferred income taxes 2,457 2,457
---------- ----------
Total current assets 118,844 138,150
Property and equipment - net 1,055,985 1,020,055
Goodwill - net 109,250 111,246
Other assets 7,920 8,330
---------- ----------
Total assets $1,291,999 $1,277,781
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,450 $ 67,286
Accrued expenses 82,954 73,967
Current portion of long-term debt and other long-term
obligations 2,700 2,700
---------- ----------
Total current liabilities 120,104 143,953
---------- ----------
Long-term debt 329,500 312,000
---------- ----------
Other long-term obligations 31,123 30,821
---------- ----------
Shareholders' equity:
Preferred stock - 100,000,000 shares of $.01 par
value authorized, no shares issued -- --
Common stock - 400,000,000 shares of $.01 par
value authorized, at January 28, 2000,
62,601,662 shares issued and 58,634,162
shares outstanding and at July 30, 1999,
62,595,662 shares issued and 58,628,162
shares outstanding 626 626
Additional paid-in capital 283,764 283,724
Retained earnings 610,353 590,128
---------- ----------
894,743 874,478
Less treasury stock, at cost, 3,967,500 shares (83,471) (83,471)
---------- ----------
Total shareholders' equity 811,272 791,007
---------- ----------
Total liabilities and shareholders' equity $1,291,999 $1,277,781
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
(*) This condensed consolidated balance sheet has been derived from the
audited consolidated balance sheet as of July 30, 1999.
<PAGE>
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------------- --------------------------
January 28, January 29, January 28, January 29,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $443,045 $367,927 $865,466 $719,423
Franchise fees and royalties 125 -- 311 --
-------- -------- -------- --------
Total revenue 443,170 367,927 865,777 719,423
Cost of goods sold 162,889 139,458 308,648 258,219
--------- -------- -------- --------
Gross profit 280,281 228,469 557,129 461,204
Labor & other related expenses 157,831 124,116 311,051 242,497
Other store operating expenses 78,552 58,388 148,910 112,051
-------- -------- -------- --------
Store operating income 43,898 45,965 97,168 106,656
General and administrative 26,918 18,062 50,287 36,962
Amortization of goodwill 999 155 1,997 311
-------- -------- -------- --------
Operating income 15,981 27,748 44,884 69,383
Interest expense 6,304 911 11,633 1,696
Interest income 204 233 235 798
-------- -------- -------- --------
Income before income taxes 9,881 27,070 33,486 68,485
Provision for income taxes 3,491 9,987 12,624 25,269
-------- -------- -------- --------
Net income $ 6,390 $ 17,083 $ 20,862 $ 43,216
======== ======== ======== ========
Net earnings per share:
Basic $ .11 $ .28 $ .36 $ .70
======== ======== ======== ========
Diluted $ .11 $ .28 $ .36 $ .70
======== ======== ======== ========
Weighted average shares:
Basic 58,633 60,936 58,631 61,543
======== ======== ======== ========
Diluted 58,695 61,254 58,708 61,961
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
January 28, January 29,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $20,862 $43,216
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,504 25,220
Loss (gain) on disposition of property and equipment 1,213 (237)
Impairment loss 3,887 --
Changes in assets and liabilities:
Inventories 8,695 (9,478)
Other assets 336 (899)
Accounts payable (32,836) (6,019)
Other current assets and liabilities 7,847 (5,640)
-------- -------
Net cash provided by operating activities 41,508 46,163
-------- -------
Cash flows from investing activities:
Purchase of property and equipment (72,809) (67,626)
Proceeds from sale of property and equipment 770 1,886
-------- -------
Net cash used in investing activities (72,039) (65,740)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 114,000 30,000
Principal payments under long-term debt and other
long-term obligations (96,617) (22,577)
Proceeds from exercise of stock options 40 837
Treasury stock purchases -- (49,165)
Dividends on common stock (637) (668)
-------- -------
Net cash provided by (used in) financing activities 16,786 (41,573)
-------- -------
Net decrease in cash and cash equivalents (13,745) (61,150)
Cash and cash equivalents, beginning of period 18,262 62,593
-------- -------
Cash and cash equivalents, end of period $ 4,517 $ 1,443
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the six months for:
Interest $ 10,398 $ 2,247
Income taxes 15,245 26,735
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CBRL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
(In thousands)
1. Condensed Consolidated Financial Statements
-------------------------------------------
The condensed consolidated balance sheet as of January 28, 2000 and the
related condensed consolidated statements of income and cash flows for the
quarters and six-month periods ended January 28, 2000 and January 29, 1999, have
been prepared by CBRL Group, Inc. (the "Company") without audit; in the opinion
of management, all adjustments for a fair presentation of such condensed
consolidated financial statements have been made.
These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended July
30, 1999.
Deloitte & Touche LLP, the Company's independent accountants, have
performed a limited review of the financial information included herein. Their
report on such review accompanies this filing.
2. Income Taxes
------------
The provision for income taxes for the six-month period ended January 28,
2000 has been computed based on management's estimate of the tax rate for the
entire fiscal year of 37.7%. The variation between the statutory tax rate and
the effective tax rate is due primarily to employer tax credits for FICA taxes
paid on employee tip income. The Company's effective tax rates for the six-month
period ended January 29, 1999 and for the entire fiscal year of 1999 were 36.9%
and 37.8%, respectively.
3. Seasonality
-----------
The sales and profits of the Company are affected significantly by seasonal
travel and vacation patterns because of its interstate highway locations.
Historically, the Company's greatest sales and profits have occurred during the
period of June through August. Early December through the last part of February,
excluding the Christmas holidays, has historically been the period of lowest
sales and profits. Therefore, the results of operations for the quarter and
six-month period ended January 28, 2000 cannot be considered indicative of the
operating results for the full fiscal year.
4. Earnings per Share and Weighted Average Shares
----------------------------------------------
Basic earnings per share are computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the reporting period. Diluted earnings per share reflects the potential
dilution that could occur if securities, options or other contracts to issue
common stock were exercised or converted into common stock. Outstanding stock
options issued by the Company represent the only dilutive effect reflected in
diluted weighted average shares.
5. Comprehensive Income
--------------------
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. There is no difference between comprehensive income and
net income as reported by the Company for all periods shown.
<PAGE>
6. Segment Reporting
-----------------
The Company manages its business on the basis of one reportable operating
segment. All of the Company's operations are located within the United States.
The following data are presented in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 131 for all periods presented.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------ ------------------------
January 28, January 29, January 28, January 29,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
Restaurant $322,251 $255,794 $654,705 $525,487
Retail 120,794 112,133 210,761 193,936
-------- -------- -------- --------
Total net sales $443,045 $367,927 $865,466 $719,423
======== ======== ======== ========
</TABLE>
7. Recent Accounting Pronouncements Adopted
----------------------------------------
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
when costs incurred for internal-use computer software are capitalized or
expensed and guidance on whether computer software is for internal use. In April
1998, SOP 98-5, "Reporting of the Costs of Start-up Activities," was issued. SOP
98-5 requires that the Company expense start-up costs of new stores as incurred
rather than when the store opens as was the Company's previous practice. SOP
98-1 and 98-5 are effective for fiscal years beginning after December 15, 1998.
The Company adopted SOP 98-1 and 98-5 in the first quarter of fiscal 2000. The
adoption of SOP 98-1 and 98-5 did not have a material effect on net income for
the six months ended January 28, 2000.
8. Asset Impairment Loss
---------------------
In accordance with SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," the Company recorded an
impairment loss on the long-lived assets of its retail-only mall store for the
quarter ended January 28, 2000. After going through the first Christmas selling
season for this test store, trends indicated that the undiscounted future cash
flows from this store would be less than the carrying value of the long-lived
assets related to the store. Accordingly, in January 2000, the Company
recognized an asset impairment loss of $551 ($343 net of tax, or $0.006 per
diluted share). This loss is the difference between the carrying value of the
store's long-lived assets and the fair value of these assets based on discounted
estimated future cash flows. As a result of recent management changes and
resulting refocused operating priorities, the Company also incurred an
impairment loss under SFAS No. 121 for the write-down of certain properties no
longer expected to be used for future development. Accordingly, in January 2000,
the Company recognized an impairment loss of $3,336 ($2,079 net of tax, or
$0.035 per diluted share). This loss is the difference between the carrying
value of these long-lived assets and the fair value of these assets based on the
Company's estimated net realizable value upon disposal. These assets are
classified in the line item titled "Property held for sale" on the Condensed
Consolidated Balance Sheet as of January 28, 2000. These losses are included in
the line item titled "Other store operating expenses" on the Condensed
Consolidated Statement of Income for the quarter and six months ended January
28, 2000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All dollar amounts reported or discussed in Item 2 are shown in thousands.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto. Except for specific historical information, many of the matters
discussed in this Form 10-Q may express or imply projections of revenues or
expenditures, statements of plans and objectives or future operations or
statements of future economic performance. These, and similar statements are
forward-looking statements concerning matters that involve risks, uncertainties
and other factors which may cause the actual performance of CBRL Group, Inc. to
differ materially from those expressed or implied by these statements. All
forward-looking information provided by the Company pursuant to the safe harbor
established under the Private Securities Litigation Reform Act of 1995 should be
evaluated in the context of these factors. The Company disclaims any intent or
obligation to update its forward-looking statements. Factors which will affect
actual results include, but are not limited to: changes in interest rates
affecting the Company's financing costs; the availability and costs of
acceptable sites for development; the effect of increased competition at Company
locations on employee recruiting and retention, labor costs and restaurant
sales; the ability of the Company to recruit, train and retain restaurant
personnel; the acceptance of the Cracker Barrel Old Country Store(R) and Logan's
Roadhouse(R) concepts as the Company continues to expand into new geographic
regions; latent Year 2000 computer system problems; the ability of management to
successfully implement its strategy for improving restaurant performance; the
ability of management to effect asset sale and lease back transactions
consistent with projected proceeds and timing expectations; the results of
pending and threatened litigation; commodity price increases; adverse general
economic conditions; adverse weather conditions; changes in or implementation of
additional governmental rules and regulations affecting wage and hour matters,
health and safety and other areas affected by governmental actions; and other
factors described from time to time in the Company's filings with the Securities
and Exchange Commission, press releases and other communications.
<PAGE>
Results of Operations
CBRL Group, Inc. acquired Logan's Roadhouse, Inc. on February 16, 1999 in
the third quarter of the Company's prior fiscal year, and therefore, results for
the quarter and six months ended January 28, 2000 are not directly comparable to
the quarter and six months ended January 29, 1999.
The Company recorded charges of $8,592 before taxes during the quarter
ended January 28, 2000 principally as a result of management changes and the
resulting refocused operating priorities. These charges consisted of $3,887 for
Statement of Financial Accounting Standards ("SFAS") No. 121 write-downs of
certain properties no longer expected to be used for future development and for
Cracker Barrel's test, retail-only mall store (see Note 8), $1,955 for severance
and related expenses and $2,750 for other charges primarily consisting of the
future minimum lease payments on certain properties no longer expected to be
used for future development, the write-down of certain abandoned property,
inventory write-downs related to the closing of Cracker Barrel's test, outlet
store and other contractual obligations. These charges affect line items on the
Company's Condensed Consolidated Statement of Income in dollars and as a percent
of total revenue for the quarter and six months ended January 28, 2000,
respectively, as follows: Cost of goods sold $205, 0.1% and 0.0%; Other store
operating expenses $6,149, 1.4% and 0.7%; and General and Administrative $2,238,
0.5% and 0.3%.
The following table highlights operating results by percentage
relationships to total revenue for the quarter and six-month period ended
January 28, 2000 as compared to the same periods a year ago:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
----------------------- ------------------------
January 28, January 29, January 28, January 29,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Franchise fees and royalties -- -- -- --
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
Cost of goods sold 36.8 37.9 35.7 35.9
----- ----- ----- -----
Gross profit 63.2 62.1 64.3 64.1
Labor & other related expenses 35.6 33.7 35.9 33.7
Other store operating expenses 17.7 15.9 17.2 15.6
----- ----- ----- -----
Store operating income 9.9 12.5 11.2 14.8
General and administrative 6.1 5.0 5.8 5.2
Amortization of goodwill 0.2 -- 0.2 --
----- ----- ----- -----
Operating income 3.6 7.5 5.2 9.6
Interest expense 1.4 0.3 1.3 0.2
Interest income -- 0.1 -- 0.1
----- ----- ----- -----
Income before income taxes 2.2 7.3 3.9 9.5
Provision for income taxes 0.8 2.7 1.5 3.5
----- ----- ----- -----
Net income 1.4% 4.6% 2.4% 6.0%
===== ===== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cracker Barrel Old Country Store Comparable Store Sales Analysis
348 Store Average 326 Store Average
Quarter Ended Six Months Ended
----------------------- -----------------------
January 28, January 29, January 28, January 29,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
Restaurant $676.2 $680.6 $1,407.4 $1,435.1
Retail 284.5 290.3 505.5 515.3
------ ------ -------- --------
Total net sales $960.7 $970.9 $1,912.9 $1,950.4
====== ====== ======== ========
</TABLE>
Total Revenue
- -------------
Total revenue for the second quarter of fiscal 2000 increased 20% compared
to last year's second quarter. Since the Company did not acquire the Logan's
Roadhouse concept until the third quarter of the prior year, the primary reason
for the increase in total revenue is the inclusion of Logan's Roadhouse revenue
in the Company's total revenue for the quarter ended January 29, 2000, which
represents approximately 11% of the total revenue increase of 20%. The Company's
total revenue also increased due to the increase in the number of stores open
for the Cracker Barrel Old Country Store ("Cracker Barrel") concept from 381
stores open at January 29, 1999 to 418 stores open at January 28, 2000. These
increases were partially offset by a decrease in comparable store sales at the
Cracker Barrel Old Country Store concept. Comparable store restaurant sales
decreased 0.7% and comparable store retail sales decreased 2.0%, for a combined
comparable store sales (total net sales) decrease of 1.0%. Comparable store
restaurant sales decreased primarily due to lower menu pricing for the quarter
of 1.5%, partially offset by increases in customer traffic of 0.8%. Comparable
store retail sales decreased primarily due to the assortment of retail items in
the stores versus the prior year and a significant decrease in the sale of
marked-down seasonal merchandise after Christmas versus the prior year. These
decreases were partially offset by the increase in restaurant customer traffic
of 0.8%. Comparable store sales data for the Logan's Roadhouse concept is for
information only, since Logan's was not acquired until the third quarter of the
Company's prior fiscal year. At the Logan's Roadhouse concept, comparable store
sales increased 3.1%, which included a 2.1% customer traffic increase.
Total revenue for the six-month period ended January 28, 2000, increased
20% compared to the six-month period ended January 29, 1999. Since the Company
did not acquire the Logan's Roadhouse concept until the third quarter of the
prior year, the primary reason for the increase in total revenue is the
inclusion of Logan's Roadhouse revenue in the Company's total revenue for the
six months ended January 29, 2000, which represents approximately 11% of the
total revenue increase of 20%. The Company's total revenue also increased due to
the increase in the number of stores open for the Cracker Barrel concept from
381 stores open at January 29, 1999 to 418 stores open at January 28, 2000.
These increases were partially offset by a decrease in comparable store sales at
the Cracker Barrel concept, comparable store restaurant sales decreased 1.9% and
comparable store retail sales decreased 1.9%, for a combined comparable store
sales (total net sales) decrease of 1.9%. Comparable store restaurant sales
decreased primarily due to lower menu pricing for the six months of 2.5%,
partially offset by increases in customer traffic of 0.6%. Comparable store
retail sales decreased primarily due to the assortment of retail items in the
stores versus the prior year and a significant decrease in the sale of
marked-down seasonal merchandise after Christmas versus the prior year. These
decreases were partially offset by the increase in restaurant customer traffic
of 0.6%. Comparable store sales data for the Logan's Roadhouse concept is for
information only, since Logan's was not acquired until the third quarter of the
Company's prior fiscal year. At the Logan's Roadhouse concept, comparable store
sales, increased 3.6%, which included approximately a 2.1% customer traffic
increase.
Cost of Goods Sold
- ------------------
Cost of goods sold as a percentage of total revenue for the quarter
ended January 28, 2000 decreased to 36.8% from 37.9% in the second quarter of
last year. This decrease was primarily due to reduced food waste in the Cracker
Barrel stores versus the prior year, the significant decrease in markdowns of
<PAGE>
seasonal merchandise after Christmas versus the prior year, lower retail
shrinkage in fiscal 2000 versus a year ago, decreases in dairy prices, and the
benefit to cost of goods sold from the inclusion of Logan's Roadhouse, which has
lower cost of goods as a percentage of total revenue than Cracker Barrel.
Additionally, the Company had $205 in charges to cost of goods sold related to
management's decision during the quarter to close Cracker Barrel's test, outlet
store. These decreases were partially offset by the effect of lower menu pricing
of 1.5% at Cracker Barrel for the quarter versus the prior year.
Cost of goods sold as a percentage of total revenue for the six-month
period ended January 28, 2000 decreased to 35.7% from 35.9% for the six-month
period ended January 29, 1999. This decrease was primarily due to the
significant decrease in markdowns of seasonal merchandise after Christmas versus
the prior year, lower retail shrinkage in the first six months of fiscal 2000
versus the same period a year ago, decreases in dairy prices and the benefit to
cost of goods sold from the inclusion of Logan's Roadhouse, which has lower cost
of goods as a percentage of total revenue than Cracker Barrel. Additionally, the
Company had $205 in charges to cost of goods sold related to management's
decision during the quarter to close Cracker Barrel's test, outlet store. These
decreases were partially offset by the effect of lower menu pricing of 2.5% at
Cracker Barrel for the six months versus the prior year.
Labor and Other Related Expenses
- --------------------------------
Labor and other related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor and other related expenses as
a percentage of total revenue increased to 35.6% in the second quarter this year
from 33.7% last year. This increase was primarily due to non-tipped, hourly
employee wage inflation at Cracker Barrel stores of approximately 6%, increases
in Cracker Barrel's field management salary structure to attract and retain
quality store managers, improved management staffing levels at Cracker Barrel
stores versus the prior year, increased costs related to a new group health plan
implemented in January 1999, the effect of lower menu pricing of 1.5% at Cracker
Barrel for the quarter versus the prior year and increases in workers
compensation costs at Cracker Barrel stores. These increases were partially
offset due to the benefit to labor expense from adding Logan's Roadhouse, which
has lower labor as a percentage of total revenue than Cracker Barrel.
Labor and related expenses as a percentage of total revenue increased to
35.9% in the six-month period ended January 28, 2000 from 33.7% in the six-month
period ended January 29, 1999. This increase was primarily due to non-tipped,
hourly employee wage inflation at Cracker Barrel stores of approximately 6%,
increases in Cracker Barrel's field management salary structure to attract and
retain quality store managers, improved management staffing levels at Cracker
Barrel stores versus the prior year, increased costs related to a new group
health plan implemented in January 1999, the effect of lower menu pricing of
2.5% at Cracker Barrel for the six months versus the prior year and increases in
workers compensation costs at Cracker Barrel stores. These increases were
partially offset due to the benefit to labor expense from adding Logan's
Roadhouse, which has lower labor as a percentage of total revenue than Cracker
Barrel and by lower bonus payouts under the store-level bonus program.
Other Store Operating Expenses
- ------------------------------
Other store operating expenses include all unit-level operating costs, the
major components of which are operating supplies, repairs and maintenance,
advertising expenses, utilities and depreciation. Other store operating expenses
as a percentage of total revenue increased to 17.7% in the second quarter of
fiscal 2000 from 15.9% in the second quarter of last year. This increase was
primarily due to charges of $6,149 consisting primarily of impairment losses of
$3,887 (see Note 8). Additionally, this increase was due to higher restaurant
supplies expenses at Cracker Barrel stores, the effect of lower menu pricing of
1.5% at Cracker Barrel for the quarter versus the prior year and the inclusion
of Logan's Roadhouse, which has higher other store operating expenses as a
percentage of total revenue than Cracker Barrel. These increases were partially
offset due to lower advertising spending at the Cracker Barrel concept.
Other store operating expenses as a percentage of total revenue increased
to 17.2% for the six-month period ended January 28, 2000 from 15.6% in the
six-month period ended January 29, 1999. This increase was primarily due to
charges of $6,149 consisting primarily of impairment losses of $3,887 (see Note
8). Additionally, this increase was due to higher restaurant supplies expenses
at Cracker Barrel stores, the effect of lower menu pricing of 2.5% at Cracker
Barrel for the six months versus the prior year and the inclusion of Logan's
Roadhouse, which has higher other store operating expenses as a percentage of
total revenue than Cracker Barrel. These increases were partially offset due to
lower advertising spending at the Cracker Barrel concept.
<PAGE>
General and Administrative Expenses
- -----------------------------------
General and administrative expenses as a percentage of total revenue
increased to 6.1% in the second quarter of fiscal 2000 from 5.0% in the second
quarter of last year. The primary reasons for the increase were an increase in
corporate bonus accruals versus the prior year and $2,238 in charges consisting
primarily of severance and related expenses of $1,955 for management changes
during the quarter and resulting refocused priorities. These increases were
partially offset due to the benefit to general and administrative expense from
adding Logan's Roadhouse, which has lower general and administrative costs as a
percentage of total revenue than Cracker Barrel.
General and administrative expenses as a percentage of total revenue
increased to 5.8% for the six-month period ended January 28, 2000 from 5.2% in
the six-month period ended January 29, 1999. The primary reasons for the
increase were an increase in corporate bonus accruals versus the prior year and
$2,238 in charges consisting primarily of severance and related expenses of
$1,955 for management changes during the quarter and the resulting refocused
priorities. These increases were partially offset due to the benefit to general
and administrative expense from adding Logan's Roadhouse, which has lower
general and administrative costs as a percentage of total revenue than Cracker
Barrel.
Interest Expense
- ----------------
Interest expense increased to $6,304 in the second quarter of fiscal 2000
from $911 in the second quarter of last year. The increase primarily resulted
from higher average debt outstanding during the quarter as compared to last year
reflecting debt added to finance the Logan's acquisition in the third quarter of
last year and to finance share repurchases throughout all of last year.
Interest expense increased to $11,633 for the six-month period ended
January 28, 2000 from $1,696 in the six-month period ended January 29, 1999. The
increase primarily resulted from higher average debt outstanding during the
quarter as compared to last year reflecting debt added to finance the Logan's
acquisition in the third quarter of last year and to finance share repurchases
throughout all of last year.
Interest Income
- ---------------
Interest income decreased to $204 in the second quarter of fiscal 2000 from
$233 in the second quarter of last year. The decrease was primarily due to lower
average funds available for investment.
Interest income decreased to $235 for the six-month period ended January
28, 2000 from $798 in the six-month period ended January 29, 1999. The decrease
was primarily due to lower average funds available for investment.
Provision for income taxes
- --------------------------
The provision for income taxes as a percent of pretax income increased to
37.7% in the first six months of fiscal 2000 from 36.9% during the same period a
year ago. The increase in tax rate was primarily due to the non-deductibility of
goodwill and costs related to the acquisition of Logan's Roadhouse. (See Note
2).
Recent Accounting Pronouncements Not Yet Adopted
- ------------------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued, but was subsequently amended by SFAS No. 137.
This statement specifies how to report and display derivative instruments and
hedging activities. This statement is effective for fiscal years beginning after
June 15, 2000. The Company will adopt SFAS No. 133, as amended, in the first
quarter of fiscal 2001. The Company is currently evaluating the effect of
adopting SFAS No. 133, as amended, but does not expect the adoption to have a
material effect on the Company's consolidated financial statements.
<PAGE>
Year 2000
- ---------
The Company has addressed the potential business risks associated with the
Year 2000. Issues relating to the Year 2000 could have arisen with the Company's
internal systems or its material suppliers' systems. As of the filing date of
this report, the Year 2000 issue has not had a material adverse impact on the
Company.
Some business risks associated with the Year 2000 issue may remain.
However, it is not anticipated that any future Year 2000 issues will have a
material adverse effect on the Company's business, consolidated financial
position, results of operations, or cash flows.
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities provided net cash of $41,508 for the
six-month period ended January 28, 2000. Most of this cash was provided by net
income adjusted for depreciation and amortization. Decreases in accounts payable
and increases in other current assets were partially offset by decreases in
inventories and other assets and increases in other current liabilities.
Capital expenditures were $72,809 for the six-month period ended January
28, 2000. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $404 and $864
for the quarter and six-month period ended January 28, 2000 as compared to $397
and $801 for the quarter and six-month period ended January 29, 1999,
respectively. The increase in capital expenditures for the six months versus the
same period a year ago and the increase in capitalized interest were primarily
due to Logan's Roadhouse new store construction partially offset by the timing
of Cracker Barrel new store construction in fiscal 2000 as compared to the same
period a year ago.
The Company's internally generated cash, along with cash at July 30, 1999
and the Company's available revolver, were sufficient to finance all of its
growth in the first six months of fiscal 2000.
The Company estimates that its capital expenditures for fiscal 2000 will be
approximately $140,000 substantially all of which will be land purchases and the
construction of new stores. During the first quarter of fiscal 2000, the Company
received net proceeds of $30,000 from its revolving credit facility to fund its
expansion. During the second quarter of fiscal 2000, the Company paid down
$10,000 of its revolving credit facility from excess cash flows from operations
beyond its cash needs for expansion. On September 30, 1999, the Company
increased its bank credit facility an additional $40,000 to $390,000. Management
believes that cash at January 28, 2000, along with cash generated from the
Company's operating activities and its available revolver, will be sufficient to
finance its continued operations, its presently authorized second 3 million
share stock buyback program and its continued expansion plans through fiscal
2000. The Company intends to pursue open market purchases from time to time of
its common stock under a previously authorized plan up to the 2,032,500 shares
remaining at January 28, 2000 under this plan. The Company has engaged an
adviser and agent to assist it with a series of real estate financing
transactions under which certain of the Company's real estate holdings would be
sold and leased back. These transactions, which could total $200 million, are
intended to result in longer-term replacement of its existing bank debt as well
as to fund the anticipated share repurchase. At least the first tranche of the
financing is currently expected to be completed in the fourth quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There are no material changes to the disclosure made in the Company's
Annual Report on Form 10-K for the year ended July 30, 1999 regarding this
matter.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
CBRL Group, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed consolidated balance sheet of CBRL
Group, Inc. and subsidiaries as of January 28, 2000, and the related condensed
consolidated statements of income and cash flows for the quarters and six-month
periods ended January 28, 2000 and January 29, 1999. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of CBRL Group, Inc. and subsidiaries
as of July 30, 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated September 8, 1999, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of July 30, 1999 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
March 9, 2000
<PAGE>
PART II
Item 1. Legal Proceedings
-----------------
As reported in Part I, Item 3 of the Company's Form
10-K filed October 26, 1999, the Company's Cracker
Barrel Old Country Store, Inc. subsidiary is involved
in two lawsuits which are not ordinary, routine
litigation incidental to its business. The disclosure
made in that item is incorporated in this Form 10-Q
by this reference.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of shareholders was held November 23, 1999.
(b) Election of Directors: Reported in the Registrant's Form 10-Q
quarterly report for the period ended October 29, 1999.
(c) Other Matters: Reported in the Registrant's Form 10-Q quarterly
report for the period ended October 29, 1999.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are filed pursuant to Item 601 of
Regulation S-K
(15)Letter regarding unaudited financial information.
(b) The Company filed a Current Report on Form 8-K on December 16,
1999 pursuant to Item 5 of such form to announce that Richard
K. Arras, President and Chief Operating Officer of the Company's
subsidiary, Cracker Barrel Old Country Store, Inc., had resigned
to pursue other interests. Dan W. Evins, Chairman and Chief
Executive Officer of the Company, continues as Chief Executive
Officer of Cracker Barrel Old Country Store, Inc. and has assumed
the title and role of President of that subsidiary.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBRL GROUP, INC.
Date: 3/9/00 By /s/Lawrence E. White
------ ------------------------------------------------
Lawrence E. White, Senior Vice President/Finance
and Chief Financial Officer
Date: 3/9/00 By /s/Patrick A. Scruggs
------ ------------------------------------------------
Patrick A. Scruggs, Assistant Treasurer
<PAGE>
March 9, 2000
CBRL Group, Inc.
Lebanon, Tennessee 37088-0787
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of CBRL Group, Inc. for the quarters and six-month periods ended
January 28, 2000 and January 29, 1999, as indicated in our report dated March 9,
2000; because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended January 28, 2000, is
incorporated by reference in Registration Statement Nos. 2-86602, 33-15775,
33-37567, 33-45482, 333-01465 and 333-81063 on Forms S-8 and Registration
Statement Nos. 33-59582 and 333-74363 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT OF CBRL GROUP, INC. AND SUBSIDIARIES FOR THE
SIX MONTHS ENDED JANUARY 28, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001067294
<NAME> CBRL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-28-2000
<PERIOD-START> JUL-31-1999
<PERIOD-END> JAN-28-2000
<CASH> 4,517
<SECURITIES> 0
<RECEIVABLES> 7,585
<ALLOWANCES> 0
<INVENTORY> 91,760
<CURRENT-ASSETS> 118,844
<PP&E> 1,311,008
<DEPRECIATION> 255,023
<TOTAL-ASSETS> 1,291,999
<CURRENT-LIABILITIES> 120,104
<BONDS> 329,500
0
0
<COMMON> 626
<OTHER-SE> 810,646
<TOTAL-LIABILITY-AND-EQUITY> 1,291,999
<SALES> 865,466
<TOTAL-REVENUES> 865,777
<CGS> 308,648
<TOTAL-COSTS> 459,961
<OTHER-EXPENSES> 52,284
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,633
<INCOME-PRETAX> 33,486
<INCOME-TAX> 12,624
<INCOME-CONTINUING> 20,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,862
<EPS-BASIC> .36
<EPS-DILUTED> .36
</TABLE>
