Cracker Barrel Reports 17% Increase in Third-Quarter EPS

2010-05-25

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Cracker Barrel Old Country Store, Inc. (“Cracker Barrel,” or the “Company”) (Nasdaq: CBRL) reported income from continuing operations of $0.61 per diluted share for the third quarter of fiscal 2010, compared with $0.52 per diluted share from continuing operations in the third quarter of fiscal 2009. Income from continuing operations was $14.4 million compared with $11.9 million in the third quarter of fiscal 2009, which reflected this year’s higher operating income and lower interest expense.

Third-Quarter Fiscal 2010 Results

Revenue from continuing operations

In the third quarter of fiscal 2010, total revenue of $578.2 million represented an increase of 1.9% from the third quarter of fiscal 2009. Comparable store restaurant sales for the period increased 0.6%, including a 2.2% higher average check. The average menu price increase for the quarter was approximately 2.1% compared with same prior year period. Comparable store retail sales were up 3.2% for the quarter.

Comparable store restaurant and retail sales for the fiscal months of February, March and April were as follows:

	February		March		April		Third Quarter
Comparable restaurant traffic	-4.6	%	1.0	%	-1.3	%	-1.6	%
Average check	2.3	%	1.9	%	2.3	%	2.2	%
Comparable restaurant sales	-2.3	%	2.9	%	1.0	%	0.6	%
Comparable retail sales	1.1	%	8.9	%	0.6	%	3.2	%

Comparable store restaurant sales in the third quarter were unfavorably affected versus prior year by approximately one percentage point as a result of severe winter weather. The severe winter weather occurred primarily in February and without this impact, February comparable restaurant sales would have been positive. The shift in the timing of the Easter holiday benefited retail sales in fiscal March but unfavorably affected fiscal April.

Operating Income

In the third quarter of fiscal 2010, operating income was $31.8 million, or 5.5% of total revenue, compared with $29.0 million, or 5.1% of total revenue, in the third quarter of fiscal 2009. The increase in operating income was the result of higher revenues, lower cost of goods sold and lower labor and related expenses partially offset by higher maintenance and general and administrative expenses.

Commenting on the third-quarter results, Cracker Barrel Chairman, President and Chief Executive Officer Michael A. Woodhouse said, “We are pleased to report positive restaurant and retail comparable store sales, along with a 17% increase in earnings per share for the quarter. We are encouraged by the improving profitability at the store level while, at the same time, delivering higher levels of customer satisfaction according to our latest surveys. As we roll out our initiatives, the focus is on continuing to improve operations and the guest experience.”

Year-to-date Fiscal 2010 Results

Total revenue from continuing operations of $1.8 billion year-to-date for fiscal 2010 represented an increase of 1.1% over fiscal 2009. Comparable store restaurant sales increased 0.3%, including a 2.1% higher check. Comparable store retail sales decreased 2.0%.

The Company reported income from continuing operations of $57.8 million, or $2.47 per diluted share, compared with income from continuing operations of $43.1 million, or $1.90 per diluted share, in fiscal 2009.

Year-to-date net cash provided by operating activities was $136.8 million, compared with $90.1 million in fiscal 2009, reflecting higher net income and continued improvements in working capital.

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited)
(In thousands, except share amounts)

	Third Quarter Ended								Nine Months Ended
	4/30/10			5/1/09			Percentage Change		4/30/10			5/1/09			Percentage Change
Total revenue	$	578,233		$	567,568		2	%	$	1,792,032		$	1,771,682		1	%
Cost of goods sold		173,041			176,327		(2	)		562,410			580,177		(3	)
Gross profit		405,192			391,241		4			1,229,622			1,191,505		3
Labor and other related expenses		226,047			230,014		(2	)		679,401			686,565		(1	)
Other store operating expenses		109,302			104,235		5			320,269			315,941		1
Impairment charges		--			--		--			2,263			--		--
Store operating income		69,843			56,992		23			227,689			188,999		20
General and administrative expenses		38,012			27,979		36			108,488			88,155		23
Operating income		31,831			29,013		10			119,201			100,844		18
Interest expense		12,186			12,737		(4	)		37,249			40,051		(7	)
Pretax income		19,645			16,276		21			81,952			60,793		35
Provision for income taxes		5,217			4,328		21			24,107			17,651		37
Income from continuing operations		14,428			11,948		21			57,845			43,142		34
Income from discontinued operations, net of tax		--			4		(100	)		--			4		(100	)
Net income	$	14,428		$	11,952		21		$	57,845		$	43,146		34

Earnings per share – Basic:
Income from continuing operations	$	0.62		$	0.53		17		$	2.52		$	1.93		31
Income from discontinued operations, net of tax	$	--		$	--		--		$	--		$	--		--
Net income per share	$	0.62		$	0.53		17		$	2.52		$	1.93		31
Earnings per share – Diluted:
Income from continuing operations	$	0.61		$	0.52		17		$	2.47		$	1.90		30
Income from discontinued operations, net of tax	$	--		$	--		--		$	--		$	--		--
Net income per share	$	0.61		$	0.52		17		$	2.47		$	1.90		30

Weighted average shares:
Basic		23,198,505			22,467,468		3			22,934,732			22,402,344		2
Diluted		23,802,998			22,830,712		4			23,445,554			22,698,074		3

Ratio Analysis
Total revenue:
Restaurant		81.9	%		82.2	%				78.9	%		78.5	%
Retail		18.1			17.8					21.1			21.5
Total revenue		100.0			100.0					100.0			100.0
Cost of goods sold		29.9			31.1					31.4			32.7
Gross profit		70.1			68.9					68.6			67.3
Labor and other related expenses		39.1			40.5					37.9			38.8
Other store operating expenses		18.9			18.4					17.9			17.8
Impairment charges		--			--					0.1			--
Store operating income		12.1			10.0					12.7			10.7
General and administrative expenses		6.6			4.9					6.0			5.0
Operating income		5.5			5.1					6.7			5.7
Interest expense		2.1			2.2					2.1			2.3
Pretax income		3.4			2.9					4.6			3.4
Provision for income taxes		0.9			0.8					1.4			1.0
Income from continuing operations		2.5			2.1					3.2			2.4
Income from discontinued operations, net of tax		--			--					--			--
Net income		2.5	%		2.1	%				3.2	%		2.4	%

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited and in thousands, except share amounts)

	4/30/10		7/31/09
Assets
Cash and cash equivalents	$	79,391	$	11,609
Inventory		120,455		137,424
Other current assets		48,496		49,292
Property and equipment, net		991,532		1,001,776
Long-lived assets		50,824		45,080
Total assets	$	1,290,698	$	1,245,181

Liabilities and Shareholders’ Equity
Accounts payable	$	78,238	$	92,168
Current liabilities		179,342		172,794
Long-term debt		593,414		638,040
Other long-term obligations		216,228		206,557
Shareholders’ equity		223,476		135,622
Total liabilities and shareholders’ equity	$	1,290,698	$	1,245,181

Common shares outstanding		23,826,755		22,722,685

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Unaudited and in thousands)

	Nine Months Ended
	4/30/10			5/1/09
Cash flows from continuing operations:
Cash flows from operating activities:
Net income	$	57,845		$	43,146
Income from discontinued operations, net of tax		--			(4	)
Depreciation and amortization		45,629			44,060
Loss on disposition of property and equipment		2,943			2,285
Impairment		2,263			--
Share-based compensation, net of excess tax benefit		5,247			5,500
Decrease in inventories		16,969			22,608
Decrease in accounts payable		(13,930	)		(31,146	)
Net changes in other assets and liabilities		19,789			3,648
Net cash provided by operating activities		136,755			90,097
Cash flows from investing activities:
Purchase of property and equipment, net of insurance recoveries		(39,994	)		(49,740	)
Proceeds from sale of property and equipment		229			1,590
Net cash used in investing activities		(39,765	)		(48,150	)
Cash flows from financing activities:
Net payments for credit facilities and other long-term obligations		(45,087	)		(9,267	)
Proceeds from exercise of share-based compensation awards		35,565			3,806
Excess tax benefit from share-based compensation		4,841			830
Purchase and retirement of common stock		(7,799	)		--
Deferred financing costs		(2,908	)		(274	)
Dividends on common stock		(13,820	)		(13,094	)
Net cash used in financing activities		(29,208	)		(17,999	)

Cash flows from discontinued operations:
Net cash provided by operating activities of discontinued operations		--			6
Net cash provided by discontinued operations		--			6

Net increase in cash and cash equivalents		67,782			23,954
Cash and cash equivalents, beginning of period		11,609			11,978
Cash and cash equivalents, end of period	$	79,391		$	35,932

CRACKER BARREL OLD COUNTRY STORE, INC.
Supplemental Information
(Unaudited)

	Third Quarter Ended					Nine Months Ended
	4/30/10			5/1/09		4/30/10			5/1/09

Units in operation:
Open at beginning of period		593			585		588			577
Opened during period		1			3		6			11
Closed during period		--			--		--			--
Open at end of period		594			588		594			588

Total revenue: (In thousands)
Restaurant	$	473,293		$	466,562	$	1,414,078		$	1,391,448
Retail		104,940			101,006		377,954			380,234
Total	$	578,233		$	567,568	$	1,792,032		$	1,771,682

Operating weeks:		7,719			7,640		23,092			22,749

Average unit volume: (In thousands)
Restaurant	$	797.1		$	793.9	$	2,388.3		$	2,385.4
Retail		176.7			171.9		638.3			651.9
Total	$	973.8		$	965.8	$	3,026.6		$	3,037.3


	Q3 2010 vs. Q3 2009					9 mo. 2010 vs. 9 mo. 2009

Comparable store sales increase (decrease):
Restaurant		0.6	%				0.3	%
Retail		3.2	%				(2.0	)%

Number of locations in comparable store base		577					570