Cracker Barrel Reports Complete Results for First Quarter Fiscal 2012

2011-11-22

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Cracker Barrel Old Country Store, Inc.(Nasdaq: CBRL) reported financial results for the first quarter of fiscal 2012 ended October 28, 2011 and provided further commentary on its previously announced increase in earnings guidance for the full 2012 fiscal year.

First-Quarter Fiscal 2012 Highlights

Earnings per diluted share of $1.03 increased 2.0% from the prior-year quarter. Charges related to the proxy contest with Biglari Holdings Inc. reduced earnings per diluted share by $0.06 in the quarter.
Comparable store restaurant and retail sales, which were down 1.6% and 1.3%, respectively, improved sequentially during the quarter. Total revenue of $598.4 million was flat to the same period last year.
Operating income margin of 7.5% of total revenue compared with 7.6% in the first quarter of fiscal 2011. Proxy contest charges reduced operating income margin by 0.3% of total revenue in the quarter.

First-Quarter Fiscal 2012 Results

Revenue

Total revenue for the first quarter of fiscal 2012 of $598.4 million was flat compared to the prior-year quarter as new store growth offset declines in comparable store restaurant and retail sales. Comparable store restaurant traffic, average check and comparable store restaurant and retail sales for the fiscal months of August, September and October and for the first quarter were as follows:


	August	September	October	First Quarter
Comparable restaurant traffic	-5.2%	-4.2%	-2.3%	-3.8%
Average check	2.7%	1.8%	2.1%	2.2%
Comparable restaurant sales	-2.5%	-2.4%	-0.2%	-1.6%
Comparable retail sales	-3.1%	-1.7%	0.2%	-1.3%

The Company opened three new stores during the first quarter of fiscal 2012 and has opened another two since the quarter ended, bringing total Company store count to 608 as of the date of this release.

Operating Income

Operating income was $44.6 million, or 7.5% of total revenue, in the first quarter of fiscal 2012 compared with $45.4 million, or 7.6% of total revenue, in the first quarter of fiscal 2011. Compared to the prior year, higher cost of goods sold, primarily because of higher food commodity prices, was offset by lower labor and related expenses and other store operating expenses as a percentage of total revenue. General and administrative expenses, which were 0.1% higher than the prior-year quarter as a percentage of total revenue, included $2.0 million, or 0.3% of total revenue, of charges related to the proxy contest with Biglari Holdings Inc.

Commenting on the first-quarter results, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran said, “We are pleased to report an increase in earnings per diluted share this quarter over the prior year, as well as a sequential improvement in restaurant and retail sales trends during the quarter. We believe these results demonstrate the early success of the six strategic priorities we outlined in September in what remains a very challenging consumer environment.”

Fiscal 2012 Outlook

The Company commented that its outlook for fiscal 2012 reflects many assumptions, the accuracy of which is not yet known. As previously announced in its preliminary first-quarter earnings release, the Company has raised full-year earnings guidance for fiscal 2012. The Company currently expects total revenue for fiscal 2012 of between $2.55 billion and $2.6 billion, reflecting comparable store restaurant and retail sales in a range of flat to up 1.5% and the opening of 15 new Cracker Barrel stores. Earnings per diluted share are expected to range between $4.10 and $4.25, excluding proxy contest expenses, which the Company now estimates to be between $0.11 and $0.14 per diluted share. Food commodity costs are expected to increase 5.5% to 6.5% from the prior year, and operating income margins are expected to range between 7.0% and 7.2% of total revenues.

The Company continues to expect depreciation expense of between $66 million and $68 million; net interest expense of approximately $45 million; an effective tax rate of between 28% and 29%; and capital expenditures of between $90 million and $100 million. The Company also reminds investors that its 2012 fiscal year is a 53-week year and that the impact of the 53^rd week, which is included in its guidance, is expected to be additional revenue of approximately $50 million and approximately $0.25 of additional earnings per diluted share.

Commenting on the outlook, Ms. Cochran said, “While we continue to remain cautious about the outlook for consumer spending and commodity costs, we are encouraged by our improving sales trends. We believe our initiatives, aimed at driving restaurant traffic, growing retail sales and controlling costs, are gaining traction and expect to build on our success as the year progresses.”

About Cracker Barrel

Cracker Barrel Old Country Store restaurants provide 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 608 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.


CRACKER BARREL OLD COUNTRY STORE, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (In thousands, except share and per share amounts, percentages and ratios)

	First Quarter Ended
	10/28/11			10/29/10			Percentage Change
Total revenue	$	598,437		$	598,691		--%
Cost of goods sold		186,307			179,753		4
Gross profit		412,130			418,938		(2)
Labor and related expenses		220,968			224,604		(2)
Other store operating expenses		109,044			111,959		(3)
Store operating income		82,118			82,375		--
General and administrative expenses		37,494			36,876		2
Impairment and store dispositions, net		--			83		(100)
Operating income		44,624			45,416		(2)
Interest expense		11,135			11,714		(5)
Pretax income		33,489			33,702		(1)
Provision for income taxes		9,687			9,968		(3)
Net income	$	23,802		$	23,734		--

Earnings per share – Basic:	$	1.04		$	1.04		--
Earnings per share – Diluted:	$	1.03		$	1.01		2

Weighted average shares:
Basic		22,870,934			22,832,393		--
Diluted		23,145,783			23,593,882		(2)

Ratio Analysis
Total revenue:
Restaurant		80.5	%		80.5	%
Retail		19.5			19.5
Total revenue		100.0			100.0
Cost of goods sold		31.1			30.0
Gross profit		68.9			70.0
Labor and related expenses		37.0			37.6
Other store operating expenses		18.2			18.7
Store operating income		13.7			13.7
General and administrative expenses		6.2			6.1
Impairment and store dispositions, net		0.0			0.0
Operating income		7.5			7.6
Interest expense		1.9			2.0
Pretax income		5.6			5.6
Provision for income taxes		1.6			1.6
Net income		4.0	%		4.0	%


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

	10/28/11		7/29/11
Assets
Cash and cash equivalents	$	49,771	$	52,274
Inventory		160,668		141,547
Other current assets		51,382		52,094
Property and equipment, net		1,011,994		1,009,164
Other long-lived assets		54,113		55,805
Total assets	$	1,327,928	$	1,310,884

Liabilities and Shareholders’ Equity
Accounts payable	$	101,467	$	99,679
Current maturities		4,812		123
Other current liabilities		169,328		167,301
Long-term debt		545,429		550,143
Other long-term obligations		213,431		225,604
Shareholders’ equity		293,461		268,034
Total liabilities and shareholders’ equity	$	1,327,928	$	1,310,884

Common shares outstanding		22,917,135		22,840,974


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

	Three Months Ended
	10/28/11			10/29/10
Cash flows from operating activities:
Net income	$	23,802		$	23,734
Depreciation and amortization		15,453			15,027
Loss on disposition of property and equipment		502			792
Share-based compensation, net of excess tax benefit		2,464			1,624
(Increase) in inventories		(19,121	)		(21,711	)
Increase (decrease) in accounts payable		1,788			(14,591	)
Net changes in other assets and liabilities		(4,644	)		(14,812	)
Net cash provided by (used in) operating activities		20,244			(9,937	)
Cash flows from investing activities:
Purchase of property and equipment, net of insurance recoveries		(18,712	)		(18,153	)
Proceeds from sale of property and equipment		107			196
Net cash used in investing activities		(18,605	)		(17,957	)
Cash flows from financing activities:
Net payments for credit facilities and other long-term obligations		(30	)		(1,743	)
Proceeds from exercise of share-based compensation awards		823			10,307
Excess tax benefit from share-based compensation		83			838
Dividends on common stock		(5,018	)		(4,547	)
Net cash (used in) provided by financing activities		(4,142	)		4,855

Net change in cash and cash equivalents		(2,503	)		(23,039	)
Cash and cash equivalents, beginning of period		52,274			47,700
Cash and cash equivalents, end of period	$	49,771		$	24,661


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

	First Quarter Ended
	10/28/11		10/29/10
Units in operation:
Open at beginning of period		603		593
Opened during period		3		3
Open at end of period		606		596

Total revenue: (In thousands)
Restaurant	$	481,509	$	481,815
Retail		116,928		116,876
Total revenue	$	598,437	$	598,691

Cost of goods sold: (In thousands)
Restaurant	$	127,696	$	122,381
Retail		58,611		57,372
Total cost of goods sold	$	186,307	$	179,753

Average unit volume: (In thousands)
Restaurant	$	797.1	$	810.5
Retail		193.6		196.6
Total	$	990.7	$	1,007.1

Operating weeks:		7,853		7,728



	Q1 2012 vs. Q1 2011
Comparable store sales period to period decrease:
Restaurant	(1.6%)
Retail	(1.3%)

Number of locations in comparable store base	591