Cracker Barrel Old Country Store, Inc 10-Q for FY2025 Q1
Cracker Barrel Old Country Store, Inc (CBRL)
About this 10-Q
Cracker Barrel Old Country Store, Inc filed this 10-Q on December 4, 2024, covering the quarter ended November 1, 2024 (FY2025 Q1).
Headline figures
Quarter ended November 1, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $845.09M
- up 2.6% from $823.84M a year earlier
- Net income
- $4.84M
- down 11.2% from net income of $5.46M a year earlier
- Diluted EPS
- $0.22
- down 12.0% from $0.25 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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.
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).
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.
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
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Outstanding as of November 22, 2024
CRACKER BARREL OLD COUNTRY STORE, INC.
INDEX
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)
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| November 01, | | August 02, | | ||
| | 2024 |
| 2024* | | ||
ASSETS | | | | | | | |
Current Assets: |
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Cash and cash equivalents | | $ | | | $ | | |
Accounts receivable | |
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Inventories | |
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Prepaid expenses and other current assets | |
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Total current assets | |
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Property and equipment | |
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Less: Accumulated depreciation and amortization | |
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Property and equipment – net | |
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Operating lease right-of-use assets, net | |
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Intangible assets | |
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Other assets | |
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Total assets | | $ | | | $ | | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Current Liabilities: |
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Accounts payable | | $ | | | $ | | |
Accrued employee compensation | |
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Other current liabilities | |
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Total current liabilities | |
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Long-term debt | |
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Long-term operating lease liabilities | |
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Other long-term obligations | |
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Commitments and Contingencies (Note 10) | |
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Shareholders’ Equity: | |
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Preferred stock – | |
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Common stock – | | | | | | | |
Additional paid-in capital | |
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Retained earnings | |
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Total shareholders’ equity | |
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Total liabilities and shareholders’ equity | | $ | | | $ | | |
See Notes to unaudited Condensed Consolidated Financial Statements.
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3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
| | Quarter Ended |
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| | November 01, | | October 27, | | | ||
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| 2024 |
| 2023 | | | ||
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Total revenue | | $ | | | $ | | | |
Cost of goods sold (exclusive of depreciation and rent) |
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Labor and other related expenses |
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Other store operating expenses |
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General and administrative expenses |
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Impairment and store closing costs |
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Operating income |
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Interest expense, net |
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Income before income taxes |
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Provision for income taxes (income tax benefit) |
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Net income | | $ | | | $ | | | |
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Net income per share: | | | | | | | | |
Basic | | $ | | | $ | | | |
Diluted | | $ | | | $ | | | |
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Weighted average shares: | | | | | | | | |
Basic | |
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Diluted | |
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See Notes to unaudited Condensed Consolidated Financial Statements.
4
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited and in thousands, except share data)
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| Additional |
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| Total | ||
| | Common Stock | | Paid-In | | Retained | | Shareholders’ | ||||||
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| Shares |
| Amount | | Capital | | Earnings | | Equity | ||||
Balances at August 02, 2024 |
| | | $ | | | $ | | | $ | | | $ | |
Comprehensive Income: | | | | | | | | | | | | | | |
Net income |
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Total comprehensive income |
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Cash dividends declared - $ |
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Share-based compensation |
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Issuance of share-based compensation awards, net of shares withheld for employee taxes |
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Balances at November 01, 2024 |
| | | $ | | | $ | | | $ | | | $ | |
| | | | | | | Additional | | | | | Total | ||
| | Common Stock | | Paid-In | | Retained | | Shareholders’ | ||||||
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| Shares |
| Amount |
| Capital |
| Earnings |
| Equity | ||||
Balances at July 28, 2023 |
| | | $ | | | $ | | | $ | | | $ | |
Comprehensive Income: | | | | | | | | | | | | | | |
Net income |
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Total comprehensive income |
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Cash dividends declared - $ |
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Share-based compensation |
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Issuance of share-based compensation awards, net of shares withheld for employee taxes |
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Balances at October 27, 2023 |
| | | $ | | | $ | | | $ | | | $ | |
See Notes to unaudited Condensed Consolidated Financial Statements.
5
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | | |||||
| | November 01, | | October 27, | | ||
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| 2024 |
| 2023 | | ||
Cash flows from operating activities: |
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Net income | | $ | | | $ | | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
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Depreciation and amortization | | | | | | | |
Amortization of debt issuance costs | |
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Loss on disposition of property and equipment | |
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Impairment | |
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Share-based compensation | |
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Noncash lease expense | |
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Amortization of asset recognized from gain on sale and leaseback transactions | | | | | | | |
Changes in assets and liabilities: | |
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Inventories | |
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Other current assets | |
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Accounts payable | |
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Other current liabilities | |
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Other long-term assets and liabilities | |
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Net cash used in operating activities | |
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Cash flows from investing activities: | |
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Purchase of property and equipment | |
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Proceeds from insurance recoveries of property and equipment | |
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Proceeds from sale of property and equipment | |
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Net cash used in investing activities | |
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Cash flows from financing activities: | |
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Proceeds from issuance of long-term debt | |
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Principal payments under long-term debt | |
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Taxes withheld from issuance of share-based compensation awards | |
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Dividends on common stock | |
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Net cash provided by financing activities | |
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Net decrease in cash and cash equivalents | |
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Cash and cash equivalents, beginning of period | |
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Cash and cash equivalents, end of period | | $ | | | $ | | |
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Supplemental disclosures of cash flow information: | |
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Cash paid during the period for: | |
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Interest, net of amounts capitalized | | $ | | | $ | | |
Income taxes | | $ | | | $ | | |
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Supplemental schedule of non-cash investing and financing activities*: | |
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Capital expenditures accrued in accounts payable | | $ | | | $ | | |
Dividends declared but not yet paid | | $ | | | $ | | |
*
See Notes to unaudited Condensed Consolidated Financial Statements.
6
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 of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept in the United States.
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 02, 2024 (the “2024 Form 10-K”). The accounting policies used in preparing these condensed consolidated financial statements are the same as described in the 2024 Form 10-K. References to a year in these Notes to Condensed Consolidated Financial Statements are to the Company’s fiscal year unless otherwise noted.
Recent Accounting Pronouncements Not Yet Adopted
Segment Disclosures
In November 2023, the Financial Accounting Standards Boards (“FASB”) issued new reportable segment disclosure requirements which require incremental segment information related to measuring segment performance on an annual and interim basis. These new disclosure requirements are effective for fiscal periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. These disclosure requirements should be applied on a retrospective basis. The Company is currently evaluating the effect of adopting these new disclosure requirements on its annual consolidated financial statements and related disclosures in 2025 as well as interim disclosures beginning in the first quarter of 2026.
Income Tax Disclosures
In December 2023, the FASB issued new income tax disclosure requirements which require disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax-related disclosures. These new disclosure requirements are effective for annual periods beginning after December 15, 2024 and allow for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the effect of adopting these new disclosure requirements on its consolidated financial statements and related disclosures in 2026.
7
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued new disclosure requirements which require disaggregated information about certain income statement line items. These new disclosure requirements are effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. These disclosure requirements may be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the effect of adopting these new disclosure requirements on its consolidated financial statements and related disclosures in 2028 as well as interim disclosures beginning in the first quarter of 2029.
| 2. | Fair Value Measurements |
The Company’s assets measured at fair value on a recurring basis at November 01, 2024 were as follows:
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| Total Fair | |
| | Level 1 | | Level 2 | | Level 3 | | Value | ||||
Cash equivalents* | | $ | | | $ | — | | $ | — | | $ | |
Total | | $ | | | $ | — | | $ | — | | $ | |
Deferred compensation plan assets** | |
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Total assets at fair value | | | | |
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| | $ | |
The Company’s assets measured at fair value on a recurring basis at August 02, 2024 were as follows:
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| Total Fair | |
| | Level 1 | | Level 2 | | Level 3 | | Value | ||||
Cash equivalents* | | $ | | | $ | — | | $ | — | | $ | |
Total | | $ | | | $ | — | | $ | — | | $ | |
Deferred compensation plan assets** | | | | |
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Total assets at fair value | | | | |
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| | $ | |
*Consists of money market fund investments.
**Represents plan assets invested in mutual funds established under a rabbi trust for the Company’s non-qualified savings plan and is included in the Condensed Consolidated Balance Sheets as other assets.
The Company’s money market fund investments are measured at fair value using quoted market prices. The Company’s deferred compensation plan assets are measured based on net asset value per share as a practical expedient to estimate fair value. The fair values of the Company’s accounts receivable and accounts payable approximate their carrying amounts because of their short duration. The Company did
The Company’s financial instruments that are not remeasured at fair value include the
8
Assets Measured at Fair Value on a Nonrecurring Basis
In the first quarter of 2025,
| 3. | Inventories |
Inventories were comprised of the following as of the dates indicated:
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| November 01, 2024 |
| August 02, 2024 | ||
Retail | | $ | | | $ | |
Restaurant | |
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Supplies | |
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Total | | $ | | | $ | |
| 4. |
| 5. |
4.Debt
On June 17, 2022, the Company entered into a
As of November 01, 2024, the Company had $
In accordance with the 2022 Revolving Credit Facility, outstanding borrowings bear interest, at the Company’s election, either at (1) the Term Secured Overnight Financing Rate (SOFR) or (2) a base rate equal to the greatest of (i) the prime rate, (ii) a rate that is
The 2022 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total senior secured leverage ratio and a minimum consolidated interest coverage ratio. At November 01, 2024, the Company was in compliance with all financial covenants under the 2022 Revolving Credit Facility.
9
The 2022 Revolving Credit Facility also imposes restrictions on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase. Under the 2022 Revolving Credit Facility, provided there is no default existing and the total of the Company’s availability under the 2022 Revolving Credit Facility plus the Company’s cash and cash equivalents on hand is at least $
Convertible Senior Notes
On June 18, 2021, the Company completed a $
The Notes are unsecured obligations and do not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. In an event of default, the principal amount of, and all accrued and unpaid interest on, all of the notes then outstanding will immediately become due and payable. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will consist exclusively of the right of the noteholders to receive special interest on the Notes for up to
The initial conversion rate applicable to the Notes was
Net proceeds from the Notes offering were approximately $
The Notes are accounted for entirely as a liability, and the issuance costs of the Notes are accounted for wholly as debt issuance costs.
10
The following table includes the outstanding principal amount and carrying value of the Notes as of the dates indicated:
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| November 01, 2024 |
| August 02, 2024 | ||
Liability component | | | | | | |
Principal | | $ | | | $ | |
Less: Debt issuance costs (1) | |
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Net carrying amount | | $ | | | $ | |
| (1) | Debt issuance costs are amortized to interest expense using the effective interest method over the expected life of the Notes. |
The effective rate of the Notes over their expected life is
| | Quarter Ended | ||||
| | November 01, | | October 27, | ||
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| 2024 |
| 2023 | ||
Coupon interest | | $ | | | $ | |
Amortization of issuance costs | |
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Total interest expense | | $ | | | $ | |
During any calendar quarter commencing after September 30, 2021, in which the closing price of the Company’s common stock exceeds
Convertible Note Hedge and Warrant Transactions
In connection with the offering of the Notes, the Company entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the initial purchasers of the Notes and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, which initially was approximately
The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlay the Notes and are expected generally to reduce the potential equity dilution, and/or offset any cash payments in excess of the principal amount due, as the case may be, upon conversion of the Notes. By default, the Warrant Transactions could have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the Warrant Transactions. The strike price was initially $
11
As these transactions meet certain accounting criteria, the Convertible Note Hedge Transactions and Warrant Transactions were recorded in shareholders’ equity, not accounted for as derivatives and are not remeasured each reporting period.
| 5. | Seasonality |
Historically, the revenue and net income of the Company have been lower in the first and third quarters and higher in the second and fourth quarters. Management attributes these variations to the holiday shopping season and the summer vacation and travel season. The Company’s retail sales, which are made substantially to the Company’s restaurant customers, historically have been highest in the Company’s second quarter, which includes the holiday shopping season. Historically, interstate tourist traffic and the propensity to dine out have been higher during the summer months, thereby contributing to higher profits in the Company’s fourth quarter. The Company generally opens additional new locations throughout the year. Therefore, the results of operations for any interim period cannot be considered indicative of the operating results for an entire year.
| 6. | Segment Information |
Cracker Barrel stores represent a single, integrated operation with
| 7. | Revenue Recognition |
Revenue consists primarily of sales from restaurant and retail operations. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest, retail customer or other customer. The Company’s policy is to present sales in the Condensed Consolidated Statements of Income on a net presentation basis after deducting sales tax.
Disaggregation of revenue
Total revenue was comprised of the following for the specified periods:
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| Quarter Ended | ||||
| | November 01, | | October 27, | ||
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| 2024 |
| 2023 | ||
Revenue: | | | | | | |
Restaurant | | $ | | | $ | |
Retail |
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Total revenue | | $ | | | $ | |
Restaurant Revenue
The Company recognizes revenues from restaurant sales when payment is tendered at the point of sale, as the Company’s performance obligation to provide food and beverages is satisfied.
Retail Revenue
The Company recognizes revenues from retail sales when payment is tendered at the point of sale, as the Company’s performance obligation to provide merchandise is satisfied. Ecommerce sales, including shipping revenue, are recorded upon delivery to the customer. Additionally, estimated sales returns are calculated based on return history and sales levels.
12
Gift Card Breakage
Included in restaurant and retail revenue is gift card breakage. Customer purchases of gift cards, to be utilized at the Company’s stores, are not recognized as sales until the card is redeemed and the customer purchases food and/or merchandise. Gift cards do not carry an expiration date; therefore, customers can redeem their gift cards indefinitely. A certain number of gift cards will not be fully redeemed. Management estimates unredeemed balances and recognizes gift card breakage revenue for these amounts in the Company’s Condensed Consolidated Statements of Income over the expected redemption period. Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote, and the Company determines that there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction.
The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage over the period of estimated redemption. For the quarter ended November 01, 2024, gift card breakage was $
Deferred revenue related to the Company’s gift cards was $
Loyalty Program
The Company’s customer loyalty program, Cracker Barrel Rewards, allows members to earn points (“pegs”) for each qualifying purchase in store or online. Pegs earned are then converted to rewards upon reaching certain thresholds. These rewards may be redeemed on future restaurant or retail purchases in store or online.
The estimation of the standalone selling price of pegs and other rewards issued to customers involves several assumptions, primarily the estimated value of the product for which the reward is expected to be redeemed and the probability that the pegs or reward will expire. These inputs are subject to change over time due to factors such as increased costs or changes in customer behavior.
The Company defers a portion of the revenue related to the pegs earned at the time of the original transaction based on the estimated value of the item for which the reward is expected to be redeemed, net of estimated unredeemed pegs. Pegs expire after
| 8. | Leases |
The Company has ground leases for its leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases. The Company also leases advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases. Additionally, the Company completed sale-leaseback transactions in 2009, 2020 and 2021 (see section below entitled “Sale and Leaseback Transactions”); all the properties qualified for sale and leaseback and operating lease accounting classification. To determine whether a contract is or contains a lease, the Company determines at contract inception whether it contains the right to control the use of an identified asset for a period of time in exchange for consideration. If the contract has the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, the Company recognizes a right-of-use asset and lease liability.
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The Company’s leases all have varying terms and expire at various dates through 2058. Restaurant real estate leases typically have base terms of
The Company has entered into real estate leases for
The Company has elected not to separate lease and non-lease components. Additionally, the Company has elected to apply the short term lease exemption to all asset classes and the short term lease expense for the period reasonably reflects the short term lease commitments. As the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, the Company used the incremental borrowing rate as of the adoption date. Assumptions used in determining the Company’s incremental borrowing rate include the Company’s implied credit rating and an estimate of secured borrowing rates based on comparable market data.
The following table summarizes the components of lease cost for operating leases for the specified periods:
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| Quarter Ended | ||||
| | November 01, | | October 27, | ||
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| 2024 |
| 2023 | ||
Operating lease cost | | $ | | | $ | |
Short term lease cost |
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Variable lease cost |
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Total lease cost | | $ | | | $ | |
The following table summarizes supplemental cash flow information and non-cash activity related to the Company’s operating leases for the specified periods:
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| Quarter Ended | ||||
| | November 01, | | October 27, | ||
|
| 2025 |
| 2023 | ||
Operating cash flow information: | |
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Cash paid for amounts included in the measurement of lease liabilities | | $ | | | $ | |
Noncash information: | |
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Right-of-use assets obtained in exchange for new operating lease liabilities | |
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Lease modifications or reassessments increasing right-of-use assets | |
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Lease modifications removing right-of-use assets | |
| ( | |
| ( |
14
The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of dates indicated:
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| November 01, 2024 |
| October 27, 2023 |
|
|
Weighted-average remaining lease term | | | | | ||
Weighted-average discount rate |
| | % | | % |
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The following table summarizes the maturities of undiscounted cash flows reconciled to the total operating lease liability as of November 01, 2024:
Year |
| Total | |
Remainder of 2025 | | $ | |
2026 | |
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2027 | |
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2028 | |
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2029 | |
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Thereafter | |
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Total future minimum lease payments | |
| |
Less imputed remaining interest | |
| ( |
Total present value of operating lease liabilities | | $ | |
Sale and Leaseback Transactions
In 2009, the Company completed sale and leaseback transactions involving
In 2020, the Company completed a sale and leaseback transaction involving
In 2021, the Company completed a sale and leaseback transaction involving
| 9. | Net Income Per Share and Weighted Average Shares |
Basic consolidated net income per share is computed by dividing consolidated net income available to common shareholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted consolidated net income per share reflects the potential dilution that could occur if securities, options or other contracts to issue shares of common stock were exercised or converted into shares of common stock and is based upon the weighted average number of shares of common stock and common equivalent shares outstanding during the reporting period. Common equivalent shares related to stock options and nonvested stock awards and units issued by the Company are calculated using the treasury stock method. The outstanding stock options and nonvested stock awards and units issued by the Company represent the only dilutive effects on diluted consolidated net income per share. The Company’s convertible senior notes and related warrants are calculated using the net share settlement option under the if converted method. Because the principal amount of the convertible senior notes will be settled in cash with any excess conversion value settled in cash or shares of common stock, the convertible senior notes have been excluded from the computation of diluted earnings per share because the average market price of the Company’s common stock during the reporting period did not exceed the conversion price of $
15
The following table reconciles the components of diluted earnings per share computations for the specified periods:
|
| Quarter Ended | ||||
| | November 01, | | October 27, | ||
|
| 2024 |
| 2023 | ||
Net income per share numerator | | $ | | | $ | |
| | | | | | |
Net income per share denominator: | |
| | |
| |
Basic weighted average shares | |
| | |
| |
Add potential dilution: | |
| | |
| |
Nonvested stock awards and units | |
| | |
| |
Diluted weighted average shares | |
| | |
| |
| 10. |
10. | Commitments and Contingencies |
The Company and its subsidiaries are party to various legal and regulatory proceedings and claims incidental to their business in the ordinary course. In the opinion of management, based upon information currently available, the ultimate liability with respect to these contingencies will not materially affect the Company’s financial statements.
Related to its insurance coverage, the Company is contingently liable pursuant to standby letters of credit as credit guarantees to certain insurers. As of November 01, 2024, the Company had $
The Company enters into certain indemnification agreements in favor of third parties in the ordinary course of business. The Company believes that the probability of incurring an actual liability under such indemnification agreements is sufficiently remote that no such liability has been recorded in the Condensed Consolidated Balance Sheet as of November 01, 2024.
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cracker Barrel Old Country Store, Inc., and its subsidiaries (collectively, the “Company,” “our” or “we”) are principally engaged in the operation and development in the United States of the Cracker Barrel Old Country StoreÒ (“Cracker Barrel”) concept. As of November 01, 2024, we operated 658 Cracker Barrel stores in 44 states and 69 Maple Street Biscuit Company (“MSBC”) locations in ten states.
All dollar amounts reported or discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are shown in thousands, except per share amounts and certain statistical information (e.g., number of stores). References to years in MD&A are to our fiscal year unless otherwise noted.
16
MD&A provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. MD&A should be read in conjunction with the (i) condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and (ii) audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 02, 2024 (the “2024 Form 10-K”). Except for specific historical information, many of the matters discussed in this report may express or imply projections of items such as revenues or expenditures, estimated capital expenditures, compliance with debt covenants, plans and objectives for future operations, store economics, inventory shrinkage, growth or initiatives, expected future economic performance or the expected outcome or impact of pending or threatened litigation. These and similar statements regarding events or results which we expect will or may occur in the future are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause our actual results and performance to differ materially from those expressed or implied by such statements. All forward-looking information is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these risks, uncertainties and other factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “trends,” “assumptions,” “target,” “guidance,” “outlook,” “opportunity,” “future,” “plans,” “goals,” “objectives,” “expectations,” “near-term,” “long-term,” “projection,” “may,” “will,” “would,” “could,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” “”regular,” “should,” “projects,” “forecasts” or “continue” (or the negative or other derivatives of each of these terms) or similar terminology. We believe the assumptions underlying any forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in or implied by the forward-looking statements. In addition to the risks of ordinary business operations, and those discussed or described in this report or in information incorporated by reference into this report, factors and risks that may result in actual results differing from this forward-looking information include, but are not limited to risks and uncertainties associated with inflationary conditions with respect to the price of commodities, ingredients, transportation, distribution and labor; disruptions to our restaurant or retail supply chain; our ability to manage retail inventory and merchandise mix; our ability to sustain or the effects of plans intended to improve operational or marketing execution and performance, including the Company’s strategic transformation plan; the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention; consumer behavior based on negative publicity or changes in consumer health or dietary trends or safety aspects of our food or products or those of the restaurant industry in general, including concerns about outbreaks of infectious disease; the effects of our indebtedness and associated restrictions on our financial and operating flexibility and ability to execute or pursue our operating plans and objectives; changes in interest rates, increases in borrowed capital or capital market conditions affecting our financing costs and ability to refinance our indebtedness, in whole or in part; our reliance on a single distribution facility and certain significant vendors, particularly for foreign-sourced retail products; information technology, disruptions and data privacy and information security breaches, whether as a result of infrastructure failures, employee or vendor errors, or actions of third parties; our compliance with privacy and data protection laws; changes in or implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, health and safety, animal welfare, pensions, insurance or other undeterminable areas; the actual results of pending, future or threatened litigation or governmental investigations; our ability to manage the impact of negative social media attention and the costs and effects of negative publicity; the impact of activist shareholders; our ability to achieve aspirations, goals and projections related to our environmental, social and governance initiatives; our ability to enter successfully into new geographic markets that may be less familiar to us; changes in land, building materials and construction costs; the availability and cost of suitable sites for restaurant development and our ability to identify those sites; our ability to retain key personnel; the ability of and cost to us to recruit, train, and retain qualified hourly and management employees; uncertain performance of acquired businesses, strategic investments and other initiatives that we may pursue from time to time; the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations; general or regional economic weakness, business and societal conditions and the weather impact on sales and customer travel; discretionary income or personal expenditure activity of our customers; implementation of new or changes in interpretation of existing accounting principles generally accepted in the United States of America (“GAAP”), and those factors contained in Part I, Item 1A of the 2024 Form 10-K, as well as other factors described from time to time in our filings with the Securities and Exchange Commission (“SEC”), press releases and other communications.
17
Readers are cautioned not to place undue reliance on forward-looking statements made in this report because the statements speak only as of the report’s date. Except as may be required by law, we have no obligation or intention to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. Readers are advised, however, to consult any future public disclosures that we may make on related subjects in reports that we file with or furnish to the SEC or in our other public disclosures.
Overview
Management believes that Cracker Barrel’s brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy. Our long-term strategy is anchored on three overarching business imperatives: driving relevancy, delivering food and experiences guests love, and growing profitability.
We believe there are significant challenges in the macroeconomic outlook for the coming quarters, including continued volatility of inflation and interest rates, high consumer debt levels and lower savings rates, as well as the potential uncertainty associated with the geopolitical environment, among other factors. However, despite these challenges, we remain focused on delivering long-term growth and returns for shareholders. Our strategic transformation plan is built on the following five pillars of our strategy:
| ● | Refining the brand: evolving the brand across all touchpoints including refining and strengthening our positioning to best reach existing and new guests. |
| ● | Enhancing the menu: introducing menu innovation focused on craveability and traffic drivers, streamlining processes to improve execution, and optimizing strategic pricing to protect value and improve profitability. |
| ● | Evolving the store and guest experience: delivering an exceptional guest experience through operational excellence and improved store design and atmosphere. We are in the process of testing remodel prototypes and expect to complete 25-30 remodels in 2025 along with 25-30 store refreshes. |
| ● | Winning in digital and off-premise: growing the off-premise business and leveraging technology such as Cracker Barrel Rewards loyalty program. We continue to leverage guest data to better understand consumer behavior and identify ways to drive frequency and engagement. |
| ● | Elevating the employee experience: upgrading training and development programs and tools and simplifying job roles and utilizing technology to improve the employee experience. |
Key Performance Indicators
Management uses a number of key performance measures to evaluate our operational and financial performance, including the following:
| ● | Comparable store restaurant sales increase/(decrease): To calculate comparable store restaurant sales increase/(decrease), we determine total restaurant sales of stores open at least six full quarters before the beginning of the applicable period, measured on comparable calendar weeks. We then subtract total comparable store restaurant sales for the current year period from total comparable store restaurant sales for the applicable historical period to calculate the absolute dollar change. To calculate comparable store restaurant sales increase/(decrease), which we express as a percentage, we divide the absolute dollar change by the comparable store restaurant sales for the historical period. |
| ● | Comparable store retail sales increase/(decrease): To calculate comparable store retail sales increase/(decrease), we determine total retail sales of stores open at least six full quarters before the beginning of the applicable period, measured on comparable calendar weeks. We then subtract total comparable store retail sales for the current year period from total comparable store retail sales for the applicable historical period to calculate the absolute dollar change. To calculate comparable store retail sales increase/(decrease), which we express as a percentage, we divide the absolute dollar change by the comparable store retail sales for the historical period. |
18
| ● | Comparable store restaurant and retail sales increase/(decrease): To calculate comparable store restaurant and retail sales increase/(decrease), we determine total restaurant and retail sales of stores open at least six full quarters before the beginning of the applicable period, measured on comparable calendar weeks. We then subtract total comparable store restaurant and retail sales for the current year period from total comparable store restaurant and retail sales for the applicable historical period to calculate the absolute dollar change. To calculate comparable store restaurant and retail sales increase/(decrease), which we express as a percentage, we divide the absolute dollar change by the comparable store restaurant and retail sales for the historical period. |
| ● | Average check increase per guest: To calculate average check per guest, we determine comparable store restaurant sales, as described above, and divide by comparable guest traffic (as described above). We then subtract average check per guest for the current year period from average check per guest for the applicable historical period to calculate the absolute dollar change. The absolute dollar change is divided by the prior year average check number to calculate average check increase per guest, which we express as a percentage. |
| ● | Comparable restaurant guest traffic increase/(decrease): To calculate comparable restaurant guest traffic increase/(decrease), we determine the number of entrees sold in our dine-in and off-premise business from stores open at least six full quarters at the beginning of the applicable period, measured on comparable calendar weeks. We then subtract total entrees sold for the current year period from total entrees sold for the applicable historical period to calculate the absolute numerical change. To calculate comparable restaurant guest traffic increase/(decrease), which we express as a percentage, we divide the absolute numerical change by the total entrees sold for the historical period. |
These performance indicators exclude the impact of new store openings and sales related to MSBC.
We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time. We use comparable restaurant guest traffic increase/(decrease) to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change. Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu changes. We believe these performance indicators are useful for investors by providing a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings, closings, and other transitional changes.
Results of Operations
The following table highlights our operating results by percentage relationships to total revenue for the specified periods:
|
| November 01, | | October 27, |
|
|
| 2024 |
| 2023 |
|
Total revenue |
| 100.0 | % | 100.0 | % |
Cost of goods sold (exclusive of depreciation and rent) |
| 30.6 |
| 31.0 |
|
Labor and other related expenses |
| 36.4 |
| 37.0 |
|
Other store operating expenses |
| 25.0 |
| 24.7 |
|
General and administrative expenses |
| 7.1 |
| 5.9 |
|
Impairment and store closing costs |
| 0.1 |
| — |
|
Operating income |
| 0.8 |
| 1.4 |
|
Interest expense, net |
| 0.7 |
| 0.6 |
|
Income before income taxes |
| 0.1 |
| 0.8 |
|
Provision for income taxes (income tax benefit) |
| (0.5) |
| 0.1 |
|
Net income |
| 0.6 | % | 0.7 | % |
19
The following table sets forth the change in the number of units in operation for the specified periods:
| | Quarter Ended |
| ||
| | November 01, | | October 27, | |
|
| 2024 |
| 2023 |
|
Net change in units: |
|
|
|
|
|
Cracker Barrel |
| — |
| 1 |
|
MSBC |
| 3 |
| 1 |
|
| | | | | |
Units in operation at end of the period: |
|
|
|
|
|
Cracker Barrel |
| 658 |
| 661 |
|
MSBC |
| 69 |
| 60 |
|
Total units at end of the period |
| 727 |
| 721 |
|
Total Revenue
Total revenue for the first quarter of 2025 increased 2.6% as compared to the same period in the prior year.
The following table highlights the key components of revenue for the specified periods:
|
| Quarter Ended | | ||||
| | November 01, | | October 27, | | ||
|
| 2024 |
| 2023 |
| ||
Revenue in dollars: | |
| | |
| | |
Restaurant |
| $ | 683,271 | | $ | 660,793 | |
Retail |
| | 161,818 | |
| 163,046 | |
Total revenue |
| $ | 845,089 | | $ | 832,389 | |
Total revenue by percentage relationships: |
|
| | |
|
| |
Restaurant |
| | 80.9 | % |
| 80.2 | % |
Retail |
| | 19.1 | % |
| 19.8 | % |
Average store volumes(1): | | | | | | | |
Restaurant | | $ | 1,012.8 | | $ | 975.6 | |
Retail | | | 245.6 | | | 246.7 | |
Total revenue | | $ | 1,258.4 | | $ | 1,222.3 | |
Comparable store sales increase (decrease) (2): |
|
| | |
|
| |
Restaurant |
| | 2.9 | % | | (0.5) | % |
Retail |
| | (1.6) | % |
| (8.1) | % |
Restaurant and retail |
| | 2.0 | % | | (2.1) | % |
Average check increase |
| | 5.8 | % |
| 6.6 | % |
Comparable restaurant guest traffic decrease(2): |
| | (2.9) | % |
| (7.1) | % |
| (1) | Average unit volumes include sales of all stores except for MSBC. |
| (2) | Comparable store sales and traffic consist of sales of stores open at least six full quarters at the beginning of the period and are measured on comparable calendar weeks. Comparable store sales and traffic exclude MSBC. |
For the first quarter of 2025, our comparable store restaurant sales increase resulted primarily from the average check increase partially offset by the guest traffic decrease. For the first quarter of 2025, the average check increase included an average menu price increase of 4.7%.
Our retail sales are made substantially to our restaurant guests. For the first quarter of 2025, our comparable store retail sales decrease resulted primarily from the guest traffic decrease.
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The decrease in guest traffic is primarily the result of lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher interest rates, higher consumer debt levels and lower savings rates.
Total revenue in the first quarter of 2025 also increased as a result of an increase in gift card breakage as compared to the prior year period. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding gift card breakage.
Cost of Goods Sold (Exclusive of Depreciation and Rent)
The following table highlights the components of cost of goods sold (exclusive of depreciation and rent) in dollar amounts and as percentages of revenues for the specified periods:
| | Quarter Ended | | ||||
| | November 01, | | October 27, | | ||
|
| 2024 |
| 2023 |
| ||
Cost of Goods Sold in dollars: | |
| | |
| | |
Restaurant | | $ | 178,407 | | $ | 173,441 | |
Retail | |
| 80,494 | |
| 82,118 | |
Total Cost of Goods Sold | | $ | 258,901 | | $ | 255,559 | |
| | | | | | | |
Cost of Goods Sold by percentage of revenue: | | | | | | | |
Restaurant | | | 26.1 | % | | 26.2 | % |
Retail | | | 49.7 | % | | 50.4 | % |
Restaurant cost of goods sold as a percentage of restaurant revenue remained relatively constant in the first quarter of 2025 as compared to the same period in the prior year. Commodity inflation was 1.9% in the first quarter of 2025. We presently expect the rate of commodity inflation to be approximately 2% to 3% in 2025.
The decrease in retail cost of goods sold as a percentage of retail revenue in the first quarter of 2025 as compared to the same period in the prior year resulted primarily from higher vendor allowances and higher initial margin partially offset by higher markdowns.
|
| First Quarter | | |
| | (Decrease) Increase | | |
| | as a Percentage of | | |
| | Total Retail Revenue | | |
Vendor allowances | | (0.5) | % | |
Higher initial margin | | (0.4) | % | |
Markdowns | | 0.3 | % | |
Labor and Related Expenses
Labor and related expenses include all direct and indirect labor and related costs incurred in store operations. The following table highlights labor and related expenses as a percentage of total revenue for the specified periods:
| | Quarter Ended | | ||
| | November 01, | | October 27, | |
|
| 2024 |
| 2023 |
|
Labor and related expenses |
| 36.4 | % | 37.0 | % |
21
This percentage change for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from the following:
| | First Quarter | |
| | (Decrease) Increase | |
| | as a Percentage of | |
|
| Total Revenue |
|
Store hourly labor | | (0.6) | % |
Store management compensation | | (0.5) | % |
Employee health care expense | | (0.1) | % |
Other wages |
| 0.4 | % |
Workers' compensation expense |
| 0.3 | % |
The decreases in store hourly labor and store management compensation as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from menu price increases being higher than wage inflation. Additionally, store hourly labor benefited from improved productivity.
We presently expect the rate of wage inflation to be approximately 3% to 4% in 2025.
The decrease in employee health care expense as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from favorable medical claim experience and lower enrollment.
The increase in workers’ compensation expense as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from unfavorable claim development due to the increasing cost of claims.
The increase in other wages as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from a revision in our employee benefits policy that resulted in a reduction in other wages expense in the first quarter of 2024.
Other Store Operating Expenses
Other store operating expenses include all store-level operating costs, the major components of which are occupancy costs, operating supplies, advertising, third-party delivery fees, credit and gift card fees, real and personal property taxes and general insurance. Occupancy costs include maintenance, utilities, depreciation and rent.
The following table highlights other store operating expenses as a percentage of total revenue for the specified periods:
| | Quarter Ended | | ||
| | November 01, | | October 27, |
|
|
| 2024 |
| 2023 |
|
Other store operating expenses |
| 25.0 | % | 24.7 | % |
22
This percentage changes for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from the following:
| | First Quarter | |
| | Increase (Decrease) | |
| | as a Percentage | |
|
| of Total Revenue |
|
Other store expenses | | 0.4 | % |
General insurance expense | | 0.2 | % |
Store occupancy costs | | (0.2) | % |
The increase in other store operating expense as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from higher conference expense due to a biennial district manager conference held in the first quarter of 2025, costs associated with our off-premise business and hurricane-related expenses incurred in the first quarter of 2025.
The increase in general insurance expense as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from unfavorable claim development.
The decrease in store occupancy costs as a percentage of total revenue for the first quarter of 2025 as compared to the same period in the prior year period resulted primarily from lower utilities expense partially offset by higher depreciation. The decrease in utilities expense for the first quarter of 2025 as compared to the prior year period resulted primarily from lower electricity, natural gas and water usage. The increase in depreciation expense for the first quarter of 2025 as compared to the prior year period resulted primarily from higher capital expenditures.
General and Administrative Expenses
The following table highlights general and administrative expenses as a percentage of total revenue for the specified periods:
| | Quarter Ended | | ||
| | November 01, | | October 27, |
|
|
| 2024 |
| 2023 |
|
General and administrative expenses |
| 7.1 | % | 5.9 | % |
This percentage change for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from higher professional fees. The increase in professional fees as a percentage of total revenue in the first quarter of 2025 as compared to the prior year period resulted primarily from an approximate $3,300 charge in connection with our settlement of a series of wage and hour arbitrations, $2,958 in costs related to a proxy contest in connection with the Company’s 2024 annual shareholders meeting held on November 21, 2024 and $3,298 in costs associated with the Company’s strategic transformation plan.
Impairment and Store Closing Costs
During the first quarter of 2025, we recorded impairment charges of $700 as a result of the deterioration in operating performance in two MSBC locations. No impairment was recorded in the first quarter of 2024. No stores were closed in the first quarter of 2025 or in the first quarter of 2024.
23
Interest Expense, Net
The following table highlights interest expense in dollars for the specified periods:
| | Quarter Ended | ||||
| | November 01, | | October 27, | ||
|
| 2024 |
| 2023 | ||
Interest expense, net | | $ | 5,822 | | $ | 4,938 |
The increase in interest expense for the first quarter of 2025 as compared to the same period in the prior year resulted primarily from higher weighted average debt levels under our 2022 Revolving Credit Facility (as defined below).
Provision for Income Taxes (Income Tax Benefit)
The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax rate”) for the specified periods:
| | Quarter Ended | | ||
| | November 01, | | October 27, |
|
|
| 2024 |
| 2023 |
|
Effective tax rate | | (287.8) | % | 15.7 | % |
The decrease in the effective tax rate from the first quarter of 2024 to the first quarter of 2025 is primarily due to the disproportionate benefit of employment credits in relation to income before taxes in the current year period.
The Company’s quarterly provision (benefit) for income taxes has historically been calculated using the annualized effective tax rate method (“AETR method”) which applies an estimated annual effective tax rate to pre-tax income or loss. However, the Company recorded its interim income tax provision (benefit) using the discrete-period computation method as of November 01, 2024, as allowed under Accounting Standards Codification 740-240, Accounting for Income Taxes – Interim Reporting. Use of the AETR method would have resulted in an unreliable tax rate as small changes in the projected ordinary annual income would have resulted in significant changes in the annualized effective tax rate.
We presently expect our effective tax rate for 2025 to be approximately (7%) to (11%).
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our 2022 Revolving Credit Facility. Cash generated from operations, together with our borrowing capacity under the 2022 Revolving Credit Facility, were sufficient to finance all of our growth, dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment obligations in the first three months of 2025. We believe that cash on hand at November 01, 2024, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, our strategic transformation initiative and continuing expansion plans, debt service, dividend payments, capital expenditures and working capital needs for the next twelve months and thereafter. Our ability to draw on our 2022 Revolving Credit Facility is subject to the satisfaction of the provisions of the credit facility, as amended, and we believe we will be able to refinance our 2022 Revolving Credit Facility and other debt instruments prior to maturity.
24
Cash Used in Operations
Our operating activities used net cash of $4,395 for the first three months of 2025 as compared to $15,797 net cash used during the first three months of 2024. This change resulted primarily from the timing of payments for accounts payable and certain taxes partially offset by higher bonus payments made in the first quarter of 2025 as a result of the prior year’s performance.
Capital Expenditures and Proceeds from Sale of Property and Equipment
Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $38,887 for the first three months of 2025 as compared to $24,637 for the same period in the prior year. Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and capital expenditures for strategic initiatives. The increase in capital expenditures in the first three months of 2025 as compared to the first three months of 2024 resulted primarily from our maintenance and remodel initiatives, including as part of our strategic transformation plan.
As part of our strategic transformation plan, we have modified our capital allocation policy and currently expect to increase our capital expenditures over the three-year period from 2025 to 2027 to approximately $600,000 to $700,000, of which we expect to expend $160,000 to $180,000 in 2025. This increase includes expansion of our maintenance and remodel initiatives as well as additional technology improvements. This increase also includes the acquisition of sites and construction costs of new Cracker Barrel and MSBC locations that have opened or that we expect to open during 2025. We intend to fund our capital expenditures with cash generated by operations and borrowings under our 2022 Revolving Credit Facility, as necessary.
Borrowing Capacity, Debt Covenants and Notes
On June 17, 2022, we entered into a five-year $700,000 revolving credit facility (the “2022 Revolving Credit Facility”). The 2022 Revolving Credit Facility contains an option for the Company to increase the revolving credit facility by $200,000.
At November 01, 2024, we had $230,000 of outstanding borrowings under the 2022 Revolving Credit Facility and $34,004 of standby letters of credit related to securing reserved claims under our workers’ compensation insurance and certain sale and leaseback transactions, which reduce our borrowing availability under the 2022 Revolving Credit Facility. At November 01, 2024, we had $435,996 in borrowing availability under our 2022 Revolving Credit Facility. During the first three months of 2025, we borrowed $136,500 and repaid $86,500 under the 2022 Revolving Credit Facility.
Our 2022 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total senior secured leverage ratio and a minimum consolidated interest coverage ratio. We were in compliance with the 2022 Revolving Credit Facility’s financial covenants at November 01, 2024, and we expect to be in compliance with the 2022 Revolving Credit Facility’s financial covenants for the remaining term of the facility.
Our $300,000 aggregate principal amount of 0.625% Convertible Senior Notes (the “Notes”) mature on June 15, 2026, unless earlier converted, repurchased or redeemed. The Notes are senior, unsecured obligations of the Company and bear cash interest at a rate of 0.625% per annum, payable semi-annually in arrears on June 15 and December 15 of each year.
See Note 4 to our Condensed Consolidated Financial Statements for further information on our long-term debt.
25
Dividends and Share-Based Compensation Awards
Our 2022 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of shares we are permitted to repurchase. Under the 2022 Revolving Credit Facility, provided there is no default existing and the total of our availability under the 2022 Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the “Cash Availability”), we may declare and pay cash dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if at the time the dividend or the repurchase is made our consolidated total senior secured leverage ratio is 2.75 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if our consolidated total leverage ratio is greater than 2.75 to 1.00 at the time the dividend or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, Cash Availability is at least $100,000, we may declare and pay cash dividends on shares of our common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.
During the first three months of 2025, we paid a regular dividend of $0.25 per share and declared a dividend of $0.25 per share that was subsequently paid on November 13, 2024, to shareholders of record on October 18, 2024. In addition, in the second quarter of 2025, our Board of Directors approved a regular dividend payable on February 12, 2025 to shareholders of record as of January 17, 2025 of $0.25 per share.
During the first three months of 2025, we issued 39,185 shares of our common stock resulting from the vesting of share-based compensation awards. Related tax withholding payments on these share-based compensation awards resulted in a net use of cash of $1,239.
Working Capital
In the restaurant industry, substantially all payments received on sales are made by credit card, debit card or cash. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while restaurant inventories purchased locally are generally financed from normal trade credit. Because of our retail gift shops, which have a lower product turnover than the restaurants, we carry larger inventories than many other companies in the restaurant industry. Retail inventories are generally financed through trade credit. These various trade terms are aided by the rapid turnover of the restaurant inventory. Employees generally are paid once every week or every two weeks except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses, such as certain taxes and some benefits, are deferred for longer periods of time.
Like many other restaurant companies, we are able to, and often do, operate with negative working capital. We had negative working capital of $137,737 at November 01, 2024 as compared to negative working capital of $175,993 at August 02, 2024. The change in working capital at November 01, 2024 as compared to August 02, 2024 primarily resulted from higher inventory levels which reflect our normal seasonal build to support our expected holiday sales and lower incentive compensations accruals due to the payment of annual and long-term incentive bonuses and the timing of payments for payroll.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements.
Material Commitments
There have been no material changes in our material commitments other than in the ordinary course of business since the end of 2024. Refer to the section entitled “Liquidity and Capital Resources” presented in the MD&A of our 2024 Form 10-K for additional information regarding our material commitments.
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Recent Accounting Pronouncements Not Yet Adopted
See Note 1 to the accompanying Condensed Consolidated Financial Statements for a discussion of recent accounting guidance not yet adopted. We are currently evaluating the impact of adopting the accounting guidance.
Critical Accounting Estimates
We prepare our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends, outside advice from parties believed to be experts in such matters, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results could differ from those assumptions and estimates, and such differences could be material.
Our critical accounting estimates are described under the heading “Critical Accounting Estimates” in Part II, Item 7 of the 2024 Form 10-K. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions.
Critical accounting estimates are those that:
| ● | management believes are most important to the accurate portrayal of both our financial condition and operating results, and |
| ● | require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. |
We consider the following accounting estimates to be most critical in understanding the judgments that are involved in preparing our Consolidated Financial Statements:
| ● | Impairment of Long-Lived Assets |
| ● | Insurance Reserves |
| ● | Retail Inventory Valuation |
| ● | Lease Accounting |
Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. There have been no material changes in our critical accounting estimates from those described in the 2024 Form 10-K.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our quantitative and qualitative market risks since August 02, 2024. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of the 2024 Form 10-K.
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Interest Rate Risk. We have interest rate risk relative to our outstanding borrowings under our revolving credit facility. At November 01, 2024, our outstanding borrowings totaled $230,000 under our 2022 Revolving Credit Facility (see Note 4 to the Condensed Consolidated Financial Statements). In accordance with the 2022 Revolving Credit Facility, outstanding borrowings bear interest, at our election, either at (1) the Term Secured Overnight Financing Rate (SOFR) or (2) a base rate equal to the greatest of (i) the prime rate, (ii) a rate that is 0.5% in excess of the Federal Funds Rate, and (iii) Term SOFR plus 1.0%, in each case plus an applicable margin based on the Company’s consolidated total leverage ratio. Our policy has been to manage interest cost using a mix of fixed and variable rate debt (see Note 4 to our Condensed Consolidated Financial Statements). Additionally, the Notes bear interest at a fixed rate of 0.625% per annum.
The impact of a one-percentage point increase or decrease in the $230,000 of our outstanding borrowings under our revolving credit facility is approximately $2,326 on a pre-tax annualized basis.
Credit Risk. In the fourth quarter of 2021, the Company issued the Notes and entered into the Convertible Note Hedge Transactions and the Warrant Transactions with the Hedge Counterparties. Subject to the changes in the market price of the Company’s common stock price, the Company could be exposed to credit risk arising out of the net settlement of the Convertible Note Hedge Transactions and the Warrant Transactions in its favor. Based on the Company’s review of the possible net settlements and the creditworthiness of the Hedge Counterparties and their affiliates, the Company believes it does not have a material exposure to credit risk as a result of these transactions at this time.
ITEM 4. Controls and Procedures
Our management, including our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that as of November 01, 2024, our disclosure controls and procedures were effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e).
There have been no changes (including corrective actions with regard to significant deficiencies and material weaknesses) during the quarter ended November 01, 2024 in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors
There have been no material changes in the risk factors previously disclosed in Part I, Item 1A “Risk Factors” of our 2024 Form 10-K.
ITEM 5. Other Information
During the quarter ended November 01, 2024, no director or officer of the Company
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ITEM 6. Exhibits
INDEX TO EXHIBITS
| | |
Exhibit |
| |
3.1 | | |
| | |
3.2 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32.1 | | |
| | |
32.2 | | |
| | |
101.INS | | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| | |
101.SCH | | Inline XBRL Taxonomy Extension Schema |
| | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase |
| | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase |
| | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase |
| | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase |
| | |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
| | |
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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.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: December 4, 2024 |
| By: /s/Craig A. Pommells |
| | Craig A. Pommells, Senior Vice President, Chief Financial Officer |
| | |
| | |
Date: December 4, 2024 | | By: /s/Brian T. Vaclavik |
| | Brian T. Vaclavik, Vice President, Corporate Controller and |
| | Principal Accounting Officer |
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EXHIBIT 31.1
CERTIFICATION
I, Julie Masino, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Cracker Barrel Old Country Store, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | December 4, 2024 | |
| | |
/s/Julie Masino | | |
Julie Masino, President | | |
and Chief Executive Officer | | |
EXHIBIT 31.2
CERTIFICATION
I, Craig A. Pommells, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Cracker Barrel Old Country Store, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | December 4, 2024 | |
| | |
/s/Craig A. Pommells | | |
Craig A. Pommells, Senior Vice President | | |
and Chief Financial Officer | | |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cracker Barrel Old Country Store, Inc. (the “Issuer”) on Form 10-Q for the fiscal quarter ended November 1, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julie Masino, President and Chief Executive Officer of the Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
Date: | December 4, 2024 | By: | /s/Julie Masino |
| | Julie Masino | |
| | President and Chief Executive Officer | |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cracker Barrel Old Country Store, Inc. (the “Issuer”) on Form 10-Q for the fiscal quarter ended November 1, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig A. Pommells, Senior Vice President and Chief Financial Officer of the Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. |
Date: | December 4, 2024 | By: | /s/Craig A. Pommells |
| | Craig A. Pommells | |
| | Senior Vice President and Chief Financial Officer | |