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 April 28, 2000
Commission file number 000-25225
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
57,029,162 Shares of Common Stock
Outstanding as of May 26, 2000
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
April 28, July 30,
2000 1999*
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,264 $ 18,262
Property held for sale 1,170 --
Receivables 8,134 8,935
Inventories 94,494 100,455
Prepaid expenses 7,005 8,041
Deferred income taxes 2,457 2,457
---------- ----------
Total current assets 127,524 138,150
Property and equipment - net 1,074,213 1,020,055
Goodwill - net 108,250 111,246
Other assets 7,702 8,330
---------- ----------
Total assets $1,317,689 $1,277,781
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,124 $ 67,286
Accrued expenses 94,447 73,967
Current portion of long-term debt
and other long-term obligations 200 2,700
---------- ----------
Total current liabilities 159,771 143,953
---------- ----------
Long-term debt 315,000 312,000
---------- ----------
Other long-term obligations 31,482 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 April
28, 2000, 62,601,662 shares issued
and 57,074,162 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 624,796 590,128
---------- ----------
909,186 874,478
Less treasury stock, at cost, 5,527,500
and 3,967,500 shares, respectively (97,750) (83,471)
---------- ----------
Total shareholders' equity 811,436 791,007
---------- ----------
Total liabilities and shareholders' equity $1,317,689 $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 Nine Months Ended
-------------------------- --------------------------
April 28, April 30, April 28, April 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $435,834 $385,417 $1,301,300 $1,104,840
Franchise fees and royalties 152 120 463 120
-------- -------- ---------- ----------
Total revenue 435,986 385,537 1,301,763 1,104,960
Cost of goods sold 148,130 129,580 456,778 387,799
--------- -------- ---------- ----------
Gross profit 287,856 255,957 844,985 717,161
Labor & other related expenses 162,563 136,369 473,614 378,866
Other store operating expenses 72,745 69,157 221,655 181,208
-------- -------- ---------- ----------
Store operating income 52,548 50,431 149,716 157,087
General and administrative 22,284 22,362 72,571 59,323
Amortization of goodwill 999 878 2,996 1,190
-------- -------- ---------- ----------
Operating income 29,265 27,191 74,149 96,574
Interest expense 6,113 3,589 17,746 5,285
Interest income 32 104 267 902
-------- -------- ---------- ----------
Income before income taxes 23,184 23,706 56,670 92,191
Provision for income taxes 8,741 9,014 21,365 34,283
-------- -------- ---------- ----------
Net income $ 14,443 $ 14,692 $ 35,305 $ 57,908
======== ======== ========== ==========
Net earnings per share:
Basic $ .25 $ .25 $ .61 $ .95
======== ======== ========== ==========
Diluted $ .25 $ .25 $ .60 $ .95
======== ======== ========== ==========
Weighted average shares:
Basic 57,704 59,619 58,322 60,902
======== ======== ========== ==========
Diluted 57,762 59,798 58,393 61,240
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
April 28, April 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $35,305 $57,908
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,112 39,911
Loss on disposition of property and equipment 1,461 7
Impairment loss 3,887 --
Changes in assets and liabilities:
Inventories 5,961 (10,742)
Other assets 527 (2,511)
Accounts payable (2,162) 18,363
Other current assets and liabilities 23,154 (6,322)
------- -------
Net cash provided by operating activities 116,245 96,614
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (107,023) (115,971)
Cash paid for acquisition, net of cash acquired -- (182,392)
Proceeds from sale of property and equipment 1,332 2,114
-------- --------
Net cash used in investing activities (105,691) (296,249)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 148,500 330,000
Principal payments under long-term debt and other
long-term obligations (148,176) (93,891)
Proceeds from exercise of stock options 40 891
Treasury stock purchases (14,279) (82,613)
Dividends on common stock (637) (970)
--------- --------
Net cash (used in) provided by financing activities (14,552) 153,417
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,998) (46,218)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 18,262 62,593
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,264 $ 16,375
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the nine months for:
Interest $ 16,758 $ 5,415
Income taxes 15,811 32,369
</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 April 28, 2000 and the
related condensed consolidated statements of income and cash flows for the
quarters and nine-month periods ended April 28, 2000 and April 30, 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 nine-month period ended April
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
nine-month period ended April 30, 1999 and for the entire fiscal year of 1999
were 37.2% 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 nine-month period ended April 28, 2000 cannot be considered
indicative of the operating results for the full fiscal year.
4. INVENTORIES
Inventories were comprised of the following at:
<TABLE>
<CAPTION>
April 28, July 30,
2000 1999
---- ----
<S> <C> <C>
Retail $68,760 $ 77,662
Restaurant 16,966 14,522
Supplies 8,768 8,271
------- --------
Total $94,494 $100,455
======= ========
</TABLE>
5. 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.
<PAGE>
6. 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.
7. 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 Nine Months Ended
----------------------- -----------------------
April 28, April 30, April 28, April 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
Restaurant $348,877 $303,447 $1,003,582 $ 828,934
Retail 86,957 81,970 297,718 275,906
-------- -------- ---------- ----------
Total net sales $435,834 $385,417 $1,301,300 $1,104,840
======== ======== ========== ==========
</TABLE>
8. 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 nine months ended April 28, 2000.
9. 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 certain 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. The Company evaluates
properties and restaurants individually for purposes of measuring and
recognizing impairments under SFAS No. 121. 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 April 28, 2000. These losses are included in
the line item titled "Other store operating expenses" on the Condensed
Consolidated Statement of Income for the nine months ended April 28, 2000.
<PAGE>
10. LITIGATION
The Company's Cracker Barrel Old Country Store, Inc. subsidiary is
involved in certain lawsuits, two of which are not ordinary routine litigation
incidental to its business: Serena McDermott and Jennifer Gentry v. Cracker
Barrel Old Country Store, Inc., a collective action under the federal Fair Labor
Standards Act and was served on Cracker Barrel on May 3, 1999; and Kelvis
Rhodes, Maria Stokes et al. v. Cracker Barrel Old Country Store, Inc., an action
under Title VII of the Civil Rights Act of 1964 and Section 1 of the Civil
Rights Act of 1866. The McDermott case alleges that certain tipped hourly
employees were required to perform non-serving duties without being paid the
minimum wage or overtime compensation for that work. The McDermott case seeks
recovery of unpaid wages and overtime wages related to those claims. The Rhodes
case seeks certification as a class action, a declaratory judgment to redress an
alleged systemic pattern and practice of racial discrimination in employment
opportunities, an order to effect certain hiring and promotion goals and back
pay and other monetary damages.
On March 17, 2000, the Court granted the plaintiffs' motion in the
McDermott case to send notice to a provisional class of plaintiffs. The Court
defined the provisional class as all persons employed as servers and all
second-shift hourly employees at Cracker Barrel Old Country Store restaurants
since January 4, 1996. Unless the case is resolved, a Court approved notice will
be sent to the defined class members, who will have 30 days following the date
of the notice to decide whether to participate in the lawsuit. The number of
persons who will be sent notice has not yet been finally determined. Because of
the provisional status of the plaintiff class, the Court could subsequently
amend its decision. If amended, the scope of the class could either be reduced
or increased or, if appropriate, the Court could dismiss the collective aspects
of the case entirely.
Cracker Barrel Old Country Store, Inc. believes it has substantial
defenses to the claims made, and it is defending each of these cases vigorously.
The parties are engaged in mediation in both cases, but the mediation process is
confidential and the parties cannot comment on the process or the status of
their discussions. Because only limited discovery has occurred to date, neither
the likelihood of an unfavorable outcome nor the amount of ultimate liability,
if any, with respect to these cases can be determined at this time. Accordingly,
no provision for any potential liability has been made in the consolidated
financial statements of the Company.
In addition to the litigation described in the preceding paragraphs,
the Company is a party to other legal proceedings incidental to its business. In
the opinion of management, based upon information currently available, the
ultimate liability with respect to these other actions will not materially
affect the operating results or the financial position of the Company.
<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 results of pending and threatened litigation;
commodity price increases; adverse general economic conditions or changes in
seasonal travel patterns of the Company's customers related thereto; adverse
weather conditions; changes in or implementation of additional governmental
rules and regulations affecting wage and hour matters, health and safety,
pensions and insurance, 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. ("Logan's") on February
16, 1999 in the third quarter of the Company's prior fiscal year, and therefore,
results for the quarter and nine months ended April 28, 2000 are not directly
comparable to the quarter and nine months ended April 30, 1999. The acquisition
of Logan's was additive to the Company's net income for both the quarter and
nine months ended April 28, 2000 compared with the same periods in the prior
year.
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 nine months ended April 28, 2000, respectively, as
follows: Cost of goods sold $205, 0.0%; Other store operating expenses $6,149,
0.5%; and General and Administrative $2,238, 0.3%.
The Company's lower net income for the quarter and nine months ended April
28, 2000 compared with the year earlier periods primarily reflects lower
operating income at Cracker Barrel and higher interest expense partially offset
by increased operating income from the acquisition of Logan's. The following
table highlights operating results by percentage relationships to total revenue
for the quarter and nine-month period ended April 28, 2000 as compared to the
same periods a year ago:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
-------------------- --------------------
April 28, April 30, April 28, April 30,
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 34.0 33.6 35.1 35.1
----- ----- ----- -----
Gross profit 66.0 66.4 64.9 64.9
Labor & other related expenses 37.3 35.4 36.4 34.3
Other store operating expenses 16.7 17.9 17.0 16.4
----- ----- ----- -----
Store operating income 12.0 13.1 11.5 14.2
General and administrative 5.1 5.8 5.6 5.4
Amortization of goodwill 0.2 0.2 0.2 0.1
----- ----- ----- -----
Operating income 6.7 7.1 5.7 8.7
Interest expense 1.4 0.9 1.4 0.5
Interest income -- -- -- 0.1
----- ----- ----- -----
Income before income taxes 5.3 6.2 4.3 8.3
Provision for income taxes 2.0 2.4 1.6 3.1
----- ----- ----- -----
Net income 3.3% 3.8% 2.7% 5.2%
===== ===== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cracker Barrel Old Country Store Comparable Store Sales Analysis
356 Store Average 326 Store Average
Quarter Ended Nine Months Ended
---------------------- ------------------------
April 28, April 30, April 28, April 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
Restaurant $718.6 $703.1 $2,134.6 $2,146.7
Retail 200.0 203.7 707.7 721.2
------ ------ -------- --------
Total net sales $918.6 $906.8 $2,842.3 $2,867.9
====== ====== ======== ========
</TABLE>
TOTAL REVENUE
Total revenue for the third quarter of fiscal 2000 increased 13%
compared to last year's third quarter. The Company's total revenue primarily
increased due to the increase in the number of stores open for the Cracker
Barrel Old Country Store ("Cracker Barrel") and Logan's concepts from 391 and 50
stores open at April 30, 1999 to 426 and 64 stores open at April 28, 2000,
respectively. Additionally, since the Company did not acquire the Logan's
concept until February 16, 1999 during the third quarter of the prior year, the
increase in total revenue reflects the inclusion of Logan's revenue in the
Company's total revenue for the entire quarter ended April 28, 2000, which
represents approximately 2% of the total revenue increase of 20%. The revenue
increases also reflected an increase in comparable store sales at the Cracker
Barrel Old Country Store concept. Comparable store restaurant sales increased
2.2% and comparable store retail sales decreased 1.8%, for a combined comparable
store sales (total net sales) increase of 1.3%. Comparable store restaurant
sales increased primarily due to increases in customer traffic of 1.2% and
higher menu pricing for the quarter of 1.0%. Comparable store retail sales
decreased primarily due to the reduced availability of certain popular retail
items for which there were stronger sales in the prior year. . Comparable store
sales data for the Logan's concept is for information only, since Logan's was
not acquired until approximately two weeks into the third quarter of the
Company's prior fiscal year. At the Logan's concept, comparable store sales
increased 3.1%, which included a 2.1% customer traffic increase. During April
2000, the Company opened a new Carmine Giardini's Gourmet Market and La
Trattoria Ristorante in Miami, Florida. This was a previously committed site
that will help the Company determine the future direction of this concept. This
evaluation presently is not expected to be complete before the end of the third
quarter of next fiscal year.
Total revenue for the nine-month period ended April 28, 2000, increased
18% compared to the nine-month period ended April 30, 1999. The primary reasons
for the increase in total revenue are the inclusion of Logan's revenue in the
Company's total revenue for the entire nine months ended April 28, 2000, which
represents approximately 8% of the total revenue increase of 21% and the
increase in the number of stores open for the Cracker Barrel concept from 391
stores open at April 30, 1999 to 426 stores open at April 28, 2000. These
increases were partially offset by a decrease in comparable store sales at the
Cracker Barrel concept. Comparable store restaurant sales decreased 0.6% and
comparable store retail sales decreased 1.9%, for a combined comparable store
sales (total net sales) decrease of 0.9%. Comparable store restaurant sales
decreased primarily due to lower menu pricing for the nine months of 1.3%,
partially offset by increases in customer traffic of 0.7%. Comparable store
retail sales decreased primarily due to the reduced availability of certain
popular retail items for which there were stronger sales in the prior year and a
decrease in the sale of marked-down seasonal merchandise after Christmas versus
the prior year. Comparable store sales data for the Logan's 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 concept, comparable store sales,
increased 3.6%, which included approximately a 2.4% customer traffic increase.
During April 2000, the Company opened a new Carmine Giardini's Gourmet Market
and La Trattoria Ristorante in Miami, Florida. This was a previously committed
site that will help the Company determine the future direction of this concept.
This evaluation presently is not expected to be complete before the end of the
third quarter of next fiscal year.
<PAGE>
COST OF GOODS SOLD
Cost of goods sold as a percentage of total revenue for the quarter
ended April 28, 2000 increased to 34.0% from 33.6% in the third quarter of last
year. This increase was primarily due to higher retail cost of goods sold as a
percentage of total revenue versus the prior year due primarily to lower initial
mark-ons and higher retail shrinkage in fiscal 2000 versus a year ago. These
increases were partially offset by the benefit to cost of goods sold from the
inclusion of Logan's, which has lower cost of goods sold as a percentage of
total revenue than Cracker Barrel Food cost as a percentage of total revenue was
unchanged from the third quarter a year ago as commodity cost pressures in pork
and beef were offset primarily by favorable dairy product costs and the effect
of higher menu pricing of 1.0% at Cracker Barrel for the quarter versus the
prior year.
Cost of goods sold as a percentage of total revenue for the nine-month
period ended April 28, 2000 was unchanged from 35.1% for the nine-month period
ended April 30, 1999. Increases primarily included the effect of lower menu
pricing of 1.3% at Cracker Barrel for the nine months versus the prior year,
commodity cost pressures in pork and beef and lower initial retail mark-ons.
These increases were partially offset by the decrease in markdowns of seasonal
merchandise after Christmas versus the prior year, decreases in dairy prices,
the benefit to cost of goods sold as a percentage of total revenue from the
increasing mix of restaurant sales which have a lower cost of goods sold as a
percentage of total revenue than retail sales and the benefit to cost of goods
sold from the inclusion of Logan's, 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 second quarter to close Cracker Barrel's test, outlet store.
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 37.3% in the third quarter this
year from 35.4% last year. This increase was primarily due to non-tipped, hourly
employee wage inflation at Cracker Barrel and Logan's 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 and increased costs related to
higher bonus payouts under the Cracker Barrel store-level bonus programs. These
increases were partially offset by improved hourly labor efficiency at Cracker
Barrel stores, the effect of higher menu pricing of 1.0% at Cracker Barrel for
the quarter versus the prior year and the benefit to labor expense from adding
Logan's, 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 36.4% in the nine-month period ended April 28, 2000 from 34.3% in the
nine-month period ended April 30, 1999. This increase was primarily due to
non-tipped, hourly employee wage inflation at Cracker Barrel and Logan's 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 higher bonus payouts under the Cracker Barrel store-level bonus
program, increased costs related to a new group health plan implemented in
January 1999, the effect of lower menu pricing of 1.3% at Cracker Barrel for the
nine months versus the prior year and increases in workers compensation costs at
Cracker Barrel stores. These increases were partially offset by the benefit to
labor expense from adding Logan's, 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 decreased to 16.7% in the third quarter of
fiscal 2000 from 17.9% in the third quarter of last year.
<PAGE>
These decreases were primarily due to lower advertising spending at the Cracker
Barrel concept and the effect of higher menu pricing of 1.0% at Cracker Barrel
for the quarter versus the prior year. These decreases were partially offset by
the inclusion of Logan's, which has higher other store operating expenses as a
percentage of total revenue than Cracker Barrel.
Other store operating expenses as a percentage of total revenue
increased to 17.0% for the nine-month period ended April 28, 2000 from 16.4% in
the nine-month period ended April 30, 1999. This increase was primarily due to
second quarter charges of $6,149 consisting primarily of impairment losses of
$3,887 (see Note 8 to the Condensed Consolidated Financial Statements).
Additionally, this increase was due to higher restaurant supplies expenses at
Cracker Barrel stores, the effect of lower menu pricing of 1.3% at Cracker
Barrel for the nine months versus the prior year and the inclusion of Logan's,
which has higher other store operating expenses as a percentage of total revenue
than Cracker Barrel. These increases were partially offset by lower advertising
spending at the Cracker Barrel concept.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses as a percentage of total revenue
decreased to 5.1% in the third quarter of fiscal 2000 from 5.8% in the third
quarter of last year. The primary reasons for the decrease were improved sales
volume, lower Cracker Barrel manager trainee costs ,certain overhead reduction
efforts begun in the second quarter of fiscal 2000 and the benefit to general
and administrative expense from adding Logan's, which has lower general and
administrative costs as a percentage of total revenue than Cracker Barrel. These
decreases were partially offset by the increase in bonus accruals versus the
prior year.
General and administrative expenses as a percentage of total revenue
increased to 5.6% for the nine-month period ended April 28, 2000 from 5.4% in
the nine-month period ended April 30, 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 second quarter and the resulting refocused
priorities. These increases were partially offset due to the benefit to general
and administrative expense from adding Logan's, which has lower general and
administrative costs as a percentage of total revenue than Cracker Barrel.
INTEREST EXPENSE
Interest expense increased to $6,113 in the third quarter of fiscal
2000 from $3,589 in the third 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.
Interest expense increased to $17,746 for the nine-month period ended
April 28, 2000 from $5,285 in the nine-month period ended April 30, 1999. The
increase primarily resulted from higher average debt outstanding during the
nine-month period 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.
INTEREST INCOME
Interest income decreased to $32 in the third quarter of fiscal 2000
from $104 in the third quarter of last year. The decrease was primarily due to
lower average funds available for investment.
Interest income decreased to $267 for the nine-month period ended April
28, 2000 from $902 in the nine-month period ended April 30, 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 nine months of fiscal 2000 from 37.2% 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 in
the third quarter of last year. (See Note 2).
<PAGE>
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided net cash of $116,245 for
the nine-month period ended April 28, 2000. Most of this cash was provided by
net income adjusted for depreciation and amortization. Decreases in inventories,
other current assets and other assets and increases in other current liabilities
were partially offset by decreases in accounts payable.
Capital expenditures were $107,023 for the nine-month period ended
April 28, 2000. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $314 and
$1,178 for the quarter and nine-month period ended April 28, 2000 as compared to
$400 and $1,261 for the quarter and nine-month period ended April 30, 1999,
respectively. The decrease in capital expenditures for the quarter and nine
month period versus the same periods a year ago was primarily due to the
decrease in Cracker Barrel new store openings in fiscal 2000 versus the prior
year and the timing of Cracker Barrel new store construction in fiscal 2000 as
compared to the same period a year ago as the Company reduced its new store
development plans to focus management attention on improvement of existing
operations. These decreases were partially offset by Logan's new store
construction.
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 nine months of fiscal 2000.
The Company estimates that its capital expenditures for fiscal 2000
will be approximately $135,000 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. During the third quarter of
fiscal 2000, the Company paid down $10,000 of its revolving credit facility,
prepaid its remaining $7,000 of senior notes and repurchased a total of
1,560,000 shares of its common stock for $14,249 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 April 28, 2000, along with cash generated from
the Company's operating activities and its available revolver, will be
sufficient to finance its continued operations, the remaining 472,500 shares of
its presently authorized stock buyback program and its continued expansion plans
through fiscal 2001. 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. In May 2000, the
Company signed a commitment letter with an investor to complete these proposed
transactions by the end of the fourth quarter. The estimated effect of the
transactions on the Company's results from operations would be to increase other
store operating expenses by the net effect of increased lease expense partially
offset by lower depreciation, and to reduce, by a lesser amount based on present
interest rates, interest expense. These transactions, which could total
approximately $100 million and include up to 50 of the Company's 399 presently
owned Cracker Barrel locations, are intended to result in longer-term
replacement of its existing bank debt as well as to fund the remaining share
repurchase. The Company also is considering certain other longer-term
refinancing of its outstanding revolving bank credit facility, which, if entered
into, could be conventional debt of $50-$100 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A of the Company's Annual Report on Form 10-K for the fiscal year
ended July 30, 1999, and filed with the Commission on October 26, 1999, is
incorporated in this item of this report by this reference.
<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 April 28, 2000, and the related condensed
consolidated statements of income and cash flows for the quarters and nine-month
periods ended April 28, 2000 and April 30, 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 in the United States of
America.
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
June 8, 2000
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Part I, Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended July 30, 1999, and
filed with the Commission on October 26, 1999, is
incorporated in this item of this report by this
reference. The Company's Current Report on Form 8-K,
filed on March 31, 2000, is incorporated in this item
of this report by this reference. See also Note 10 to
the Company's Condensed Consolidated Financial
Statements filed in Part I, Item 1 of this Quarterly
Report on Form 10-Q, which is also incorporated in
this item of this report by this reference.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to Item 601 of
Regulation S-K
(15)Letter regarding unaudited financial information.
(17)Financial Data Schedule
(b) On March 31, 2000, the Company filed a Current Report
on Form 8-K reporting under Item 5 that on March 17,
2000, the Court granted the plaintiffs' motion in the
SERENA MCDERMOTT AND JENNIFER GENTRY V. CRACKER
BARREL OLD COUNTRY STORE, INC. unpaid wage case to
send notice to a provisional class of plaintiffs.
<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: 6/8/00 By /s/Lawrence E. White
------ ------------------------------------------------
Lawrence E. White, Senior Vice President/Finance
and Chief Financial Officer
Date: 6/8/00 By /s/Patrick A. Scruggs
------ ------------------------------------------------
Patrick A. Scruggs, Assistant Treasurer
<PAGE>
June 8, 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 nine-month periods ended
April 28, 2000 and April 30, 1999, as indicated in our report dated June 8,
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 April 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
