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Press release from Business Wire

Cracker Barrel Reports Results for Second Quarter Fiscal 2013

<p class='bwalignc'> <i><b>Positive Comparable Store Traffic, Restaurant and Retail Sales in the Quarter</b></i> </p>

Tuesday, February 26, 2013

Cracker Barrel Reports Results for Second Quarter Fiscal 201307:00 EST Tuesday, February 26, 2013 LEBANON, Tenn. (Business Wire) -- Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq: CBRL) today reported financial results for the second quarter of fiscal 2013 ended February 1, 2013. Second-Quarter Fiscal 2013 HighlightsCompared to the prior year second quarter, comparable store traffic increased 0.2%, comparable store restaurant sales increased 3.3% and comparable store retail sales increased 3.1%.Fifth consecutive quarter of positive comparable traffic, restaurant sales and retail sales, and outperformance of the Knapp-TrackTM casual dining index.On a GAAP basis, operating income margin was 8.1% of total revenue, compared with 7.0% in the prior year quarter. Adjusted for proxy contest and severance expenses, adjusted operating income margin was 8.4% of total revenue, compared with 7.5% in the prior year quarter. (See non-GAAP reconciliation below.)On a GAAP basis, earnings per diluted share were $1.47, compared to $1.10 in the prior year quarter. Adjusted for proxy contest and severance expenses, and the prior year benefit from the Work Opportunities Tax Credit (“WOTC”), adjusted earnings per diluted share were $1.43 compared to adjusted earnings per diluted share of $1.20 in the prior year quarter. Second quarter GAAP EPS includes $0.19 per diluted share due to the retroactive reinstatement (effective January 1, 2012) of the WOTC, of which $0.09 per share relates to the prior fiscal year. (See non-GAAP reconciliation below.)Second-Quarter Fiscal 2013 ResultsRevenue The Company reported total revenue of $702.7 million for the second quarter of fiscal 2013, representing an increase of 4.4% over the second quarter of the prior year. Comparable store restaurant sales increased 3.3%, including a 3.1% increase in average check. The average menu price increase for the quarter was approximately 2.6%. Comparable store retail sales were up 3.1% for the quarter. The Company estimates that inclement weather in the second quarter reduced comparable store traffic, restaurant and retail sales by approximately 0.3%. During the quarter, the Company opened one new Cracker Barrel store, for a total of five new store openings year-to-date. Comparable store restaurant traffic, average check and comparable store restaurant and retail sales for the fiscal months of November, December and January were as follows:         November       December       January       Second Quarter Comparable restaurant traffic       0.6 %       -1.9 %       1.6 %       0.2% Average check       3.3 %       3.4 %       2.7 %       3.1% Comparable restaurant sales       3.9 %       1.5 %       4.3 %       3.3% Comparable retail sales       -8.4 %       11.0 %       5.3 %       3.1%                         Fiscal 2012 was a 53-week year. For Fiscal 2013, the Company calculates comparable store traffic, check and sales using the corresponding prior year weeks. Operating Income On a GAAP basis, operating income was $57.2 million, or 8.1% of total revenue, in the second quarter of fiscal 2013 compared with $47.3 million, or 7.0% of total revenue, in the second quarter of the prior year. Adjusted for proxy contest and severance expenses, adjusted operating income was $58.9 million, or 8.4% of total revenue, in the second quarter of fiscal 2013, compared with adjusted operating income of $50.6 million, or 7.5% of total revenue, in the prior year quarter. Lower retail cost of goods, restaurant hourly labor expense, and general and administrative expense as a percent of total revenue contributed to most of this operating income margin improvement. Diluted Earnings Per Share On a GAAP basis, earnings per diluted share in the second quarter of fiscal 2013 were $1.47, compared with $1.10 in the prior year quarter. During the quarter, Congress retroactively reinstated the WOTC effective to January 1, 2012, which reduced the effective income tax rate in the quarter to 25.0% compared with 29.5% in the prior year quarter, and contributed $0.19 per diluted share to second quarter earnings. Adjusted for proxy contest and severance expenses and the prior-year WOTC benefit of $0.09 per diluted share, adjusted earnings per diluted share were $1.43, an increase of 19.2% over adjusted earnings per diluted share in the prior year quarter. “This is the first quarter in more than ten years with positive comparable store traffic against a prior-year quarter with positive comparable store traffic,” said Sandra B. Cochran, Cracker Barrel's President and Chief Executive Officer. “This was also the fifth consecutive quarter of comparable store traffic and sales growth, and of outperforming the Knapp-Track casual dining index. This quarter's financial results exceeded our expectations and reflect the continued success of our marketing, menu, and operational initiatives. While we remain confident of our ability to execute our strategic plan, we also remain cautious about general economic conditions and consumer spending.” Fiscal 2013 Outlook Based upon year-to-date financial performance, continued food commodity pressures, inclement weather in February, the reinstatement of WOTC, and remaining uncertainty in the economic environment, the Company adjusted its previous full year earnings guidance. For fiscal 2013, the Company expects total revenue of between $2.6 billion and $2.65 billion and adjusted earnings per diluted share of between $4.60 and $4.80. The revenue projection for fiscal 2013 reflects the expected opening of eight new Cracker Barrel stores and projected increases in comparable store restaurant and retail sales in a range of 2.0% to 3.0%. The Company projects an adjusted operating income margin of between 7.3% and 7.5% of total revenue for fiscal 2013. The Company expects to report earnings per diluted share for the third quarter of fiscal 2013 of between $0.90 and $0.95. The Company reminds investors that its outlook for fiscal 2013 reflects a number of assumptions, many of which are outside the Company's control. Fiscal 2013 Second-Quarter Conference Call As previously announced, the live broadcast of Cracker Barrel's quarterly conference call will be available to the public on-line at investor.crackerbarrel.com on February 26, 2013, beginning at 11:00 a.m. (Eastern Time). An on-line replay will be available at 2:00 p.m. (Eastern Time) and continue through March 12, 2013. About Cracker Barrel Cracker Barrel Old Country Store provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that's surprisingly unique, genuinely fun and reminiscent of America's country heritage…all at a fair price. The restaurants serve up delicious, home-style country food such as meatloaf and homemade chicken n' dumplins as well as our signature biscuits using an old family recipe. The authentic old country retail store is fun to shop and offers unique gifts and self-indulgences. Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 in Lebanon, Tenn. and operates 621 company-owned locations in 42 states. Every Cracker Barrel store is open seven days a week with hours Sunday through Thursday, 6 a.m. – 10 p.m., and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com. CBRL-F Except for specific historical information, certain of the matters discussed in this press release 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 Cracker Barrel Old Country Store, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is subject to completion of our financial procedures for Q2 FY13 and 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 factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "trends," "assumptions," "target," "guidance," "outlook," "opportunity," "future," "plans," "goals," "objectives," "expectations," "near-term," "long-term," "projection," "may," "will," "would," "could," "expect," "intend," "estimate," "anticipate," "believe," "potential," "should," "projects," "forecasts," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology and include the expected effects of operational improvement initiatives, such as new menu items and retail offerings. Factors which could materially affect actual results include, but are not limited to: the effects of uncertain consumer confidence, higher costs for energy, general or regional economic weakness, weather on sales and customer travel, and discretionary income or personal expenditure activity of our customers; our ability to identify, acquire and sell successful new lines of retail merchandise and new menu items at our restaurants; our ability to successfully implement or sustain plans intended to improve operational or marketing execution and performance; changes in or implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, pensions, insurance or other undeterminable areas; our ability to successfully implement plans intended to promote or protect our brands and products; commodity price increases; the ability of and cost to us to recruit, train, and retain qualified hourly and management employees in an escalating wage environment; the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention; workers' compensation, group health and utility price changes; consumer behavior based on negative publicity or concerns over nutritional or safety aspects of our food or products or those of the restaurant industry in general, including concerns about pandemics, as well as the possible effects of such events on the price or availability of ingredients used in our restaurants; the effects of our substantial 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 or capital market conditions affecting our financing costs and ability to refinance all or portions of our indebtedness; the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations; the availability and cost of suitable sites for restaurant development and our ability to identify those sites; changes in land, building materials and construction costs; the actual results of pending, future or threatened litigation or governmental investigations and the costs and effects of negative publicity associated with these activities; practical or psychological effects of natural disasters or terrorist acts or war and military or government responses; disruptions to our restaurant or retail supply chain; changes in foreign exchange rates affecting our future retail inventory purchases; implementation of new or changes in interpretation of existing accounting principles generally accepted in the United States of America; and other factors described from time to time in our filings with the Securities and Exchange Commission, press releases, and other communications.Any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which made. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.             CRACKER BARREL OLD COUNTRY STORE, INC.CONDENSED CONSOLIDATED INCOME STATEMENT(Unaudited)(In thousands, except share and per share amounts, percentages and ratios)   Second Quarter EndedSix Months Ended             Percentage             Percentage   2/1/13     1/27/12   Change   2/1/13     1/27/12   Change Total revenue $ 702,671 $ 673,234 4 % $ 1,330,122 $ 1,271,671 5 % Cost of goods sold   244,187     235,391   4   442,045     421,698   5 Gross profit 458,484 437,843 4 888,077 849,973 5 Labor and other related expenses 244,871 234,933 4 477,610 455,901 5 Other store operating expenses   122,586     119,136   3   238,451     228,180   5 Store operating income 91,027 83,774 9 172,016 165,892 4 General and administrative expenses   33,830     36,437   (7 )   69,511     73,931   (6 ) Operating income 57,197 47,337 21 102,505 91,961 12 Interest expense   10,293     11,025   (7 )   21,005     22,160   (5 ) Pretax income 46,904 36,312 29 81,500 69,801 17 Provision for income taxes   11,736     10,703   10   23,140     20,390   14 Net income $35,168   $25,609   37 $58,360   $49,411   18   Earnings per share – Basic: $1.48   $1.11   33 $2.47   $2.16   14 Earnings per share – Diluted: $1.47   $1.10   34 $2.45   $2.13   15   Weighted average shares: Basic 23,711,235 22,968,002 3 23,644,405 22,919,451 3 Diluted 23,945,236 23,306,177 3 23,866,431 23,225,963 3   Ratio Analysis Total revenue: Restaurant 75.2 % 74.8 % 77.6 % 77.5 % Retail   24.8     25.2     22.4     22.5   Total revenue 100.0 100.0 100.0 100.0 Cost of goods sold   34.8     35.0     33.2     33.2   Gross profit 65.2 65.0 66.8 66.8 Labor and other related expenses 34.8 34.9 35.9 35.9 Other store operating expenses   17.4     17.7     18.0     17.9   Store operating income 13.0 12.4 12.9 13.0 General and administrative expenses   4.9     5.4     5.2     5.8   Operating income 8.1 7.0 7.7 7.2 Interest expense   1.4     1.6     1.6     1.7   Pretax income 6.7 5.4 6.1 5.5 Provision for income taxes   1.7     1.6     1.7     1.6   Net income   5.0 %   3.8 %   4.4 %   3.9 %               CRACKER BARREL OLD COUNTRY STORE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited and in thousands, except share amounts)   2/1/138/3/12 Assets Cash and cash equivalents $ 186,148 $ 151,962 Property held for sale 882 884 Accounts receivable 13,338 14,609 Inventory 139,567 143,267 Prepaid expenses 19,229 11,405 Deferred income taxes 9,206 15,181 Property and equipment, net 1,017,930 1,022,370 Other long-term assets 59,301 59,314 Total assets $ 1,445,601 $ 1,418,992   Liabilities and Shareholders' Equity Accounts payable $ 85,109 $ 101,271 Other current liabilities 220,585 217,788 Long-term debt 512,500 525,036 Interest rate swap liability 14,911 14,166 Other long-term obligations 116,660 114,897 Deferred income taxes 61,543 63,159 Shareholders' equity, net 434,293 382,675 Total liabilities and shareholders' equity $ 1,445,601 $ 1,418,992   Common shares issued and outstanding 23,728,808 23,473,024         CRACKER BARREL OLD COUNTRY STORE, INC.CONDENSED CONSOLIDATED CASH FLOW STATEMENT(Unaudited and in thousands)   Six Months Ended2/1/13       1/27/12 Cash flows from operating activities: Net income $ 58,360 $ 49,411 Depreciation and amortization 32,357 31,339 Loss on disposition of property and equipment 1,465 1,258 Share-based compensation, net of excess tax benefit 4,120 5,791 Increase in inventories 3,700 14,371 (Decrease) in accounts payable (16,162 ) (6,087 ) Net changes in other assets and liabilities (2,860)17,876 Net cash provided by operating activities 80,980113,959 Cash flows from investing activities: Purchase of property and equipment, net of insurance recoveries (29,329 ) (38,719 ) Proceeds from sale of property and equipment 333477 Net cash used in investing activities (28,996)(38,242) Cash flows from financing activities: Net payments for credit facilities and other long-term obligations (58 ) (76 ) Proceeds from exercise of share-based compensation awards 2,622 2,137 Excess tax benefit from share-based compensation 1,289 155 Dividends on common stock (21,651 ) (10,822 ) Net cash used in financing activities (17,798 ) (8,606 )   Net increase in cash and cash equivalents 34,186 67,111 Cash and cash equivalents, beginning of period 151,96252,274 Cash and cash equivalents, end of period $186,148$119,385               CRACKER BARREL OLD COUNTRY STORE, INC.Supplemental Information(Unaudited)   Second Quarter EndedSix Months Ended2/1/13       1/27/122/1/13       1/27/12   Units in operation: Open at beginning of period 620 606 616 603 Opened during period 1255 Open at end of period 621 608 621 608   Total revenue: (In thousands) Restaurant $ 528,155 $ 503,531 $ 1,032,469 $ 985,040 Retail 174,516169,703297,653286,631 Total revenue $702,671$673,234$1,330,122$1,271,671   Cost of goods sold: (In thousands) Restaurant $ 146,338 $ 138,456 $ 281,521 $ 266,152 Retail 97,84996,935160,524155,546 Total cost of goods sold $244,187$235,391$442,045$421,698 Average unit volume: (In thousands) Restaurant $ 850.5 $ 828.3 $ 1,665.7 $ 1,625.5 Retail 281.0279.1480.2473.0 Total $1,131.5$1,107.4$2,145.9$2,098.5   Operating weeks: 8,073 7,903 16,116 15,756           Q2 2013 vs. Q2 2012       6 mo. 2013 vs. 6 mo. 2012   Comparable store sales period to period increase: Restaurant 3.3 % 3.3 % Retail 3.1 % 2.5 %   Number of locations in comparable store base 600 596   CRACKER BARREL OLD COUNTRY STORE, INC.Reconciliation of GAAP basis operatingresults to adjusted non-GAAP operating results(Unaudited and in thousands) The Company makes reference in this release to “adjusted store operating income,” “adjusted operating income,” “adjusted net income,” “adjusted earnings per diluted share,” and “adjusted general and administrative expenses,” excluding the impact of severance and proxy contest expenses and the retroactive restatement of the work opportunities tax credit. The Company believes that excluding these items and their related tax effects from its financial results reflects operating results that are more indicative of the Company's ongoing operating performance while improving comparability to prior periods, and as such, may provide investors with an enhanced understanding of the Company's past financial performance and prospects for the future. This information is not intended to be considered in isolation or as a substitute for operating income, net income, or earnings per share or expense information prepared in accordance with GAAP.           Second Quarter ended February 1, 2013 Second Quarter ended January 27, 2012 As Reported     Adjust     As Adjusted As Reported     Adjust     As Adjusted (1) (2) (3) (1)   Store operating income $ 91,027 $ - $ 91,027 $ 83,774 $ - $ 83,774 General and administrative expenses   33,830   (1,726 )   32,104   36,437   (3,249 )   33,188 Operating income 57,197 1,726 58,923 47,337 3,249 50,586 Interest Expense   10,293   -     10,293   11,025   -     11,025 Pretax income 46,904 1,726 48,630 36,312 3,249 39,561 Provision for income taxes   11,736   2,637     14,373   10,703   958     11,661 Net income $ 35,168 $ (911 ) $ 34,257 $ 25,609 $ 2,291   $ 27,900   Earning per share - Basic $ 1.48 (0.04 ) $ 1.44 $ 1.11 $ 0.10 $ 1.21 Earning per share - Diluted $ 1.47 (0.04 ) $ 1.43 $ 1.10 $ 0.10 $ 1.20   Six months ended February 1, 2013 Six months ended January 27, 2012 As Reported Adjust As Adjusted As Reported Adjust As Adjusted (1) (2) (3) (1)   Store operating income $ 172,016 $ - $ 172,016 $ 165,892 $ - $ 165,892 General and administrative expenses   69,511   (5,634 )   63,877   73,931   (5,203 )   68,728 Operating income 102,505 5,634 108,139 91,961 5,203 97,164 Interest Expense   21,005   -     21,005   22,160   -     22,160 Pretax income 81,500 5,634 87,134 69,801 5,203 75,004 Provision for income taxes   23,140   3,847     26,987   20,390   1,520     21,910 Net income $ 58,360 $ 1,787   $ 60,147 $ 49,411 $ 3,683   $ 53,094   Earning per share - Basic $ 2.47 $ 0.07 $ 2.54 $ 2.16 $ 0.16 $ 2.32 Earning per share - Diluted $ 2.45 $ 0.07 $ 2.52 $ 2.13 $ 0.16 $ 2.29 (1) Charges and tax effects of the proxy contest concluded at the Company's annual meeting of shareholders. (2) Severance, other charges and tax effects related to organizational changes. (3) Provision for taxes adjusted to exclude the $2.1 million prior year favorable effect of the retroactive reinstatement of the work opportunity tax credit.   Cracker BarrelInvestors:Lawrence E. Hyatt, 615-235-4432orMedia:Jeanne Ludington, 615-443-9115