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<SEC-DOCUMENT>0001067294-03-000048.txt : 20031015
<SEC-HEADER>0001067294-03-000048.hdr.sgml : 20031014
<ACCEPTANCE-DATETIME>20031015161240
ACCESSION NUMBER: 0001067294-03-000048
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20030801
FILED AS OF DATE: 20031015
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CBRL GROUP INC
CENTRAL INDEX KEY: 0001067294
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812]
IRS NUMBER: 621749513
STATE OF INCORPORATION: TN
FISCAL YEAR END: 0731
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25225
FILM NUMBER: 03942011
BUSINESS ADDRESS:
STREET 1: PO BOX 787
CITY: LEBANON
STATE: TN
ZIP: 370880787
BUSINESS PHONE: 6154439217
MAIL ADDRESS:
STREET 1: PO BOX 787
CITY: LEBANON
STATE: TN
ZIP: 37087
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a10k2003.txt
<DESCRIPTION>FY 03 10-K
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended August 1, 2003
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
---------- ----------
Commission file number
000-25225
---------------------
CBRL GROUP, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-1749513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Hartmann Drive, P.O. Box 787 37088-0787
Lebanon, Tennessee (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (615)444-5533
----------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Par Value $.01)
Common Stock Purchase Rights
(No Par Value)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
<PAGE>
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes X No __
The aggregate market value of voting stock held by nonaffiliates of the
registrant, by reference to the price at which the common equity was last sold,
or the average bid and asked price of such common equity, as of the last
business day of the quarter ended January 31, 2003, was $1,548,719,735. For
purposes of this computation, all directors, executive officers and 10%
beneficial owners of the registrant are assumed to be affiliates. This
assumption is not a conclusive determination for purposes other than this
calculation.
As of September 26, 2003, there were 48,001,226 shares of common stock
outstanding.
<PAGE>
Documents Incorporated by Reference
Document from which Portions Part of Form 10-K
are Incorporated by Reference into which incorporated
- ----------------------------- -----------------------
1. Annual Report to Shareholders Part II
for the fiscal year ended
August 1, 2003 (the "2003 Annual Report")
2. Proxy Statement for Annual Part III
Meeting of Shareholders
to be held November 25, 2003
(the "2003 Proxy Statement")
<PAGE>
PART I
PAGE
ITEM 1. BUSINESS 5
ITEM 2. PROPERTIES 14
ITEM 3. LEGAL PROCEEDINGS 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 20
ITEM 6. SELECTED FINANCIAL DATA 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 20
ITEM 9A. CONTROLS AND PROCEDURES 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 21
ITEM 11. EXECUTIVE COMPENSATION 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 21
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 21
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 21
SIGNATURES 23
<PAGE>
Except for specific historical information, the matters discussed in
this Form 10-K, as well as the 2003 Annual Report that is incorporated herein by
reference, are forward-looking statements that involve risks, uncertainties and
other factors which may cause actual results and performance of CBRL Group, Inc.
to differ materially from those expressed or implied by those statements. All
forward-looking information is provided by the Company 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 "assumptions", "target", "guidance", "outlook", "plans", "projection",
"may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe",
"potential" or "continue" (or the negative or other derivatives of each of these
terms) or similar terminology. Factors which could materially affect actual
results include, but are not limited to: the effects of uncertain consumer
confidence or general or regional economic weakness on sales and customer travel
activity; practical or psychological effects of terrorist acts or war and
military or government responses; consumer behavior based on concerns over
nutritional aspects of the Company's products or restaurant food in general;
competitive marketing and operational initiatives; commodity, workers'
compensation, group health and utility price changes; the effects of plans
intended to improve operational execution and performance; the effects of
increased competition at Company locations on sales and on labor recruiting,
cost, and retention; the ability of and cost to the Company to recruit, train,
and retain qualified restaurant hourly and management employees; the ability of
the Company to identify and acquire successful new lines of retail merchandise;
changes in foreign exchange rates affecting the Company's future retail
inventory purchases; the availability and cost of acceptable sites for
development and the Company's ability to identify such sites; changes in
accounting principles generally accepted in the United States of America or
changes in capital market conditions that could affect valuations of restaurant
companies in general or the Company's goodwill in particular; changes in
interest rates affecting the Company's financing costs; increases in
construction costs; changes in or implementation of additional governmental or
regulatory rules, regulations and interpretations affecting accounting, tax,
wage and hour matters, health and safety, pensions and insurance; the actual
results of pending or threatened litigation or governmental investigations and
the costs and effects of negative publicity associated with these activities;
other undeterminable areas of government or regulatory actions or regulations;
and other factors described from time to time in the Company's filings with the
Securities and Exchange Commission ("SEC"), press releases, and other
communications.
PART I
ITEM 1. BUSINESS
OVERVIEW
CBRL Group, Inc. (the "Company") is a holding company that, through
certain subsidiaries, is engaged in the operation and development of the Cracker
Barrel Old Country Store(R) and Logan's Roadhouse(R) restaurant and retail
concepts. The Company was organized under the laws of the state of Tennessee in
August 1998. We maintain an internet website at http://www.cbrlgroup.com. We
make available free of charge on or through our internet website our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange Act")
as soon as reasonably practicable after we file such material with, or furnish
it to, the SEC.
CONCEPTS
Cracker Barrel Old Country Store
- --------------------------------
Cracker Barrel Old Country Store, Inc. ("Cracker Barrel"),
headquartered in Lebanon, Tennessee, through its various affiliates, as of
October 15, 2003, operates 484 full service "country store" restaurants and gift
shops, which are located in 41 states. Stores primarily are located along
interstate highways; however, 59 stores are located near "tourist destinations"
or are considered "off-interstate" stores. These "off-interstate" stores
represent a significant part of Cracker Barrel's expected future efforts to
expand the brand. However, in fiscal 2004 Cracker Barrel intends to open up to
<PAGE>
75% of its new stores along interstate highways as compared to approximately
half in fiscal 2003. The Company believes that it should focus primarily on
available interstate locations where Cracker Barrel generates the greatest brand
awareness. The restaurants serve breakfast, lunch and dinner daily between the
hours of 6:00 a.m. and 10:00 p.m. (11:00 p.m. on Fridays and Saturdays) and
feature home style country cooking from Cracker Barrel's own recipes using
quality ingredients and emphasizing authenticity. Menu items are moderately
priced and include country ham, chicken, fish, roast beef, beans, turnip greens,
vegetable plates, salads, sandwiches, pancakes, eggs, bacon, sausage and grits
among other items. The restaurants do not serve alcoholic beverages. The stores
are constructed in a trademarked rustic, old country store design and feature a
separate retail area offering a wide variety of decorative and functional items
specializing in rocking chairs, holiday and seasonal gifts and toys, apparel,
cookware and foods, including various old fashioned candies and jellies among
other things. Cracker Barrel sometimes offers items for sale in the retail store
that are also featured on the restaurant menu, such as pies or cornbread mix.
The Company believes that Cracker Barrel achieves high retail sales per square
foot (over $425 annually) both by offering interesting merchandise and by having
a significant source of retail customers from the high volume of restaurant
customers, an average of over 8,000 per week in a typical store. Cracker Barrel
stores are intended to appeal to both the traveler and the local customer and
consistently have been a consumer favorite. Cracker Barrel was ranked as the top
family dining chain for the thirteenth consecutive year in the 2003 Restaurants
& Institutions magazine "Choice in Chains" annual consumer survey. Additionally,
Cracker Barrel was named "Chain of the Year" by Restaurant Hospitality magazine
in its August 2003 issue.
Logan's Roadhouse
- -----------------
Logan's Roadhouse, Inc. ("Logan's"), headquartered in Nashville,
Tennessee, through its various affiliates, as of October 15, 2003, in 17 states
operates 101 Logan's Roadhouse restaurants and franchises an additional 16
Logan's restaurants. Logan's restaurants feature steaks, ribs, chicken and
seafood dishes and combinations among other items served in a distinctive
atmosphere reminiscent of an American roadhouse of the 1930s and 1940s. The
restaurants are open seven days a week for lunch and dinner and offer full bar
service. Logan's serves lunch and dinner between the hours of 11:00 a.m. and
10:00 p.m. (11:00 p.m. on Fridays and Saturdays). The Logan's concept is
designed to appeal to a broad range of customers by offering generous portions
of moderately-priced, high quality food in a very casual, relaxed dining
environment that is lively and entertaining. The fun atmosphere is enhanced by
display cooking of grilled items and buckets of complimentary peanuts on every
table, which the guests are encouraged to enjoy and let the shells fall on the
floor. Alcoholic beverages represented less than 9% of Logan's net sales in
fiscal 2003. The Logan's menu is designed to appeal to a wide variety of tastes,
and emphasizes extra-aged, hand-cut on premises USDA choice steaks and signature
dishes such as baked sweet potatoes and made-from-scratch yeast rolls.
OPERATIONS
Cracker Barrel Old Country Store
- --------------------------------
Store Format: The format of Cracker Barrel stores consists of a
trademarked rustic, old country-store style building. All stores are
freestanding buildings. Store interiors are subdivided into a dining room
consisting of approximately 30% of the total interior store space, and a retail
shop consisting of approximately 22% of such space, with the balance primarily
consisting of kitchen, storage and training areas. All stores have stone
fireplaces, which burn wood where permitted. All are decorated with
antique-style furnishings and other authentic and nostalgic items, reminiscent
of and similar to those found and sold in the past in original old country
stores. The front porch of each store features a row of the signature Cracker
Barrel rocking chairs that are used by guests waiting for a table and are sold
in the retail shop. The kitchens contain modern food preparation and storage
equipment allowing for flexibility in menu variety and development.
Products: Cracker Barrel's restaurant operations, which generated
approximately 77% of Cracker Barrel's total revenue in fiscal 2003, offer
home-style country cooking featuring Cracker Barrel's own recipes emphasizing
authenticity and quality. The restaurants offer breakfast, lunch and dinner from
<PAGE>
a moderately-priced menu. Breakfast items can be ordered at any time throughout
the day and include juices, eggs, pancakes, bacon, country ham, sausage, grits,
and a variety of biscuit specialties, including gravy and biscuits and country
ham and biscuits. Prices for a breakfast meal range from $1.99 to $7.99. Lunch
and dinner items include country ham, chicken and dumplings, chicken fried
chicken, meatloaf, country fried steak, pork chops, fish, steak, roast beef,
vegetable plates, salads, sandwiches, soups and specialty items such as pinto
beans and turnip greens. The Company also periodically features new items as
off-menu specials to enhance customer interest and identify potential future
additions to the menu. Lunches and dinners range in price from $2.99 to $12.99.
The average check per customer for fiscal 2003 was $7.54. Cracker Barrel from
time to time adjusts its prices. A price increase of less than 1% was instituted
in November 2002.
The retail operations, which generated approximately 23% of Cracker
Barrel's total revenue in fiscal 2003, offer a wide variety of decorative and
functional items such as rocking chairs, holiday gifts and toys, apparel, cast
iron cookware, old-fashioned crockery, handcrafted figurines, a book-on-audio
sale and exchange program and various other gift items, as well as various
candies, preserves, smoked sausage, syrups and other food items. Many of the
candy items, smoked bacon, jellies and jams, along with other high quality
products, are sold under the "Cracker Barrel Old Country Store" brand name.
Cracker Barrel sometimes offers items for sale in the retail store that are also
featured on the restaurant menu, such as pies or cornbread mix. The Company
believes that Cracker Barrel achieves high retail sales per square foot (over
$425 annually) both by offering interesting merchandise and by having a
significant source of retail customers from the high volume of restaurant
customers, an average of over 8,000 per week in a typical store.
Product Development and Merchandising: Cracker Barrel maintains a
product development department, which develops new and improved menu items in
response either to shifts in customer preferences or to create customer
interest. Cracker Barrel merchandising specialists are involved on a continuing
basis in selecting and positioning merchandise in the retail shop with an
overall nostalgic theme targeted to appeal to travelers. Cracker Barrel recently
introduced the first editions of proprietary "Heritage Music" CDs featuring
various styles of traditional American music from bluegrass, to blues, to Cajun,
to gospel and to other styles. Management believes that Cracker Barrel has
adequate flexibility to meet future shifts in consumer preference on a timely
basis. Coordinated seasonal promotions are used regularly in the restaurants and
retail shops.
Store Management and Quality Controls: Cracker Barrel store management
typically consists of a general manager, four associate managers and a retail
manager, who are responsible for over 100 employees on two shifts. The relative
complexity of operating a Cracker Barrel requires an effective management team
at the individual store level. As a motivation to store managers to improve
sales and operational efficiency, Cracker Barrel maintains a bonus plan designed
to provide store management with an opportunity to share in the profits of their
store. Additionally, Cracker Barrel has a supplemental bonus plan, providing
managers an opportunity to earn additional bonus based on achieving specific
operational targets. Cracker Barrel also offers general managers stock options.
To assure that individual stores are operated at a high level of quality,
Cracker Barrel emphasizes the selection and training of store managers. It also
employs District Managers to support individual store managers and Regional Vice
Presidents to support individual District Managers. Each District Manager's
individual span of control typically is seven to eight individual restaurants,
and Regional Vice Presidents support eight to ten District Managers. Each store
is assigned to both a restaurant and a retail District Manager and each District
is assigned to both a restaurant and a retail Regional Vice President. The
various levels of restaurant and retail management work closely together.
The store management recruiting and training program begins with an
evaluation and screening process. In addition to multiple interviews and
background and experience verification, Cracker Barrel conducts testing which is
designed to identify those applicants most likely to be best suited to manage
store operations. Those candidates who successfully pass this screening process
are then required to complete an 11-week training program consisting of eight
<PAGE>
weeks of in-store training and three weeks of training at Cracker Barrel's
corporate facilities. This program allows new managers the opportunity to become
familiar with Cracker Barrel operations, culture, management objectives,
controls and evaluation criteria before assuming management responsibility.
Cracker Barrel provides its managers with ongoing training through its various
management development classes. Additionally, the Company is in the final stages
of implementing internet-based computer-assisted instruction capability to train
both hourly and, eventually, management staff consistently at all locations.
Purchasing and Distribution: Cracker Barrel negotiates directly with
food vendors as to price and other material terms of most food purchases.
Cracker Barrel is a party to a prime vendor contract with an unaffiliated
distributor with custom distribution centers in Lebanon, Tennessee; McKinney,
Texas; Gainesville, Florida; Elkton, Maryland; and Ft. Mill, South Carolina. In
June 2003 this vendor's contract was renewed through fiscal 2007 with no price
increase from fiscal 2002 pricing until fiscal 2005. The contract does provide
for fuel cost adjustments under certain conditions. The contract will remain in
effect until both parties mutually modify it in writing or until terminated by
either Cracker Barrel or the distributor upon 180 days written notice to the
other party. Cracker Barrel purchases the majority of its food products and
restaurant supplies on a cost-plus basis through its unaffiliated distributor.
The distributor is responsible for placing food orders and warehousing and
delivering food products to Cracker Barrel's stores. Deliveries generally are
made once per week to the individual stores. Certain perishable food items are
purchased locally by Cracker Barrel stores.
Three food categories (beef, pork and poultry) account for the largest
shares of Cracker Barrel's food purchasing expense at approximately 14%, 13% and
13% each, respectively, but each category does include several individual items.
The single food item within these categories accounting for the largest share of
Cracker Barrel's food purchasing expense is chicken tenderloin at approximately
7% of food purchases in fiscal 2003. Cracker Barrel presently purchases its beef
through seven vendors, pork through eight vendors, and poultry through eleven
vendors. Cracker Barrel purchases its chicken tenderloin through seven vendors.
Should any food items from these vendors become unavailable, management is of
the opinion that these food items could be obtained in sufficient quantities
from other sources at competitive prices.
The majority of retail items (approximately 65% in fiscal 2003) are
centrally purchased directly by Cracker Barrel from domestic and international
retail vendors and warehoused at the Company's owned Lebanon distribution
center. Approximately 25% of Cracker Barrel's retail purchases in fiscal 2003
were directly from the People's Republic of China, and the Company believes that
other of its retail merchandise vendors may also make such purchases of items
sold to Cracker Barrel. The distribution center fulfills retail item orders
generated by Cracker Barrel's automated replenishment system and generally ships
the retail orders once a week to the individual stores. Certain retail items,
not centrally purchased and warehoused at the distribution center, are
drop-shipped directly from Cracker Barrel's vendors to its stores. The
distribution center is a 367,200 square foot warehouse facility with 36 foot
ceilings and 170 bays, and includes an additional 13,800 square feet of office
and maintenance space. The facility originally was built in 1993 and expanded in
1996.
Cost and Inventory Controls: Cracker Barrel's computer systems and
various analysis tools are used to evaluate store operating information and
provide management with reports to determine if any material variances in food
costs, labor costs or operating expenses have occurred. Management also monitors
individual store restaurant and retail sales on a daily basis and closely
monitors sales mix, sales trends, operational costs and inventory levels. The
information generated by the computer systems, analysis tools and monitoring
processes are used to manage the operations of the store, replenish retail
inventory levels and to facilitate retail purchasing decisions. These systems
and processes also are used in the development of forecasts, budget analyses,
and planning.
Guest Satisfaction: Cracker Barrel is committed to providing its guests
a home-style, country-cooked meal, and a variety of retail merchandise served
and sold with genuine hospitality in a comfortable environment, in a way that
evokes memories of the past. Cracker Barrel's commitment to offering guests a
quality experience begins with its employees. Its mission statement, "Pleasing
People", means all people, guests and employees alike, and the Company's
employees are trained and reinforced on the importance in a culture of mutual
respect. Cracker Barrel also is committed to staffing each store with an
<PAGE>
experienced management team to ensure attentive customer service and consistent
food quality. Through the regular use of guest surveys and store visits by its
District Managers and Regional Vice Presidents, management receives valuable
feedback, which it uses in its ongoing efforts to improve the stores and to
demonstrate Cracker Barrel's continuing commitment to pleasing its guests.
Cracker Barrel also has for many years had a guest relations call center that
takes comments and suggestions from guests and forwards them to operations or
other management for information and follow up.
Marketing: Outdoor advertising (i.e., billboards, state department of
transportation signs) is the primary advertising medium utilized to reach
consumers in the primary trade area for each Cracker Barrel store and also to
reach interstate travelers and tourists. Outdoor advertising accounted for
approximately 60% of advertising expenditures in fiscal 2003. In recent years
Cracker Barrel has utilized other types of media, such as radio and print, in
its core markets to maintain customer awareness, and outside of its core markets
to increase name awareness and to build brand loyalty. Cracker Barrel defines
its core markets based on geographic location, longevity in the market and name
awareness in each market. Cracker Barrel plans to maintain its overall
advertising spending at approximately 2% of Cracker Barrel's net sales in fiscal
2004, as it has since fiscal 2000. Outdoor advertising should continue to
represent approximately 60% of advertising expenditures in fiscal 2004. New
store locations generally are not advertised in the media until several weeks
after they have been opened in order to give the staff time to adjust to local
customer habits and traffic volume, after which time a full marketing plan may
be implemented.
Logan's Roadhouse
- -----------------
Store Format: Logan's restaurants generally are constructed of
rough-hewn cedar siding in combination with bands of corrugated metal outlined
in red neon. Interiors are decorated with murals and other artifacts depicting
scenes or billboard advertisements reminiscent of American roadhouses of the
1930s and 1940s, concrete and wooden planked floors and neon signs. The lively,
upbeat, friendly, relaxed atmosphere seeks to appeal to families, couples,
single adults and business persons. The restaurants feature display cooking and
an old-fashioned meat counter displaying ribs and hand-cut USDA choice steaks,
and also include a spacious, comfortable bar area. While dining or waiting for a
table, guests may eat complimentary roasted in-shell peanuts and toss the shells
on the floor. In the waiting area they also may watch as cooks prepare steaks
and other entrees on gas-fired mesquite grills. Many of the restaurants feature
a complimentary Wurlitzer(R) jukebox in the waiting or bar area. All of these
features are intended to emphasize a relaxed, roadhouse-type environment.
Products: Logan's restaurants offer a wide variety of items designed to
appeal to a broad range of consumer tastes. Specialty appetizers include hot
wings "roadhouse-style", baby back rib baskets and "roadhouse" nachos. The
Logan's dinner menu features an assortment of specially seasoned USDA choice
steaks, extra-aged, and cut by hand on premises. Guests also may choose from
slow-cooked baby back ribs, seafood, mesquite grilled shrimp, mesquite grilled
pork chops, grilled chicken and an assortment of hamburgers, salads and
sandwiches. All dinner entrees include dinner salad, made-from-scratch yeast
rolls and a choice of brown sugar and cinnamon sweet potato, baked potato,
mashed potatoes, steamed vegetables, fries or rice pilaf at no additional cost.
Logan's express lunch menu provides specially priced items to be served in less
than 15 minutes. All lunch salads are served with made-from-scratch yeast rolls,
and all lunch sandwiches are served with home-style potato chips at no
additional cost. Prices range from $4.79 to $8.79 for lunch items and from $4.99
to $17.99 for dinner entrees. Logan's generally targets to achieve value parity
or advantage relative to key competitors, especially on comparable menu items.
The average check per customer for fiscal 2003 was $11.61. Logan's adjusts its
prices from time to time, but had no menu price increases in fiscal 2003. Less
than 9% of Logan's net sales in fiscal 2003 were from alcoholic beverages.
Product Development and Merchandising: Logan's strives to obtain
consistent quality items at competitive prices from reliable sources. Logan's
tests various new products in an effort to obtain the highest quality products
possible and to be responsive to changing customer tastes. In order to maximize
operating efficiencies and provide the freshest ingredients for its food
products, purchasing decisions are made by Logan's corporate management.
Management believes that Logan's has adequate flexibility to meet future shifts
in consumer preference on a timely basis.
<PAGE>
Restaurant Management and Quality Controls: Logan's restaurant
management typically consists of a general manager, one kitchen manager and four
assistant managers who are responsible for approximately 78 hourly employees.
Each restaurant employs a skilled meat-cutter to cut steaks from USDA choice
beef. The general manager of each restaurant is responsible for the day-to-day
operations of the restaurant, including maintaining the standards of quality and
performance established by Logan's corporate management. The relative complexity
of operating a Logan's restaurant requires an effective management team at the
individual restaurant level. As a motivation to restaurant managers to increase
revenues and operational efficiency, Logan's maintains a bonus plan that rewards
managers for improving sales and hourly turnover, achieving Logan's standard of
guest satisfaction as measured through a secret shopper program, and achieving
key operating cost targets. Management believes that having five to six
managers in its restaurants contributes to the attentive service and high
quality food. Logan's restaurant management teams typically are comprised of two
persons who were promoted into management positions from non-management
positions and, therefore fully understand the Logan's concept, and three to four
managers with high levels of previous management experience. To assure that
individual restaurants are operated at a high level of quality, Logan's has
Regional Managers to support individual restaurant managers, four Directors of
Operations and one Vice President of Operations to support individual Regional
Managers. Each Regional Manager supports 4 to 5 individual restaurants, and each
Director of Operations supports 7 to 8 Regional Managers. Through regular visits
to the restaurants, the Vice President of Operations, the Directors of
Operations and the Regional Managers ensure that the Logan's concept, strategy
and standards of quality are being adhered to in all aspects of restaurant
operations.
Logan's requires that its restaurant managers have significant
experience in the full-service restaurant industry. All new managers are
required to complete a comprehensive ten-week training course. This course is
comprised of eight weeks of training at a Logan's restaurant and two weeks of
classroom training conducted at the Logan's training facility in Nashville. The
entire course emphasizes the Logan's operating strategy, procedures and
standards. Logan's also has a specialized training program required for managers
and hourly service employees on responsible alcohol service.
Purchasing and Distribution: Logan's negotiates directly with food
vendors as to price and other material terms of most food purchases. Logan's
purchases the majority of its food products and restaurant supplies on a
cost-plus basis through the same unaffiliated distributor that is used by
Cracker Barrel. The distributor is responsible for placing food orders and
warehousing and delivering food products for Logan's restaurants. Certain
perishable food items are purchased locally by the restaurants.
The single food item accounting for the largest share (approximately
34%) of Logan's food costs is beef. Steaks are hand-cut on the premises. Logan's
presently purchases its beef through one supply contract. Should any beef items
from this supplier become unavailable for any reason, management believes that
such items could be obtained in sufficient quantities from other sources at
competitive prices.
Cost and Inventory Controls: Management closely monitors sales, product
costs and labor at each of its restaurants. Weekly restaurant operating results
are analyzed by management to detect trends at each location, and negative
trends are promptly addressed. Financial controls are maintained through
management of an accounting and information management system that is
implemented at the restaurant level. Administrative and management staff prepare
daily reports of sales, labor and customer counts. On a weekly basis, condensed
operating statements are compiled by the accounting department and provide
management a detailed analysis of sales, product and labor costs, with a
comparison to budget and prior year performance. These systems also are used in
the development of budget analyses and planning.
Guest Satisfaction: Logan's is committed to providing its guests
prompt, friendly, efficient service, keeping table-to-server ratios low and
staffing each restaurant with an experienced management team to ensure attentive
guest service and consistent food quality. Through the regular use of marketing
research, guest feedback to the managers while in the restaurant and an
outsourced "secret shoppers" program, management receives valuable feedback,
which it uses to improve restaurants and demonstrate a continuing interest in
guest satisfaction.
<PAGE>
Marketing: Logan's employs an advertising and marketing strategy
designed to establish and maintain a high level of name recognition and to
attract new customers. Logan's primarily uses radio advertising in selected
markets. Management's goal is to develop a sufficient number of restaurants in
certain markets to permit the cost-efficient use of television, radio and
outdoor advertising. Logan's currently spends approximately 1.3% to 1.4% of its
net sales on advertising. Logan's also engages in a variety of promotional
activities, such as contributing time, money and complimentary meals to
charitable, civic and cultural programs, in order to increase public awareness
of Logan's restaurants. Logan's also has certain tie-ins with the National
Football League's Tennessee Titans, including two concession facilities (named
"Logan's Landing") inside Nashville, Tennessee's Coliseum and various promotions
during and around the games as well as other events, such as home football games
for Tennessee State University. Additionally, Logan's peanuts are sold at the
Gaylord Entertainment Center, home of the Nashville Predators of the National
Hockey League.
Franchising: Prior to the Company acquiring Logan's Roadhouse, Inc.,
Logan's entered into three area development agreements and accompanying
franchise agreements. Subsequent to the acquisition, Logan's terminated one of
the area development agreements. Franchisees operate 16 Logan's restaurants in 4
states, and they have rights under the existing agreements, subject to
development terms, conditions and timing requirements, to open up to 11
additional locations in those same states plus parts of Oregon. Certain of the
agreements provide for the possible acquisition of the franchise locations by
Logan's under specified terms. Management currently is not planning any other
future franchising opportunities beyond the current development agreements.
<PAGE>
EXPANSION
Cracker Barrel opened the following 23 new stores in fiscal 2003:
Interstate Off-Interstate
---------- --------------
Florida 1 6
Georgia 1 3
Ohio 2 -
Tennessee 1 1
Kentucky 1 -
Michigan 1 -
New Jersey 1 -
North Carolina 1 -
Pennsylvania 1 1
Virginia - 1
West Virginia 1 -
Cracker Barrel plans to open 24 new stores during fiscal 2004, of which
four of those stores are already open as of October 15, 2003:
Interstate Off-Interstate
---------- --------------
Florida - 1
Kentucky 1 -
Ohio 1 -
Pennsylvania 1 -
Logan's opened the following 12 new company-operated restaurants and 4
franchised restaurants in fiscal 2003:
Company-Operated Franchised
---------------- ----------
Indiana 3 -
North Carolina - 2
Tennessee 3 -
Alabama 2 -
Texas 2 -
California - 1
Georgia 1 -
Michigan 1 -
South Carolina - 1
Logan's plans to open 11 new company-operated restaurants and four
franchised restaurants during fiscal 2004, of which five company-operated
restaurants are already open as of October 15, 2003:
Michigan 2
Alabama 1
Mississippi 1
Texas 1
<PAGE>
Prior to committing to a new location, Cracker Barrel and Logan's
perform extensive reviews of various available sites, gathering cost,
demographic, traffic and other data. This information is analyzed by computer
models to help with the decision on building at a new location. Cracker Barrel
and Logan's utilize in-house engineers to consult on architectural plans,
develop engineering plans and oversee new construction. Both Cracker Barrel and
Logan's currently are engaged in the process of seeking and selecting new sites,
negotiating purchase or lease terms and developing chosen sites.
It traditionally has been the Company's strategy to own its properties.
However, on July 31, 2000, Cracker Barrel completed a sale-leaseback transaction
involving 65 of its owned Cracker Barrel stores, and in recent years it has made
greater use of ground leases for real estate acquisitions. The sale-leaseback
transaction was for an initial term of 21 years plus options for up to 20
additional years. New leases typically have base terms of ten to fifteen years
with renewal options at pre-determined rates for another fifteen to twenty
years. Of the 484 Cracker Barrel stores open as of October 15, 2003, the Company
owns 350, while the other 134 properties are either ground leases or ground and
building leases. The current Cracker Barrel store prototype is approximately
10,000 square feet including 2,200 square feet in the retail gift shop. The
prototype has 194 seats in the restaurant. Based on recent and projected new
store development, the average cost for approximately 2.5 acres of land for a
purchased site for a new Cracker Barrel store is expected to be between $900,000
and $1,000,000. Development costs of a new restaurant are approximately
$2,400,000, including furniture, fixtures and equipment of approximately
$670,000. Individual site costs, however, can vary materially from these
estimates depending on local real estate, site and construction conditions. In
addition, approximately $300,000 is budgeted for pre-opening expenses. The
Company typically projects that a new Cracker Barrel store will generate annual
sales of approximately $4,250,000 to $4,450,000. The Company's plans reflect a
higher percentage of purchased stores than leased stores for the foreseeable
future.
Of the 117 Logan's restaurants open as of October 15, 2003, 16 are
franchised restaurants. Of the remaining 101 Logan's restaurants, 54 are owned
and 47 are ground leases. The current Logan's restaurant prototype is
approximately 8,060 square feet with 277 seats, including 19 seats at the bar.
Based on recent and projected new store development, the average cost for
1.6-1.9 acres of land for a purchased site for a new Logan's is expected to be
between $750,000 to $850,000. Development costs of a new restaurant are
approximately $2,100,000, including furniture, fixtures and equipment of
approximately $500,000. Individual site costs, however, can vary materially from
these estimates depending on local real estate, site and construction
conditions. In addition, pre-opening expenses of approximately $140,000 are
budgeted. The Company typically projects annual sales for a new Logan's
restaurant of approximately $2,950,000 to $3,050,000. The Logan's prototype is
under review and development cost estimates could vary in future months. The
Company plans a higher percentage of leased units than purchased units for the
foreseeable future.
EMPLOYEES
As of August 1, 2003, CBRL Group, Inc. employed 21 people, of whom 8
were in advisory and supervisory capacities and 6 were officers of the Company.
Cracker Barrel employed 57,073 people, of whom 436 were in advisory and
supervisory capacities, 2,936 were in store management positions and 33 were
officers. Logan's employed 8,098 people, of whom 68 were in advisory and
supervisory capacities, 550 were in restaurant management positions and 4 were
officers. Many of the restaurant personnel are employed on a part-time basis.
Competition for and availability of qualified new employees has always been
difficult, contributing to increases in store labor expenses, but general
economic and labor market conditions have been relatively soft in recent
quarters, contributing to less wage pressure than in prior years. None of the
employees of the Company or its subsidiaries are represented by any union, and
management considers its employee relations to be good.
COMPETITION
The restaurant business is highly competitive and often is affected by
changes in the taste and eating habits of the public, local and national
economic conditions affecting spending habits, and population and traffic
patterns. Restaurant industry segments overlap and often provide competition for
widely diverse restaurant concepts. In exceptionally good economic times,
consumers can be expected to patronize a broader range of restaurants and the
breadth of competition at different restaurant segments is likewise increased.
The principal basis of competition in the industry is the quality, variety and
price of the food products offered. Site selection, quality and speed of
service, advertising and the attractiveness of facilities are also important.
<PAGE>
There are many restaurant companies catering to the public, some of
which are substantially larger and have greater financial and marketing
resources than those of either Cracker Barrel or Logan's and which compete
directly and indirectly in all areas in which either Cracker Barrel or Logan's
operates.
TRADEMARKS
Cracker Barrel and Logan's deem the trademarks owned by them or their
affiliates to be of substantial value Their policy is to obtain federal
registration of their trademarks and other intellectual property whenever
possible and to pursue vigorously any infringement of trademarks.
RESEARCH AND DEVELOPMENT
While research and development are important to the Company, these
expenditures have not been material due to the nature of the restaurant and
retail industry.
SEASONAL ASPECTS
Historically the profits of the Company have been lower in the first
three fiscal quarters and highest in the fourth fiscal quarter, which includes
much of the summer vacation and travel season. Management attributes these
variations primarily to the decrease in interstate tourist traffic and
propensity to dine out during the school year and winter months and the increase
in interstate tourist traffic and propensity to dine out during the summer
months. The Company's retail sales historically have been highest in the
Company's second fiscal quarter, which includes the Christmas holiday shopping
season.
SEGMENT REPORTING
The Company has one reportable segment. See Notes 2 and 8 to the
consolidated financial statements contained in the 2003 Annual Report
incorporated by reference in Part II of this Annual Report on Form 10-K for more
information on segment reporting.
WORKING CAPITAL
In the restaurant industry, substantially all sales are either for cash
or credit card. Like most other restaurant companies, the Company is able to,
and may from time to time, operate with a working capital deficit. Restaurant
inventories purchased through the Company's principal food distributor now are
on terms of net zero days, while restaurant inventories purchased locally
generally are financed through normal trade credit. Because of its retail
operations, which have a lower product turnover than the restaurant business,
the Company carries larger inventories than many in the restaurant industry.
Retail inventories purchased domestically generally are financed from normal
trade credit, while imported retail inventories generally are purchased through
letters of credit and wire transfers. These various trade terms are aided by
rapid product turnover of the restaurant inventory. Employee compensation and
benefits payable generally may be related to weekly, bi-weekly or semi-monthly
pay cycles, and many other operating expenses have normal trade terms.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located on approximately 10
acres of land owned by Cracker Barrel Old Country Store, Inc. in Lebanon,
Tennessee. The Company utilizes 10,000 square feet of office space for its
corporate headquarters.
The Cracker Barrel corporate headquarters and warehouse facilities are
located on approximately 120 acres of land owned by Cracker Barrel Old Country
Store, Inc. in Lebanon, Tennessee. Cracker Barrel utilizes approximately 110,000
square feet of office space for its corporate headquarters and decorative
fixtures warehouse and 367,200 square feet of warehouse facilities and an
additional 13,800 square feet of office and maintenance space for its retail
distribution center.
<PAGE>
The Logan's corporate headquarters and training facility are located in
approximately 31,000 square feet of office space in Nashville, Tennessee, under
a lease expiring on April 1, 2010.
Cracker Barrel opened a retail-only mall store, named "The Store," in a
regional mall in Nashville, Tennessee in July 1999 to test this growth
opportunity to leverage the Cracker Barrel's merchandising and logistical
expertise. The retail-only mall store is leased and is presently considered a
research and development site.
Cracker Barrel owns and operates a motel in Lebanon, Tennessee which is
used for housing its management trainees when they are in the classroom portion
of their training, and which also serves the general public.
<PAGE>
In addition to the various corporate facilities, 21 properties owned or
leased for future development, Cracker Barrel's retail-only mall store and motel
and 9 parcels of excess real property and improvements including one leased
property, which the Company intends to dispose of, Cracker Barrel and Logan's
own or lease the following store properties as of October 15, 2003:
State Cracker Barrel Logan's Combined
- ----- -------------- ------------- -------------
Owned Leased Owned Leased Owned Leased
Tennessee 30 11 12 4 42 15
Florida 36 9 4 1 40 10
Texas 23 4 8 10 31 14
Georgia 24 8 5 3 29 11
Ohio 21 9 1 2 22 11
Alabama 14 8 6 4 20 12
Indiana 17 5 6 4 23 9
Kentucky 17 9 - 5 17 14
Michigan 13 3 2 8 15 11
North Carolina 19 6 - - 19 6
Virginia 15 2 6 1 21 3
Illinois 21 1 - - 21 1
Pennsylvania 8 10 - - 8 10
South Carolina 11 6 - - 11 6
Louisiana 7 2 3 2 10 4
Missouri 11 2 - 1 11 3
Mississippi 8 3 1 1 9 4
Arkansas 4 6 - - 4 6
Arizona 2 7 - - 2 7
West Virginia 3 5 - 1 3 6
New York 7 1 - - 7 1
New Jersey 2 4 - - 2 4
Oklahoma 4 2 - - 4 2
Kansas 4 1 - - 4 1
Wisconsin 5 - - - 5 -
Colorado 3 1 - - 3 1
Maryland 3 1 - - 3 1
Iowa 3 - - - 3 -
Massachusetts - 3 - - - 3
New Mexico 2 1 - - 2 1
Utah 3 - - - 3 -
Connecticut 1 1 - - 1 1
Minnesota 2 - - - 2 -
Montana 2 - - - 2 -
Nebraska 1 1 - - 1 1
Delaware - 1 - - - 1
Idaho 1 - - - 1 -
New Hampshire 1 - - - 1 -
North Dakota 1 - - - 1 -
Rhode Island - 1 - - - 1
South Dakota 1 - - - 1 -
Total 350 134 54 47 404 181
See "Business-Operations" and "Business-Expansion" for additional
information on the Company's and its subsidiaries' properties.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Part I, Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended August 2, 2002 (filed with the Commission on October 25, 2002)
is incorporated herein by this reference.
Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended January 31, 2003 (filed with the Commission on March
17, 2003) is incorporated herein by this reference.
Item 5 of the Company's Current Report on Form 8-K filed with the
Commission on August 6, 2003 is incorporated herein by this reference.
Item 5 of the Company's Current Report on Form 8-K filed with the
Commission on October 1, 2003 is incorporated herein by this reference.
See also Note 9 to the Company's Consolidated Financial Statements
filed or incorporated by reference into in Part II, Item 8 of this Annual Report
on Form 10-K, which also is incorporated herein by this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3) to Form 10-K, the following information is included in Part I
of this Form 10-K.
Executive Officers of the Registrant
- ------------------------------------
The following table sets forth certain information concerning the executive
officers of the Company, as of September 26, 2003:
Name Age Position with Registrant
- ---- --- ------------------------
Dan W. Evins 68 Chairman of the Board
Michael A. Woodhouse 58 President & Chief Executive Officer
Lawrence E. White 53 Senior Vice President, Finance
& Chief Financial Officer
James F. Blackstock 56 Senior Vice President,
General Counsel and Secretary
Norman J. Hill 61 Senior Vice President, Human
Resources
Patrick A. Scruggs 39 Vice President of Accounting and
Tax, Assistant Treasurer and Chief
Accounting Officer
Donald M. Turner 55 President and Chief Operating
Officer of Cracker Barrel Old
Country Store, Inc.
David L. Gilbert 46 Chief Administrative Officer of
Cracker Barrel Old Country
Store, Inc.
G. Thomas Vogel 39 President and Chief Operating
Officer of Logan's Roadhouse, Inc.
The following information summarizes the business experience of each
executive officer of the Company for at least the past five years:
Prior to his employment with the Company in January 1999, Mr. Evins was
Chairman of the Board and Chief Executive Officer ("CEO") of Cracker Barrel Old
Country Store, Inc. since its founding in 1969. He continued to serve as CEO of
Cracker Barrel Old Country Store, Inc. until August 2001. Mr. Evins has 34 years
of experience in the restaurant and retail industries.
Prior to his employment with the Company in January 1999, Mr. Woodhouse was
Senior Vice President of Finance and Chief Financial Officer of Cracker Barrel
Old Country Store, Inc. since December 1995. Mr. Woodhouse served the Company as
Senior Vice President of Finance and Chief Financial Officer from January 1999
to July 1999, as Executive Vice President and Chief Operating Officer from
August 1999 until July 2000 and then as President and Chief Operating Officer
from August 2000 until July 2001 when he assumed his current positions. Mr.
Woodhouse has 19 years of experience in the restaurant industry and 11 years of
experience in the retail industry.
Prior to his employment with the Company in September 1999, Mr. White was
Executive Vice President and Chief Financial Officer of Boston Chicken, Inc.
from 1998 to 1999. Mr. White has 16 years of experience in the restaurant
industry and 4 years of experience in the retail industry.
Mr. Blackstock served the Company as Vice President, General Counsel and
Secretary from January 1999 to February 2000 when he was promoted to Senior Vice
President. Prior to his employment with the Company in January 1999, Mr.
Blackstock was Vice President, General Counsel and Secretary of Cracker Barrel
Old Country Store, Inc. from June 1997 until January 1999. Mr. Blackstock has
10 years of experience in the restaurant and retail industries.
Prior to his employment with the Company in January 2002, Mr. Hill was
Senior Vice President of Human Resources for Cracker Barrel Old Country Store,
Inc. from October 1996. Mr. Hill has 24 years of experience in the restaurant
industry and 7 years of experience in the retail industry.
Prior to his employment with the Company in January 1999, Mr. Scruggs was
employed by Cracker Barrel Old Country Store, Inc. since April 1989. Mr. Scruggs
has served as Assistant Treasurer of Cracker Barrel Old Country Store, Inc.
since August 1993. Mr. Scruggs has 14 years of experience in the restaurant and
retail industries.
Mr. Turner returned to Cracker Barrel Old Country Store, Inc. in December
1999, serving as Executive Vice President and Chief Operations Officer until his
promotion to President and Chief Operating Officer in August 2001. Prior to his
return to Cracker Barrel Old Country Store, Inc. in November 1999, Mr. Turner
was retired. Mr. Turner retired from Cracker Barrel Old Country Store, Inc. as
Senior Vice President and Chief Operations Officer in 1993, prior to which he
served in various capacities since 1976. Mr. Turner has 22 years of experience
in the restaurant industry and 24 years of experience in the retail industry.
Prior to his employment with Cracker Barrel Old Country Store, Inc. in July
2001, Mr. Gilbert was with Shoney's Inc. serving as its Executive Vice President
and Chief Administrative Officer from January 1999 to July 2001 and its Senior
Vice President of Real Estate from January 1998 to January 1999. Mr. Gilbert has
25 years of experience in the restaurant industry and 2 years of experience in
the retail industry.
Prior to his employment with Logan's Roadhouse, Inc. in August 2003, Mr.
Vogel was with Darden Restaurants Inc., since August 1991 serving in various
capacities for its Red Lobster concept, including Senior Vice President of
Operations, West/Southeast Divisions from June 1999 to August 2003, Vice
President of Food and Beverage from November 1997 to June 1999, and Concept
Development Director from March 1995 to November 1997. Mr. Vogel has 17 years of
experience in the restaurant industry.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on The Nasdaq Stock Market
(National Market System) ("Nasdaq") under the symbol CBRL. There were 14,777
shareholders of record as of September 26, 2003.
The table "Market Price and Dividend Information" on page 20 of the
2003 Annual Report is incorporated herein by reference. Item 12 of this Annual
Report on Form 10-K is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The table "Selected Financial Data" on page 20 of the 2003 Annual
Report is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following portions of the 2003 Annual Report are incorporated
herein by this reference:
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 21 through 25.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The following portion of the 2003 Annual Report is incorporated herein
by this reference:
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 22 and 23.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following portions of the 2003 Annual Report are incorporated
herein by this reference:
Consolidated Financial Statements and Independent Auditors' Report on
pages 26 through 36.
Quarterly Financial Data (Unaudited) on page 35.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer of the
Company have carried out an evaluation of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rule 13a-14(c) promulgated
under the Exchange Act). Based upon this evaluation, the Chief Executive Officer
and the Chief Financial Officer have concluded that as of August 1, 2003, the
Company's disclosure controls and procedures were adequate for the purposes set
forth in the definition thereof in Exchange Act Rule 13a-14(c).
There have been no significant changes (including corrective actions
with regard to significant deficiencies and material weaknesses) in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their most recent evaluation.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company is incorporated herein by this reference to the section entitled
"Proposal 1: Election of Directors" in the 2003 Proxy Statement. The information
required by this item with respect to executive officers of the Company is set
forth in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by this
reference to the sections entitled "Board of Directors and Committees" and
"Executive Compensation" in the 2003 Proxy Statement. The matters labeled
"Report of the Compensation and Stock Option Committee" and "Shareholder Return
Performance Graph" shall not be deemed to be incorporated by reference into this
Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by this
reference to the sections entitled "Stock Ownership of Management and Certain
Beneficial Owners" and "Equity Compensation Plan Information" in the 2003 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by this
reference to the section entitled "Certain Transactions" in the 2003 Proxy
Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated herein by this
reference to the sections entitled "Fees Paid to Auditors" and "What is the
Audit Committee's pre-approval policy and procedure with respect to audit and
non-audit services provided by our auditors?" in the 2003 Proxy Statement. The
remainder of the section entitled "Audit Committee Report" shall not be deemed
to be incorporated by reference into this Annual Report on Form 10-K.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. The following Consolidated Financial Statements and the
Independent Auditors' Report of Deloitte & Touche LLP on pages 26
through 36 of the 2003 Annual Report are incorporated herein by
this reference:
Independent Auditors' Report dated September 10, 2003
(September 25, 2003 as to Note 13)
Consolidated Balance Sheet as of August 1, 2003 and August 2, 2002
Consolidated Statement of Income for each of the three fiscal
years ended August 1, 2003, August 2, 2002 and August 3, 2001
Consolidated Statement of Changes in Shareholders' Equity for each
of the three fiscal years ended August 1, 2003, August 2, 2002 and
August 3, 2001
Consolidated Statement of Cash Flows for each of the three fiscal
years ended August 1, 2003, August 2, 2002 and August 3, 2001
Notes to Consolidated Financial Statements
<PAGE>
2. The exhibits listed in the accompanying Index to Exhibits on pages
24 through 26 are filed as part of this annual report.
(b) Reports on Form 8-K filed during the last quarter of the period
covered by this Annual Report on Form 10-K:
Form 8-K dated July 17, 2003, reporting under Item 9 the issuance
of a press release announcing the Company's fiscal 2003 fourth
quarter-to-date earnings, sales trends and reaffirming the
earnings guidance for the fourth fiscal quarter of fiscal 2003.
Form 8-K dated July 9, 2003, reporting under Item 9 the Board of
Directors' authorization to repurchase up to 1 million additional
shares of the Company's common stock.
Form 8-K dated June 19, 2003, reporting under Item 9 the issuance
of a press release announcing the Company's fiscal 2003 fourth
quarter-to-date sales and operating trends discussing the outlook
for the remainder of the quarter.
Form 8-K dated May 30, 2003, reporting under Item 9 the Board of
Directors' authorization to repurchase up to 1 million additional
shares of the Company's common stock.
Form 8-K (as amended) dated May 22, 2003, reporting under Item 9
issuance of a press release announcing the Company's fiscal 2003
third quarter earnings, current sales trends and earnings guidance
for the remainder of fiscal 2003.
Form 8-K dated May 15, 2003, reporting under Item 9 the issuance
of a press release announcing the availability of the Company's
third quarter fiscal 2003 conference call on the internet.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 15th day of
October, 2003.
CBRL GROUP, INC.
By: /s/Michael A. Woodhouse
-----------------------
Michael A. Woodhouse
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/Dan W. Evins
- ---------------
Dan W. Evins Chairman of the Board and Director October 15, 2003
/s/Michael A. Woodhouse
- -----------------------
Michael A. Woodhouse President, Chief Executive Officer and Director October 15, 2003
/s/Lawrence E. White
- --------------------
Lawrence E. White Senior Vice President, Finance and Chief October 15, 2003
Financial Officer (Principal Financial Officer)
/s/James F. Blackstock
- ----------------------
James F. Blackstock Senior Vice President, General Counsel and October 15, 2003
Secretary
/s/Patrick A. Scruggs
- ---------------------
Patrick A. Scruggs Assistant Treasurer and Chief Accounting October 15, 2003
Officer
(Principal Accounting Officer)
/s/James D. Carreker
- --------------------
James D. Carreker Director October 15, 2003
/s/Robert V. Dale
- -----------------
Robert V. Dale Director October 15, 2003
/s/Robert C. Hilton
- -------------------
Robert C. Hilton Director October 15, 2003
/s/Charles E. Jones, Jr.
- ------------------------
Charles E. Jones, Jr. Director October 15, 2003
/s/B.F. Lowery
- --------------
B.F. Lowery Director October 15, 2003
- -------------------
Gordon L. Miller Director October 15, 2003
/s/Martha M. Mitchell
- ---------------------
Martha M. Mitchell Director October 15, 2003
- ------------------
Andrea M. Weiss Director October 15, 2003
- ------------------
Jimmie D. White Director October 15, 2003
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
- -------
3(I), 4(a) Charter (1)
3(II), 4(b) Bylaws (1)
4(c) Shareholder Rights Agreement dated 9/7/1999 (2)
4(d) Indenture, dated as of April 3, 2002, among the Company, the
Guarantors (as defined therein) and Wachovia Bank, National
Association, as trustee, relating to the Company's zero-coupon
convertible senior notes (3)
4(e) Form of Certificate for the Company's zero-coupon convertible
senior notes (included in the Indenture filed as Exhibit 4(e)
hereof) (3)
4(f) Form of Guarantee of the Company's zero-coupon convertible senior
notes (included in the Indenture filed as Exhibit 4(e) hereof) (3)
4(g),10(a) Credit Agreement dated 2/21/2003, relating to the $300,000,000
Revolving Credit Facility (4)
10(b) Lease dated 8/27/1981 for lease of Macon, Georgia, store between
Cracker Barrel Old Country Store, Inc. and B. F. Lowery, a
director of the Company (5)
10(c) The Company's 1987 Stock Option Plan, as amended (6)
10(d) The Company's Amended and Restated Stock Option Plan, as amended
(7)
10(e) The Company's 2000 Non-Executive Stock Option Plan (8)
10(f) The Company's 1989 Non-Employee Director's Stock Option Plan, as
amended (9)
10(g) The Company's Non-Qualified Savings Plan, effective 1/1/1996, as
amended (6)
10(h) The Company's Deferred Compensation Plan, effective 1/1/1994 (5)
10(i) The Company's 2002 Omnibus Incentive Compensation Plan
10(j) Executive Employment Agreement executed January 15, 2002 between
Dan W. Evins and the Company (3)
10(k) Executive Employment Agreement executed July 25, 2002 between
Michael A. Woodhouse and the Company (8)
10(l) Change-in-control Agreement for Dan W. Evins dated 10/8/1999 (7)
10(m) Change-in-control Agreement for Michael A. Woodhouse dated
10/8/1999 (7)
10(n) Change-in-control Agreement for Lawrence E. White dated 10/8/1999
(7)
10(o) Change-in-control Agreement for James F. Blackstock dated 10/8/1999
(7)
10(p) Change-in-control Agreement for Norman J. Hill dated 10/13/1999 (8)
10(q) Change-in-control Agreement for Donald M. Turner dated 12/6/1999
(10)
10(r) Change-in-control Agreement for David L. Gilbert dated 10/3/2001
(8)
<PAGE>
10(s) Change-in-control Agreement for George T. Vogel dated October 3,
2003
10(t) Change-in-control Agreement for Patrick A. Scruggs dated October
13, 1999
10(u) Master Lease dated July 31, 2000 between Country Stores Property
I, LLC ("Lessor") and Cracker Barrel Old Country Store, Inc.
("Lessee") for lease of 21 Cracker Barrel Old Country Store(R)sites
(11)
10(v) Master Lease dated July 31, 2000 between Country Stores Property
I, LLC ("Lessor") and Cracker Barrel Old Country Store, Inc.
("Lessee") for lease of 9 Cracker Barrel Old Country Store(R)sites*
10(w) Master Lease dated July 31, 2000 between Country Stores Property
II, LLC ("Lessor") and Cracker Barrel Old Country Store, Inc.
("Lessee") for lease of 23 Cracker Barrel Old Country Store(R)
sites*
10(x) Master Lease dated July 31, 2000 between Country Stores Property
III, LLC ("Lessor") and Cracker Barrel Old Country Store, Inc.
("Lessee") for lease of 12 Cracker Barrel Old Country Store(R)
sites*
10(y) CBRL Group, Inc. Long-Term Incentive Plan Cover Letter (3)
10(z) CBRL Group, Inc. Long-Term Incentive Plan (3)
10(aa) CBRL Group, Inc. Long-Term Incentive Summary Plan Description (3)
13 Pertinent portions, incorporated by reference herein, of the
Company's 2003 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
*Document not filed because essentially identical in terms and conditions to
Exhibit 10(u).
(1) Incorporated by reference to the Company's Registration Statement on
Form S-4/A under the Securities Act of 1933 (File No. 333-62469).
(2) Incorporated by reference to the Company's Forms 8-K and 8-A under the
Securities Exchange Act of 1934, filed September 21, 1999 (File No. 000-25225).
(3) Incorporated by reference to the Company's Quarterly Report on Form
10-Q under the Securities Exchange Act of 1934 for the quarterly period ended
May 3, 2002 (File No. 000-25225).
(4) Incorporated by reference to the Company's Quarterly Report on Form
10-Q under the Securities Exchange Act of 1934 for the quarterly period ended
January 31, 2003 (File No. 000-25225).
(5) Incorporated by reference to the Company's Registration Statement on
Form S-7 under the Securities Act of 1933 (File No. 2-74266).
(6) Incorporated by reference to the Company's Registration Statement on
Form S-8 under the Securities Act of 1933 (File No. 33-45482).
(7) Incorporated by reference to the Company's Annual Report on Form 10-K
under the Securities Exchange Act of 1934 for the fiscal year ended July 30,
1999 (File No. 000-25225).
<PAGE>
(8) Incorporated by reference to the Company's Annual Report on Form 10-K
under the Securities Exchange Act of 1934 for the fiscal year ended August 2,
2002 (File No. 000-25225).
(9) Incorporated by reference to the Company's Annual Report on Form 10-K
under the Securities Exchange Act of 1934 for the fiscal year ended August 2,
1991 (File No. 0-7536).
(10) Incorporated by reference to the Company's Annual Report on Form 10-K
under the Securities Exchange Act of 1934 for the fiscal year ended August 3,
2001 (File No. 000-25225).
(11) Incorporated by reference to the Company's Annual Report on Form 10-K
under the Securities Exchange Act of 1934 for the fiscal year ended July 28,
2000 (File No. 000-25225).
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>aex10ify03.txt
<DESCRIPTION>EXHIBIT 10I - OMNIBUS PLAN
<TEXT>
CBRL GROUP, INC.
2002 OMNIBUS INCENTIVE COMPENSATION PLAN
1. PURPOSE.
The purpose of the CBRL Group, Inc. 2002 Omnibus Incentive Compensation
Plan (the "Plan") is to provide motivation to Employees of the Company and its
Subsidiaries and Affiliates to put forth maximum efforts toward the continued
growth, profitability, and success of the Company and its Subsidiaries and
Affiliates by providing incentives to such Employees through the ownership and
performance of Common Stock of the Company. Toward this objective, the Committee
may grant stock options, SAR, Stock Awards, performance shares, cash bonuses and
other incentive awards to Employees of the Company and its Subsidiaries and
Affiliates on the terms and subject to the conditions set forth in the Plan. In
addition, this Plan is intended to enable the Company to effectively attract,
retain and reward Outside Directors by providing for grants of Outside Director
Options to Outside Directors.
2. DEFINITIONS.
2.1 "Affiliate" means any entity (other than the Company and any
Subsidiary) that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of that entity or at least 20%
of the ownership interests in that entity.
2.2 "Award" means any form of stock option, SAR, Stock Award,
performance shares, cash bonus or other incentive award granted under the Plan,
whether singly, in combination, or in tandem, to a Participant by the Committee
pursuant to terms, conditions, restrictions and limitations, if any, as the
Committee may establish by the Award Notice or otherwise.
2.3 "Award Notice" means a written notice from the Company to a
Participant that establishes the terms, conditions, restrictions, and
limitations applicable to an Award in addition to those established by the Plan
and by the Committee's exercise of its administrative powers.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means matters which, in the judgment of the Committee,
constitute any one or more of the following: (i) intoxication while on the job;
(ii) theft or dishonesty in the conduct of the Company's business; (iii) willful
neglect or negligence in the management of the Company's business, or violation
of Company race or gender anti-harassment policies; (iv) violence that results
in personal injury; or (v) conviction of a crime involving moral turpitude.
2.6 "Change In Control" means the happening of any of the following:
a. any person or entity, including a "group" as defined in
Section 13(d)(3) of the Exchange Act, other than the Company or a
wholly-owned Subsidiary, or any employee benefit plan of the Company or
any Subsidiary, becomes the beneficial owner of the Company's
securities having 50% or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election
of directors of the Company (other than as a result of an issuance of
securities initiated by the Company in the ordinary course of
business); or
<PAGE>
b. as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sales of assets
or contested election, or any combination of the foregoing
transactions, after the transaction less than a majority of the
combined voting power of the then outstanding securities of the
Company, or any successor corporation or cooperative or entity,
entitled to vote generally in the election of the directors of the
Company, or other successor corporation or other entity, are held in
the aggregate by the holders of the Company's securities who
immediately prior to the transaction had been entitled to vote
generally in the election of directors of the Company; or
c. during any period of 2 consecutive years, individuals who
at the beginning of the period constitute the Board cease for any
reason to constitute at least a majority of the Board, unless the
election, or the nomination for election by the Company's shareholders,
of each director of the Company first elected during the relevant
2-year period was approved by a vote of at least 2/3 of the directors
of the Company then still in office who were directors of the Company
at the beginning of that period.
2.7 "Change In Control Price" means the highest closing price (or, if
the shares are not traded on an exchange, the highest last sale price or closing
"asked" price) per share paid for the purchase of Common Stock in a national
securities market during the 60-day period ending on the date the Change In
Control occurs (or, where applicable, the occurrence of the Potential Change in
Control event), as determined by the Committee.
2.8 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.9 "Committee" means the Compensation and Stock Option Committee of
the Board, or any other committee designated by the Board, authorized to
administer the Plan under Section 3 of this Plan. The Committee shall consist of
not less than 2 members who shall be appointed by, and shall serve at the
pleasure of, the Board. It is intended that the directors appointed to serve on
the Committee shall be "independent" as defined by the Company from time to
time, and that they shall be "non-employee directors" (within the meaning of
Rule 16b-3 under the Exchange Act) and "outside directors" (within the meaning
of Code Section 162(m) and its related regulations). However, the mere fact that
a Committee member fails to qualify under any of the foregoing requirements
shall not invalidate any Award made by the Committee if the Award is otherwise
validly made under the Plan.
2.10 "Common Stock" means the $0.01 par value common stock of the
Company.
2.11 "Company" means CBRL Group, Inc. or any successor.
2.12 "Covered Employee" means an individual who is, with respect to the
Company, an individual defined in Code Section 162(m)(3).
2.13 "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained by the Company or if applicable, most
recently maintained, by the Company or if applicable, a Subsidiary or Affiliate,
for the Participant, whether or not that Participant actually receives
disability benefits under the plan or policy. If no long-term disability plan or
policy was ever maintained on behalf of Participant or if the determination of
Disability relates to an incentive stock option (within the meaning of Section 8
of this Plan), Disability means Permanent and Total Disability as defined in
Section 22(e)(3) of the Code. In a dispute, the determination whether a
Participant has suffered a Disability will be made by the Committee and may be
supported by the advice of a physician competent in the area to which that
Disability relates.
2.14 "Effective Date" is defined in Section 6.
<PAGE>
2.15 "Employee" means an employee of the Company, a Subsidiary or an
Affiliate.
2.16 "Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time.
2.17 "Fair Market Value" with respect to the Common Stock, as of any
given date, unless otherwise determined by the Committee in good faith, means
the reported closing sale price of a share of Common Stock on the automated
quotation system or other market or exchange that is the principal trading
market for the Common Stock, or if no sale of a share of Common Stock is so
reported on that date, the fair market value of a share of Common Stock as
determined by the Committee in good faith.
2.18 "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and includes
adoptive relationships.
2.19 "Outside Director" means a member of the Board who is not an
officer or employee of the Company or any Subsidiary or Affiliate of the
Company.
2.20 "Outside Director Option" means a stock option award to an Outside
Director under Section 27.
2.21 "Participant" means any individual to whom an Award has been
granted by the Committee under this Plan.
2.22 "Potential Change in Control" means the happening of any one of
the following:
a. the approval by shareholders of an agreement by the Company
which would result in a Change in Control of the Company whe
n consummated; or
b. the acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company or Subsidiary employee benefit plan,
including any trustee of the plan acting as trustee) of securities of
the Company representing 25% or more of the combined voting power of
the then outstanding securities of the Company (without being
accompanied by a formal statement or public filing disclaiming any
intention to obtain or exercise control of the Company) and the
adoption by the Committee of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of
this Plan.
2.23 "Qualified Performance-Based Award" means (i) any stock option or
SAR granted under the Plan, or (ii) any other Award that is intended to qualify
for the Section 162(m) Exemption and is made subject to performance goals based
on Qualified Performance Measures as set forth in Section 13.
2.24 "Qualified Performance Measures" means 1 or more of the
performance measures listed in Section 13.2 upon which performance goals for
certain Qualified Performance-Based Awards may be established by the Committee.
2.25 "SAR" is an Award that shall entitle the recipient to receive a
payment equal to the appreciation in value of a stated number of shares of
Common Stock from the price established in the Award to the market value of that
number of shares of Common Stock on the date of exercise.
<PAGE>
2.26 "Section 162(m) Exemption" means the exemption from the limitation
on deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code or any successor provision thereto.
2.27 "Section 162(m) Cash Maximum" means $1,000,000.
2.28 "Section 16 Insider" means a Participant who is subject to the
reporting requirements of Section 16 of the Exchange Act with respect to the
Company.
2.29 "Stock Award" means an Award granted pursuant to Section 10 in the
form of shares of Common Stock, restricted shares of Common Stock or Units of
Common Stock.
2.30 "Subsidiary" means a corporation or other business entity in which
the Company directly or indirectly has an ownership interest of 50% or more.
2.31 "Unit" means a bookkeeping entry used by the Company to record and
account for the grant of the following Awards until the Award is paid, canceled,
forfeited or terminated, as the case may be: shares of Common Stock, SARs and
performance shares may be expressed in terms of Units of Common Stock.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
have the discretionary authority to: (a) interpret the Plan; (b) establish any
rules and regulations it deems necessary for the proper operation and
administration of the Plan; (c) select Employees to become Participants and
receive Awards under the Plan; (d) determine the form of an Award, whether a
stock option, SAR, Stock Award, performance share, cash bonus, or other
incentive award established by the Committee, the number of shares or Units
subject to the Award, all the terms, conditions, restrictions and limitations,
if any, of an Award, including the time and conditions of exercise or vesting,
and the terms of any Award Notice; (e) determine whether Awards should be
granted singly, in combination or in tandem; (f) grant waivers of Plan terms,
conditions, restrictions and limitations; (g) accelerate the vesting, exercise
or payment of an Award or the performance period of an Award in the event of a
Participant's termination of employment or when that action or actions would be
in the best interests of the Company; (h) establish such other types of Awards,
besides those specifically enumerated in Section 2.2, which the Committee
determines are consistent with the Plan's purpose; and (i) take all other action
it deems necessary or advisable for the proper operation or administration of
the Plan. Subject to Section 24, the Committee also shall have the authority to
grant Awards in replacement of Awards previously granted under the Plan or any
other executive compensation plan of the Company or a Subsidiary. All
determinations of the Committee shall be made by a majority of its members, and
its determinations shall be final, binding and conclusive on all persons,
including the Company and Participants.
The Committee, in its discretion, may delegate its authority and duties
under the Plan to the Chief Executive Officer or to other senior officers of the
Company under conditions and limitations the Committee may establish; however,
only the Committee may select, grant, and establish the terms of Awards to
Section 16 Insiders or Covered Employees.
Notwithstanding the general authority granted in this Section 3, the
Committee (and any delegate of the Committee) has no authority to determine
terms or conditions of awards to Outside Directors, which shall be governed
solely by Section 27 of this Plan.
<PAGE>
4. ELIGIBILITY.
Any Employee is eligible to become a Participant in the Plan. Outside
Directors are eligible to receive awards only pursuant to Section 27 and not
pursuant to any other provisions of this Plan.
5. NUMBER OF SHARES AVAILABLE.
The maximum number of shares of Common Stock that shall be available
for grant of Awards under the Plan (including incentive stock options) during
its term shall not exceed 2.5 million shares, subject to adjustment as provided
in Section 19. Any shares of Common Stock related to Awards that are settled in
cash in lieu of Common Stock shall be available again for grant under the Plan.
Similarly, any shares of Common Stock related to Awards that terminate by
expiration, forfeiture, cancellation or otherwise without the issuance of the
related shares or are exchanged with the Committee's permission for Awards not
involving Common Stock, shall be available again for grant under the Plan.
Further, any shares of Common Stock that are used by a Participant for the full
or partial payment to the Company of the purchase price of Common Stock upon
exercise of a stock option, or for withholding taxes due as a result of that
exercise, shall again be available for Awards under the Plan. Notwithstanding
any provision in the Plan to the contrary, the maximum number of shares of
Common Stock with respect to 1 or more options and/or SARs that may be granted
during any 1 calendar year under the Plan to any 1 Participant shall be 300,000.
For purposes of this limitation, forfeited, canceled or repriced shares granted
to a Participant in any given calendar year shall continue to be counted against
the maximum number of shares that may be granted to that Participant in that
calendar year. The maximum fair market value of any Awards (other than options,
SARs and cash bonuses) that may be received by a Participant (less any
consideration paid by the Participant for that Award) during any 1 calendar year
under the Plan shall be the equivalent value of 300,000 shares of Common Stock
as of the first business day of such calendar year. The shares of Common Stock
available for issuance under the Plan may be authorized and unissued shares.
6. EFFECTIVE DATE; TERM.
The Plan shall become effective as of the date upon which it is
approved by the shareholders of the Company (the "Effective Date"). No Awards or
Outside Director Options shall be exercisable or payable before the Plan becomes
effective. This Plan shall remain in effect until terminated by action of the
Board.
7. PARTICIPATION.
The Committee shall select, from time to time, Participants from those
Employees who, in the opinion of the Committee, can further the Plan's purposes.
Once a Participant is selected, the Committee shall determine the type or types
of Awards to be made to the Participant and shall establish in the related Award
Notices the terms, conditions, restrictions and limitations, if any, applicable
to the Awards in addition to those set forth in the Plan and the administrative
rules and regulations issued by the Committee.
8. STOCK OPTIONS.
8.1 Grants. Awards may be granted in the form of stock options. These
stock options may be incentive stock options within the meaning of Section 422
of the Code, other tax-qualified stock options, or non-qualified stock options
(i.e., stock options that are not incentive or other tax-qualified stock
options), or a combination of any of those.
<PAGE>
8.2 Terms and Conditions of Options. An option shall be exercisable in
whole or in such installments and at the times determined by the Committee. The
Committee also shall determine the performance or other conditions, if any,
which must be satisfied before all or part of an option may be exercised. The
price at which Common Stock may be purchased upon exercise of a stock option
shall be established by the Committee, but such price shall not be less than
100% (or, in the case of any employee who owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of any
of its Subsidiaries, not less than 110%) in the case of incentive stock options,
and not less than 85% (or, in the case of a Covered Employee, not less than
100%) in the case of other stock options, of the Fair Market Value of the Common
Stock on the date of the stock option grant. Each stock option shall expire not
later than 10 years (or, in the case of an Employee who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, not later than 5 years) from its date of
grant.
8.3 Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to being
subject to all applicable terms, conditions, restrictions and limitations
established by the Committee, comply with Section 422 of the Code. Accordingly,
incentive stock options may only be granted to Employees who are employees of
the Company or a Subsidiary, and the aggregate market value (determined at the
time the option was granted) of the Common Stock with respect to which incentive
stock options are exercisable for the first time by a Participant during any
calendar year (under the Plan or any other plan of the Company or any of its
Subsidiaries) shall not exceed $100,000 (or other limit required by the Code).
Each incentive stock option shall expire not later than 10 years from its date
of grant.
8.4 Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, establish other terms, conditions, restrictions and
limitations, if any, on any stock option Award, provided they are not
inconsistent with the Plan. Without limiting the generality of the foregoing,
options may provide for the automatic granting of new options at the time of
exercise.
8.5 Exercise. The Committee shall determine the methods by which the
exercise price of an option may be paid, the form of payment, including, without
limitation, cash, shares of Common Stock, or other property (including "cashless
exercise" arrangements, so long as they do not in any way conflict with the
requirements of applicable law), and the methods by which shares of Common Stock
shall be delivered or deemed to be delivered by Participants; however, if shares
of Common Stock are used to pay the exercise price of a stock option, those
shares must have been held by the Participant for at least 6 months (or any
shorter or longer period necessary to avoid a charge to the Company's earnings
for financial reporting purposes).
9. STOCK APPRECIATION RIGHTS.
9.1 Grants. Awards may be granted in the form of SARs. The SAR may be
granted in tandem with all or a portion of a related stock option under the Plan
("Tandem SARs"), or may be granted separately ("Freestanding SARs"). A Tandem
SAR may be granted either at the time of the grant of the related stock option
or at any time thereafter during the term of the stock option. In the case of
SARs granted in tandem with stock options granted prior to the grant of the
SARs, the appreciation in value is the difference between the option price of
the related stock option and the Fair Market Value of the Common Stock on the
date of exercise. The number of SARs granted may never exceed the lesser of the
number of shares of Common Stock still available under the Plan at the time of
the SAR grant or 625,000.
9.2 Terms and Conditions of Tandem SARs. A Tandem SAR shall be
exercisable to the extent, and only to the extent, that the related stock option
is exercisable, and the "exercise price" of that SAR (the base from which the
value of the SAR is measured at its exercise) shall be the option price under
the related stock option. If a related stock option is exercised as to some or
all of the shares covered by the Award, the related Tandem SAR, if any, shall be
canceled automatically to the extent of the number of shares covered by the
stock option exercise. Upon exercise of a Tandem SAR as to some or all of the
shares covered by the Award, the related stock option shall be canceled
automatically to the extent of the number of shares covered by the exercise.
<PAGE>
9.3 Terms and Conditions of Freestanding SARs. Freestanding SARs shall
be exercisable in whole or in the installments and at the times determined by
the Committee. Freestanding SARs shall have a term specified by the Committee,
in no event to exceed 10 years. The exercise price of a Freestanding SAR shall
also be determined by the Committee; however, that price shall not be less than
100% of the Fair Market Value of the Common Stock on the date of the
Freestanding SAR grant. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of a
Freestanding SAR may be exercised.
9.4 Deemed Exercise. The Committee may provide that an SAR shall be
deemed to be exercised at the close of business on the scheduled expiration date
of the affected SAR if at that time the SAR by its terms remains exercisable
and, if so exercised, would result in a payment to the holder of the SAR.
9.5 Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine such other terms, conditions, restrictions
and limitations, if any, of any SAR Award, provided they are not inconsistent
with the Plan.
10. STOCK AWARDS.
10.1 Grants. Awards may be granted in the form of Stock Awards. Stock
Awards shall be awarded in such numbers and at such times during the term of the
Plan as the Committee shall determine. Stock Awards may be actual shares of
Common Stock or the economic equivalent thereof ("Stock Award Units"). The total
number of Stock Award Units granted at any time may not exceed the lesser of the
number of shares of Common Stock available for grant at the time of the Stock
Award Unit grant or 625,000.
10.2 Award Restrictions. Stock Awards shall be subject to terms,
conditions, restrictions, and limitations, if any, the Committee deems
appropriate including, without limitation, restrictions on transferability and
continued employment of the Participant. The Committee also shall determine the
performance or other conditions, if any, that must be satisfied before all or
part of the applicable restrictions lapse.
10.3 Rights as Shareholder. During the period in which any restricted
shares of Common Stock are subject to restrictions imposed pursuant to Section
10.2, the Committee may, in its discretion, grant to the Participant to whom
restricted shares have been awarded all or any of the rights of a shareholder
with respect to those shares, including, without limitation, the right to vote
those shares and to receive dividends.
10.4 Evidence of Award. Any Stock Award granted under the Plan may be
evidenced in any manner the Committee deems appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate or
certificates.
<PAGE>
11. PERFORMANCE SHARES.
11.1 Grants. Awards may be granted in the form of performance shares.
"Performance shares" in this Plan mean shares of Common Stock or Units which are
expressed in terms of Common Stock and which are subject to performance criteria
as discussed in Section 11.2.
11.2 Performance Criteria. The award of performance shares shall be
contingent upon the attainment during a performance period of certain
performance objectives. The length of the performance period, the performance
objectives to be achieved during the performance period, and the measure of
whether and to what degree the objectives have been attained shall be
conclusively determined by the Committee in the exercise of its absolute
discretion. Performance objectives may be revised by the Committee, at times it
deems appropriate during the performance period, in order to take into
consideration any unforeseen events or changes in circumstances.
11.3 Additional Terms and Conditions. The Committee may, by way of the
Award Notice or otherwise, determine other terms, conditions, restrictions and
limitations, if any, of any Award of performance shares, provided they are not
inconsistent with the Plan.
12. PLAN CASH BONUSES.
While cash bonuses may be granted at any time outside this Plan, cash
awards may also be granted in addition to other Awards granted under the Plan
and to cash awards made outside of the Plan. Subject to the provisions of the
Plan, the Committee shall have authority to determine the persons to whom cash
bonuses shall be granted and the amount, terms and conditions of those cash
bonuses. Notwithstanding anything to the contrary in this Plan, no Covered
Employee shall be eligible to receive a cash bonus in excess of the Section
162(m) Cash Maximum in any fiscal year; and no cash bonus shall be granted
pursuant to this Plan to any Covered Employee unless the cash bonus constitutes
a Qualified Performance-Based Award in accordance with the provisions of Section
13.
13. PERFORMANCE GOALS FOR CERTAIN SECTION 162(m) AWARDS.
13.1 162(m) Exemption. This Plan shall be operated to ensure that all
stock options and SARs granted hereunder to any Covered Employee qualify for the
Section 162(m) Exemption.
13.2 Qualified Performance-Based Awards. When granting any Award
other than stock options or SARs, the Committee may designate
the Award as a Qualified Performance-Based Award, based upon a
determination that the recipient is or may be a Covered
Employee with respect to that Award, and the Committee wishes
the Award to qualify for the Section 162(m) Exemption. If an
Award is so designated, the Committee shall establish
performance goals for the Award within the time period
prescribed by Section 162(m) of the Code based on one or more
of the following Qualified Performance Measures, which may be
expressed in terms of Company-wide objectives or in terms of
objectives that relate to the performance of a Subsidiary or a
division, region, department or function within the Company or
a Subsidiary:
(1) return on capital, equity, or assets (including economic value
created),
(2) productivity,
(3) cost improvements,
(4) cash flow,
(5) sales revenue growth,
(6) net income, earnings per share, or earnings from operations,
<PAGE>
(7) quality,
(8) customer satisfaction,
(9) comparable store sales, or
(10) stock price or total shareholder return.
Measurement of the Company's performance against the goals
established by the Committee shall be objectively determinable,
and to the extent goals are expressed in standard accounting
terms, performance shall be measured according to generally
accepted accounting principles as in existence on the date on
which the performance goals are established and without regard to
any changes in those principles after that date.
13.3 Performance Goal Conditions. Each Qualified Performance-Based
Award (other than a stock option or SAR) shall be earned, vested and payable (as
applicable) only upon the achievement of performance goals established by the
Committee based upon one or more of the Qualified Performance Measures, together
with the satisfaction of any other conditions, such as continued employment, the
Committee may determine to be appropriate; however, (i) the Committee may
provide, either in connection with the grant of an Award or by later amendment,
that achievement of the performance goals will be waived upon the death or
Disability of the Participant, and (ii) the provisions of Section 26 shall apply
notwithstanding this sentence.
13.4 Certification of Goal Achievement. Any payment of a Qualified
Performance-Based Award granted with performance goals shall be conditioned on
the written certification of the Committee in each case that the performance
goals and any other material conditions were satisfied. Except as specifically
provided in Section 13.3, no Qualified Performance-Based Award may be amended,
nor may the Committee exercise any discretionary authority it may otherwise have
under the Plan with respect to a Qualified Performance-Based Award, in any
manner to waive the achievement of the applicable performance goal based on
Qualified Performance Measures or to increase the amount payable under, or the
value of, the Award, or otherwise in a manner that would cause the Qualified
Performance-Based Award to cease to qualify for the Section 162(m) Exemption.
14. PAYMENT OF AWARDS.
At the discretion of the Committee, payment of Awards may be made in
cash, Common Stock, a combination of cash and Common Stock, or any other form of
property the Committee shall determine. In addition, payment of Awards may
include terms, conditions, restrictions and limitations, if any, the Committee
deems appropriate, including, in the case of Awards paid in the form of Common
Stock, restrictions on transfer and forfeiture provisions. Payment of Awards may
be made in a lump sum, or in installments, as determined by the Committee.
15. DIVIDEND AND DIVIDEND EQUIVALENTS.
If an Award is granted in the form of a Stock Award, stock option, or
performance share, or in the form of any other stock-based grant, the Committee
may choose, at the time of the grant of the Award or any time thereafter up to
the time of the Award's payment, subject to Section 13.1 of this Plan, to
include as part of the Award in those forms an entitlement to receive dividends
or dividend equivalents with respect to Stock Awards, performance shares, or
options which are vested, subject to terms, conditions, restrictions and
limitations, if any, the Committee may establish. Dividends and dividend
equivalents shall be paid in a form and manner (i.e., lump sum or installments),
and at a time or times the Committee shall determine. All dividends or dividend
equivalents that are not paid currently may, at the Committee's discretion,
accrue interest, be reinvested in additional shares of Common Stock or, in the
case of dividends or dividend equivalents credited in connection with
performance shares, be credited as additional performance shares and paid to the
Participant if and when, and to the extent that, payment is made pursuant to
that Award.
<PAGE>
16. DEFERRAL OF AWARDS.
At the discretion of the Committee, payment of a Stock Award,
performance share, dividend, dividend equivalent, or any portion thereof may be
deferred by a Participant until a time the Committee may establish. All
deferrals shall be accomplished by the delivery of a written, irrevocable
request by the Participant prior to the time payment would otherwise be made, on
a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to ensure
that deferrals comply with all applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. The Committee also may credit interest, at rates to
be determined by the Committee, on cash payments that are deferred and credit
dividends or dividend equivalents on deferred payments denominated in the form
of Common Stock. The Committee also may, in its discretion, require deferral of
payment of any Award or portion of it, if payment of the Award would, or could
in the reasonable estimation of the Committee, result in the Participant
receiving compensation in excess of the maximum amount deductible by the Company
under the provisions of Code Section 162(m), as amended.
17. TERMINATION OF EMPLOYMENT.
If a Participant's employment with the Company or a Subsidiary or
Affiliate terminates for Cause or for a reason other than death, Disability,
retirement, or any other approved reason, all unexercised, unearned, and unpaid
Awards, including without limitation, Awards earned but not yet paid, all unpaid
dividends and dividend equivalents, and all interest accrued on the foregoing
shall be canceled or forfeited, as the case may be, unless the Participant's
Award Notice provides otherwise. The Committee shall have the authority to
promulgate rules and regulations to (i) determine what events constitute
Disability, retirement or termination for an approved reason for purposes of the
Plan, and (ii) determine the treatment of a Participant under the Plan in the
event of a Participant's death, Disability, retirement or termination for an
approved reason.
18. NO ASSIGNMENT.
No Awards (other than unrestricted Stock Awards) or any other payment
under the Plan shall be subject in any manner to alienation, anticipation, sale,
transfer (except by will or the laws of descent and distribution), assignment,
pledge, or encumbrance; however, the Committee may (but need not) permit other
transfers where the Committee concludes that transferability (i) does not result
in accelerated taxation, (ii) does not cause any option intended to be an
incentive stock option to fail to be described in Code Section 422(b), and (iii)
is otherwise appropriate and desirable, taking into account any state or federal
securities laws applicable to transferable Awards. During the lifetime of the
Participant no Award shall be payable to or exercisable by anyone other than the
Participant to whom it was granted, other than (a) the duly appointed
conservator or other lawfully designated representative of the Participant in
the case of a permanent Disability involving a mental incapacity or (b) the
transferee in the case of an Award transferred in accordance with the preceding
sentence.
19. ADJUSTMENT OF NUMBER OF SHARES AVAILABLE.
If there is a change in the number of outstanding shares of Common
Stock through the declaration of stock dividends or stock splits, the number of
shares available for Awards, the shares subject to any Award, the shares
underlying any Outside Director Option, and the option prices or exercise prices
of Awards and Outside Director Options shall be automatically adjusted such that
the value of the Awards held by the Participants immediately following the
change is the same as that value immediately prior to the change. If there is a
change in the number of outstanding shares of Common Stock or any change in the
outstanding stock of the Company (or any successor to the Company), or any other
transaction described in Section 424(a) of the Code, the Committee shall make
appropriate adjustments in the number and kind of shares of stock that may be
issued under the Plan, including in connection with Outside Director Options,
and any adjustments and modifications to outstanding Awards and Outside Director
Options as it deems appropriate. In the event of any other change in the capital
structure or in the Common Stock of the Company, the Committee shall also be
authorized to make appropriate adjustments in the shares of stock available for
issuance under the Plan, including in connection with Outside Director Options,
and any adjustments and/or modifications to outstanding Awards and Outside
Director Options as it deems appropriate.
<PAGE>
20. WITHHOLDING TAXES.
The Company shall have the power and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to any taxable event
arising as a result of this Plan. With respect to withholding required upon any
taxable event, the Company may elect in its discretion, and Participants may
elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by withholding or having the Company withhold
shares of Common Stock having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All elections by Participants shall be irrevocable, made in
writing, and signed by the Participant.
21. NONCOMPETITION; CONFIDENTIALITY.
For purposes of this Section 21, "Company" shall include any Subsidiary
or Affiliate employing the Participant. A Participant will not, without the
written consent of the Company, either during or after his or her employment by
the Company, disclose to anyone or make use of any confidential information
which he or she has acquired during his or her employment relating to any of the
business of the Company, except as such disclosure or use may be required in
connection with his or her work as an employee of Company, or as demanded by a
subpoena issued by a court of competent jurisdiction, if the Participant gives
notice of the demand to the Company as soon as reasonably possible after receipt
of the subpoena. The confidential information of the Company includes, but is
not limited to, all technology, recipes, business systems and styles, customer
lists and all other Company proprietary information not generally known to the
public. During Participant's employment by the Company, he or she will not,
either as principal, agent, consultant, employee or otherwise, engage in any
work or other activity in competition with the Company in the field or fields in
which he or she has worked for the Company. Unless the Award Notice specifies
otherwise, a Participant shall forfeit all rights under this Plan to any
unexercised or unpaid Awards or to the deferral of any Award, dividend, or
dividend equivalent, if, in the determination of the Committee, the Participant
has violated the Agreement set forth in this Section 21, and in that event any
further payment, deferral of payment, or other action with respect to any Award,
dividend, or dividend equivalent shall be made or taken, if at all, in the sole
discretion of the Committee.
22. REGULATORY APPROVALS AND LISTINGS.
Notwithstanding anything contained in the Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates of Common
Stock evidencing Stock Awards or any other Award resulting in the payment of
Common Stock prior to (a) the obtaining of any approval from any governmental
agency which the Company shall, in its sole discretion, determine to be
necessary or advisable, (b) the admission of the shares to quotation or listing
on the automated quotation system or stock exchange on which the Common Stock
may be listed, and (c) the completion of any registration or other qualification
of the shares under any State or Federal law or ruling of any governmental body
that the Company shall, in its sole discretion, determine to be necessary or
advisable.
<PAGE>
23. PLAN AMENDMENT.
Except as provided in Section 26, the Board or the Committee may, at
any time and from time to time, suspend, amend, modify, or terminate the Plan
without shareholder approval; however, if an amendment to the Plan would, in the
reasonable opinion of the Board or the Committee, either (i) result in repricing
stock options or otherwise increase the benefits accruing to Participants or
Outside Directors, (ii) increase the number of shares of Common Stock issuable
under the Plan, or (iii) modify the requirements for eligibility, then that
amendment shall be subject to shareholder approval; and, the Board or Committee
may condition any amendment or modification on the approval of shareholders of
the Company if that approval is necessary or deemed advisable to (i) permit
Awards to be exempt from liability under Section 16(b) of the Exchange Act, (ii)
to comply with the listing or other requirements of an automated quotation
system or stock exchange, or (iii) to satisfy any other tax, securities or other
applicable laws, policies or regulations.
24. AWARD AMENDMENTS.
Except as provided in Section 26, the Committee may amend, modify or
terminate any outstanding Award or Outside Director Option without approval of
the Participant or Outside Director, as applicable; however:
a. except as otherwise provided in Section 21, subject to the
terms of the applicable Award Notice, an amendment, modification or
termination shall not, without the Participant's or Outside Director's
consent, as applicable, reduce or diminish the value of the Award or
Outside Director Option determined as if the Award or Outside Director
Option had been exercised, vested, cashed in (at the spread value in
the case of stock options or SARs) or otherwise settled on the date of
that amendment or termination;
b. the original term of any stock option or SAR may not be
extended without the prior approval of the shareholders of the Company;
c. except as otherwise provided in Section 19, the exercise
price of any stock option or SAR may not be reduced, directly or
indirectly, without the prior approval of the shareholders of the
Company; and
d. no termination, amendment, or modification of the Plan
shall adversely affect any Award or Outside Director Options previously
granted under the Plan, without the written consent of the affected
Participant or Outside Director.
<PAGE>
25. GOVERNING LAW.
This Plan shall be governed by and construed in accordance with the
laws of the State of Tennessee, except as superseded by applicable Federal law.
26. CHANGE IN CONTROL.
Subject to the limitations set forth in this Section 26, but only if
and to the extent determined by the Committee or the Board at or after the
affected award or grant and subject to any right of approval expressly reserved
by the Committee or the Board at the time of the determination, in case of a
Change in Control or a Potential Change in Control, the following provisions
shall apply to any Award which has not previously terminated or expired:
a. any SAR and any stock option or Outside Director Option
awarded under this Plan that is not previously vested and exercisable
shall become fully vested and exercisable;
b. the restrictions applicable to any Award which are not
already vested under the Plan shall lapse, and those existing shares
and awards shall be deemed fully vested;
c. unless otherwise determined by the Board or by the
Committee in its sole discretion prior to any Change in Control, the
value of all vested outstanding stock options, SARs, Outside Director
Options and other Awards, shall be cashed out on the basis of the
Change in Control Price as of the date the Change in Control or
Potential Change in Control is determined to have occurred (or other
date determined by the Board or Committee prior to the Change in
Control);
d. the Board or the Committee may impose additional conditions
on the acceleration or valuation of any Award in the applicable Award
Notice; and
e. for purposes of making payment to Participants in
connection with performance shares, each performance period for which
the Committee has granted performance shares (a "current performance
period") shall be treated as terminating upon the date the Change in
Control or Potential Change in Control is determined to have occurred
(or other date determined by the Board or Committee prior to the Change
in Control), and for each current performance period and each completed
performance period for which the Committee has not on or before that
date made a determination as to whether and what degree the performance
objectives for the period have been attained (a "completed performance
period"), it shall be assumed that the performance objectives have been
attained at a level of 100% or the equivalent. If the Participant is
participating in one or more current performance periods, he or she
shall be considered to have earned and, therefore, be entitled to
receive that prorated portion of the Awards previously granted for each
of those performance periods. The prorated portion shall be determined
by multiplying the number of performance shares granted to the
Participant by a fraction, the numerator of which is the total number
of whole and partial years (with each partial year being treated as a
whole year) that have elapsed since the beginning of the performance
period, and the denominator of which is the total number of years in
the performance period. A Participant in one or more completed
performance periods shall be considered to have earned and, therefore,
be entitled to receive all the performance shares previously granted
during each performance period.
<PAGE>
27. AWARDS TO OUTSIDE DIRECTORS.
27.1 Application. The provisions of this Section 27 apply only to
awards to Outside Directors made in accordance with this Section. The Committee
shall have no authority to determine the timing of or the terms or conditions of
any award under this Section 27.
27.2 Awards, Restrictions and Conditions.
-----------------------------------
a. At the Effective Date, each person elected to serve as an
Outside Director on that date will receive a non-qualified stock option
(within the meaning of Section 8.1) to purchase 5,000 shares of Common
Stock. The date on which the election occurs is the date of this grant.
The exercise price per share of each option granted pursuant to this
Section 27.2a. shall equal the Fair Market Value per share of Common
Stock on the last business day immediately prior to the date of this
grant. These options shall vest and become exercisable in 3 equal
annual installments, with the first 1/3 vesting on the first
anniversary of the date of this grant.
b. On the date of each Annual Meeting of Shareholders of the
Company following the Annual Meeting of Shareholders in 2002, unless
this Plan has been previously terminated, each Outside Director who
will continue as a director following the meeting will receive a
non-qualified stock option (within the meaning of Section 8.1) to
purchase 5,000 shares of Common Stock. The date on which the Annual
Meeting of Shareholders occurs is the date of this grant. The exercise
price per share of each option granted pursuant to this Section 27.2.b.
shall equal the Fair Market Value per share of Common Stock on the last
business day immediately prior to the date of the grant. These options
shall vest and become exercisable in 3 equal annual installments with
the first 1/3 vesting on the first anniversary of the date of the
grant.
c. If any person who was not previously a member of the Board
is elected or appointed an Outside Director following the Effective
Date, but prior to the July 31 immediately preceding the first annual
meeting of shareholders following his or her election of appointment,
that Outside Director will receive a non-qualified stock option (within
the meaning of Section 8.1) to purchase 5,000 shares of Common Stock.
The date prior to July 31 on which the election or appointment occurs
is the date of this grant. The exercise price per share of each option
granted pursuant to this Section 27.2.c. shall equal the Fair Market
Value per share of Common Stock on the last business day immediately
prior to the date of this grant. These options shall vest and become
exercisable in 3 equal annual installments, with the first 1/3 vesting
on the first anniversary of the date of this grant.
d. No Outside Director Option shall be exercisable prior to
vesting. Each unexercised Outside Director Option shall expire on the
10th anniversary of the date of grant.
e. The exercise price may be paid in cash or in shares of
Common Stock which have been owned for at least 6 months (or any
shorter or longer period necessary to avoid a charge to the Company's
earnings for financial reporting purposes), and including shares of
Common Stock subject to an Outside Director Option.
f. Outside Director Options shall not be transferable without
the prior written consent of the Board other than transfers by the
Outside Director (i) to a member of his or her Immediate Family or a to
trust for the benefit of the Outside Director or a member of his or her
Immediate Family, directly or by will or by the laws of descent and
distribution, or (ii) to a fund affiliated with him or her.
<PAGE>
g. Grantees of Outside Director Options shall enter into a
stock option agreement with the Company setting forth the exercise
price and other terms and restrictions as provided in this Plan.
h. Upon termination of an Outside Director's service as a
Company director, (i) all Outside Director Options that are vested and
exercisable and held by that Outside Director will remain vested and
exercisable through their expiration dates and (ii) all remaining
Outside Director Options held by that Outside Director will become
exercisable and vested to the extent of any shares that would have
become exercisable and vested within a 12-month period ending on the
anniversary date of termination of service. The options which vest
under this provision must be exercised, if at all, within that same
12-month period, until a director qualifies for retirement from the
Board after reaching at least 50 years of age and 7 years of Board
service as a director. After reaching retirement status, a director
whose Board service ends will be permitted to exercise all options
vested pursuant to these provisions until the stated expiration date of
the options. Any unvested Outside Director Options held by the Outside
Director on the date of termination of service will be forfeited to the
extent of any shares that would not have become vested and exercisable
on or before that same anniversary date. The Board may, in its sole
discretion, elect to accelerate the vesting of any Outside Director
Options in connection with the termination of service of any individual
Outside Director.
i. Outside Director Options shall be subject to Section 26.
The number of shares and the exercise price per share of each existing
Outside Director Option shall be adjusted automatically when, and in
the same manner as, the number of shares and the exercise price of
Stock Options under Section 19 are adjusted pursuant to Section 19. The
number of shares underlying potential future Outside Director Options
shall be adjusted automatically when, and in the same manner as, the
number of shares underlying outstanding Stock Options are adjusted
pursuant to Section 19.
j. The Board, in its sole discretion (and absent other express
action, without affecting the size of future option grants), may reduce
the size of any Outside Director Option prior to grant or to postpone
the vesting and exercisability of any Outside Director Option prior to
grant.
28. NO RIGHT TO EMPLOYMENT OR PARTICIPATION.
Participation in the Plan shall not give any Participant any right to
remain in the employ, or to serve as a director, of the Company or any
Subsidiary or Affiliate. The Company or, in the case of employment with a
Subsidiary or Affiliate, the Subsidiary or Affiliate, reserves the right to
terminate the employment of any Participant at any time. Further, the adoption
of this Plan shall not be deemed to give any Employee or any other individual
any right to be selected as a Participant or to be granted an Award.
29. NO RIGHT, TITLE OR INTEREST IN COMPANY ASSETS.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. No Participant shall have any rights as a shareholder as
a result of participation in the Plan until the date of issuance of a stock
certificate in the Participant's name, and, in the case of restricted shares of
Common Stock, such rights are granted to the Participant under Section 10.3
hereof. To the extent any person acquires a right to receive payments from the
Company under the Plan, those rights shall be no greater than the rights of an
unsecured creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or to make payments in lieu of,
or with respect to, Plan awards. However, unless the Committee determines
otherwise with the express consent of the affected Participant, the existence of
any such trusts or other arrangements is consistent with this "unfunded" status
of the Plan.
<PAGE>
30. SECURITIES LAWS.
With respect to Section 16 Insiders, transactions under this Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan or
action by the Committee fails so to comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
31. REQUIRED WRITTEN REPRESENTATIONS.
The Committee may require each person purchasing shares pursuant to a
stock option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or Participant is acquiring any shares of
Common Stock without a view to their distribution. The certificates for shares
may include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to stop transfer orders and
other restrictions the Committee deems advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Common Stock is then listed, and any applicable Federal
or state securities laws, and the Committee may cause a legend or legends to be
put on any certificates to make appropriate reference to the applicable
restrictions. Each Participant is responsible for fully complying with all
applicable state and federal securities laws and rules and the Company assumes
no responsibility for compliance with any such laws or rules pertaining to a
Participant's resale of any shares of Common Stock acquired pursuant to this
Plan.
32. NON-EXCLUSIVE ARRANGEMENT.
Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if required; and those arrangements may be either generally applicable or
applicable only in specific cases.
33. LIMITS ON LIABILITY AND INDEMNIFICATION.
The members of the Committee and the Board shall not be liable to any
employee or other person with respect to any determination made under the Plan
in a manner that is not inconsistent with their legal obligations as members of
the Board. In addition to all other rights of indemnification they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against reasonable expenses, including attorneys'
fees actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party because of any action taken or failure to act
under or in connection with the Plan or any Award granted under it, and against
all amounts paid by them in settlement (provided the settlement is approved by
independent legal counsel selected by the Company) or paid to them in
satisfaction of a judgment in that action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in the action, suit or
proceeding that the Committee member is liable for negligence or misconduct in
the performance of his or her duties. Within 60 days after institution of any
action, suit or proceeding covered by this Section, the Committee member must
inform the Company in writing of the claim and offer the Company the
opportunity, at its own expense, to handle and defend the matter.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>aex10sfy03.txt
<DESCRIPTION>EXHIBIT 10S - CIC AGREEMENT VOGEL
<TEXT>
October 3, 2003
Mr. Tom Vogel
17107 Crown Brook Circle
Franklin, TN 37067
Re: Employee Retention Agreement
----------------------------
Dear Tom:
The Board of Directors of the CBRL Group, Inc. recognizes the
contribution that you have made to CBRL Group, Inc. or one of its direct or
indirect subsidiaries (collectively, the "Company") and wishes to ensure your
continuing commitment to the Company and its business operations. Accordingly,
in exchange for your continuing commitment to the Company, and your energetic
focus on continually improving operations, the Company promises you the
following benefits if your employment with the Company is terminated in certain
circumstances:
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings which are equally applicable to both the singular and plural
forms of the terms defined:
1.1 "Cause" means any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means: (a) that after the date of this
Agreement, a person becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding voting securities, unless that acquisition was
approved by a vote of at least 2/3 of the directors in office immediately prior
to the acquisition; (b) that during any period of 2 consecutive years following
the date of this Agreement, individuals who at the beginning of the period
constitute members of the Board of Directors of the Company cease for any reason
to constitute a majority of the Board unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of at least 2/3 of the directors then still in office who were directors at
<PAGE>
the beginning of the 2-year period; (c) a merger, consolidation or
reorganization of the Company (but this provision does not apply to a
recapitalization or similar financial restructuring which does not involve a
material change in ownership of equity of the Company and which does not result
in a change in membership of the Board of Directors); or (d) a sale of all or
substantially all of the Company's assets.
1.3 "Change in Control Period" means a 2-year year period beginning the
day after a Change in Control occurs.
1.4 "Change in Duties or Compensation" means any one of: (a) a material
change in your duties and responsibilities for the Company (without your
consent) from those duties and responsibilities for the Company in effect at the
time a Change in Control occurs, which change results in the assignment of
duties and responsibilities inferior to your duties and responsibilities at the
time such Change in Control occurs (it being understood and acknowledged by you
that a Change in Control that results in two persons of which you are one having
similar or sharing duties and responsibilities shall not be a material change in
your duties and responsibilities); (b) a reduction in your salary or a material
change in benefits (excluding discretionary bonuses), from the salary and
benefits in effect at the time a Change in Control occurs; or (c) a change in
the location of your work assignment from your location at the time a Change in
Control occurs to any other city or geographical location that is located
further than 50 miles from that location.
2. TERMINATION OF EMPLOYMENT; SEVERANCE. Your immediate supervisor or the
Company's Board of Directors may terminate your employment, with or without
cause, at any time by giving you written notice of your termination, such
termination of employment to be effective on the date specified in the notice.
You also may terminate your employment with the Company at any time. The
effective date of termination (the "Effective Date") shall be the last day of
your employment with the Company, as specified in a notice by you, or if you are
terminated by the Company, the date that is specified by the Company in its
notice to you. The following subsections set forth your rights to severance in
the event of the termination of your employment in certain circumstances by
either the Company or you. Section 5 also sets forth certain restrictions on
your activities if your employment with the Company is terminated, whether by
the Company or you. That section shall survive any termination of this Agreement
or your employment with the Company.
2.1 Termination by the Company for Cause. If you are terminated for
Cause, the Company shall have no further obligation to you, and your
participation in all of the Company's benefit plans and programs shall cease as
of the Effective Date. In the event of a termination for Cause, you shall not be
entitled to receive severance benefits described in Section 3.
<PAGE>
2.2 Termination by the Company Without Cause Other Than During a Change
in Control Period. If your employment with the Company is terminated by the
Company without Cause at a time other than during a Change in Control Period,
you shall be entitled to only those severance benefits provided by the Company's
severance policy or policies then in effect. You shall not be entitled to
receive benefits pursuant to Section 3 of this Agreement.
2.3 Termination by the Company Without Cause During a Change in Control
Period. If your employment with the Company is terminated by the Company without
Cause during a Change in Control Period, you shall be entitled to receive
Benefits pursuant to Section 3. A termination within 90 days prior to a Change
in Control which occurs solely in order to make you ineligible for the benefits
of this Agreement shall be considered a termination without Cause during a
Change in Control Period.
2.4 Termination By You For Change in Duties or Compensation During a
Change in Control Period. If during a Change in Control Period there occurs a
Change in Duties or Compensation you may terminate your employment with the
Company at any time within 30 days after the occurrence of the Change in Duties
or Compensation, by giving to the Company not less than 120 nor more than 180
days notice of termination. During the notice period that you continue to work,
any reduction in your Compensation will be restored. At the option of the
Company, following receipt of this notice, it may: (a) change or cure, within 15
days, the condition that you claim has caused the Change in Duties or
Compensation, in which case, your rights to terminate your employment with the
Company pursuant to this Section 2.4 shall cease (unless there occurs thereafter
another Change in Duties or Compensation) and you shall continue in the
employment of the Company notwithstanding the notice that you have given; (b)
allow you to continue your employment through the date that you have specified
in your notice; or (c) immediately terminate your employment pursuant to Section
2.3. If you terminate your employment with the Company pursuant to this Section
2.4, you shall be entitled to receive Benefits pursuant to Section 3. Your
failure to provide the notice required by this Section 2.4 shall result in you
having no right to receive any further compensation from the Company except for
any base salary or vacation earned but not paid, plus any bonus earned and
accrued by the Company through the Effective Date.
3. SEVERANCE BENEFITS. If your employment with the Company is
terminated as described in Section 2.3 or 2.4, you shall be entitled to the
benefits specified in subsections 3.1, 3.2, and 3.3 (the "Benefits") for the
period of time set forth in the applicable section.
3.1 Salary Payment or Continuance. You will be paid a single lump sum
payment in an amount equal to 2.99 times the average of your annual base salary
and any bonus payments for the 3 years immediately preceding the Effective Date.
The determination of the amount of this payment shall be made by the Company's
actuaries and benefit consultants and, absent manifest error, shall be final,
binding and conclusive upon you and the Company.
<PAGE>
3.2 Continuation of Benefits. During the 2 years following the
Effective Date (the "Severance Period") that results in benefits under this
Article 3, you shall continue to receive the medical, prescription, dental,
employee life and group life insurance benefits at the levels to which you were
entitled on the day preceding the Effective Date, or reasonably equivalent
benefits, to the extent continuation is not prohibited or limited by applicable
law. In no event shall substitute plans, practices, policies and programs
provide you with benefits which are less favorable, in the aggregate, than the
most favorable of those plans, practices, policies and programs in effect for
you at any time during the 120-day period immediately preceding the Effective
Date. However, if you become reemployed with another employer and are eligible
to receive medical or other welfare benefits under another employer-provided
plan, Company payments for these medical and other welfare benefits shall cease.
4. EFFECT OF TERMINATION ON STOCK OPTIONS AND RESTRICTED STOCK. In the
event of any termination of your employment, all stock options and restricted
stock held by you that are vested prior to the Effective Date shall be owned or
exercisable in accordance with their terms; all stock options held by you that
are not vested prior to the Effective Date shall lapse and be void; however, if
your employment with the Company is terminated as described in Sections 2.3 or
2.4, then, if your option or restricted stock grants provide for immediate
vesting in the event of a Change in Control, the terms of your option or
restricted stock agreement shall control. If your option or restricted stock
agreement does not provide for immediate vesting, you shall receive, within 30
days after the Effective Date, a lump sum cash distribution equal to: (a) the
number of shares of the Company's ordinary shares that are subject to options or
restricted stock grants held by you that are not vested as of the Effective Date
multiplied by (b) the difference between: (i) the closing price of a share of
the Company's ordinary shares on the NASDAQ National Market System as reported
by The Wall Street Journal as of the day prior to the Effective Date (or, if the
market is closed on that date, on the last preceding date on which the market
was open for trading), and (ii) the applicable exercise prices or stock grant
values of those non-vested shares.
5. DISCLOSURE OF INFORMATION. You recognize and acknowledge that, as a
result of your employment by the Company, you have or will become familiar with
and acquire knowledge of confidential information and certain trade secrets that
are valuable, special, and unique assets of the Company. You agree that all that
confidential information and trade secrets are the property of the Company.
Therefore, you agree that, for and during your employment with the Company and
continuing following the termination of your employment for any reason, all
confidential information and trade secrets shall be considered to be proprietary
to the Company and kept as the private records of the Company and will not be
divulged to any firm, individual, or institution, or used to the detriment of
the Company. The parties agree that nothing in this Section 6 shall be construed
as prohibiting the Company from pursuing any remedies available to it for any
breach or threatened breach of this Section 6, including, without limitation,
the recovery of damages from you or any person or entity acting in concert with
you.
<PAGE>
6. GENERAL PROVISIONS.
6.1 Other Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities or
duties or to participate in and receive benefits from any pension plan, benefit
plan or profit sharing plans except plans which specifically address benefits of
the type addressed in Sections 3 and 4 of this Agreement.
6.2 Death During Severance Period. If you die during the Severance
Period, any Benefits remaining to be paid to you shall be paid to the
beneficiary designated by you to receive those Benefits (or in the absence of
designation, to your surviving spouse or next of kin).
6.3 Notices. Any notices to be given under this Agreement may be
effected by personal delivery in writing or by mail, registered or certified,
postage prepaid with return receipt requested. Mailed notices shall be addressed
to the parties at the addresses appearing on the first page of this Agreement
(to the attention of the Secretary in the case of notices to the Company), but
each party may change the delivery address by written notice in accordance with
this Section 7.3. Notices delivered personally shall be deemed communicated as
of actual receipt; mailed notices shall be deemed communicated as of the second
day following deposit in the United States Mail.
6.4 Entire Agreement. This Agreement supersedes all previous oral or
written agreements, understandings or arrangements between the Company and you
regarding a termination of your employment with the Company or a change in your
status, scope or authority and the salary, benefits or other compensation that
you receive from the Company as a result of the termination of your employment
with the Company (the "Subject Matter"), all of which are wholly terminated and
canceled. This Agreement contains all of the covenants and agreements between
the parties with respect to the Subject Matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made with respect to the Subject Matter by any
party, or anyone acting on behalf of any party, which are not embodied in this
Agreement. Any subsequent agreement relating to the Subject Matter or any
modification of this Agreement will be effective only if it is in writing signed
by the party against whom enforcement of the modification is sought.
6.5 Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, and it shall be enforced or
challenged only in the courts of the State of Tennessee.
6.7 Waiver of Jury Trial. The Company and you expressly waive any right
to a trial by jury in any action or proceeding to enforce or defend any rights
under this Agreement, and agree that any such action or proceeding shall be
tried before a court and not a jury. You irrevocably waive, to the fullest
extent permitted by law, any objection that you may have now or hereafter to the
specified venue of any such action or proceeding and any claim that any such
action or proceeding has been brought in an inconvenient forum.
<PAGE>
6.8 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision of this Agreement will not operate as and is not
to be construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with the provision or to take remedial
steps to recover damages or other relief for noncompliance. Any express waiver
of any provision of this Agreement will not operate, and is not to be construed,
as a waiver of any subsequent breach, irrespective of whether occurring under
similar or dissimilar circumstances. You may not assign any of your rights under
this Agreement. The rights and obligations of the Company under this Agreement
shall benefit and bind the successors and assigns of the Company. The Company
agrees that if it assigns this Agreement to any successor company, it will
ensure that its terms are continued.
6.9 Certain Additional Payments by the Company.
a. The Company will pay you an amount (the "Additional Amount") equal to
the excise tax under the United States Internal Revenue Code of 1986, as amended
(the "Code"), if any, incurred by you by reason of the payments under this
Agreement and any other plan, agreement or understanding between you and the
Company or its parent, subsidiaries or affiliates (collectively, "Separation
Payments") constituting excess parachute payments under Section 280G of the Code
(or any successor provision). In addition, the Company will pay an amount equal
to all excise taxes and federal, state and local income taxes incurred by you
with respect to receipt of the Additional Amount. All determinations required to
be made under this Section 6.9 including whether an Additional Amount is
required and the amount of any Additional Amount, will be made by the
independent auditors engaged by the Company immediately prior to the Change in
Control (the "Accounting Firm"), which will provide detailed supporting
calculations to the Company and you. In computing taxes, the Accounting Firm
will use the highest marginal federal, state and local income tax rates
applicable to you and will assume the full deductibility of state and local
income taxes for purposes of computing federal income tax liability, unless you
demonstrate that you will not in fact be entitled to such a deduction for the
year of payment.
b. The Additional Amount, computed assuming that all of the Separation
Payments constitute excess parachute payments as defined in Section 280G of the
Code (or any successor provision), will be paid to you at the time that the
payments made pursuant to Section 3.1 is made unless the Company, prior to the
Severance Period, provides you with an opinion of the Accounting Firm that you
will not incur an excise tax on part or all of the Separation Payments. That
opinion will be based upon the applicable regulations under Sections 280G and
4999 of the Code (or any successor provisions) or substantial authority within
the meaning of Section 6662 of the Code. If that opinion applies only to part of
the Separation Payments, the Company will pay you the Additional Amount with
respect to the part of the Separation Payments not covered by the opinion.
<PAGE>
c. The amount of the Additional Amount and the assumptions to be utilized
in arriving at the determination, shall be made by the Company's Accounting
Firm, whose decision shall be final and binding upon both you and the Company.
You must notify the Company in writing no later than 30 days after you are
informed of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Additional Amount. You must also
cooperate fully with the Company and give the Company any information reasonably
requested relating to the claim, and take all action in connection with
contesting the claim as the Company reasonably requests in writing from time to
time.
If all of the terms and conditions in this Agreement are agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning it to us. At the date of your return, this letter shall
constitute a fully enforceable Agreement between us.
CBRL GROUP, INC.
By: /s/Michael A. Woodhouse
-----------------------
Michael A. Woodhouse
President and CEO, CBRL Group
The foregoing is fully agreed to and accepted by:
Company Employee's Signature: /s/Tom Vogel
------------
Please Print or Type Name: Tom Vogel
---------
Please Print or Type Title: President & COO
---------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>aex10tfy03.txt
<DESCRIPTION>EXHIBIT 10T - CIC AGREEMENT SCRUGGS
<TEXT>
October 13, 1999
Patrick A. Scruggs
9354 Ansley Lane
Brentwood, TN 37027
Re: Employee Severance Benefit Agreement
------------------------------------
Dear Pat:
The Board of Directors of CBRL Group, Inc. recognizes the contribution
that you have made to CBRL Group, Inc. or one of its direct or indirect
subsidiaries (collectively, the "Company") and wishes to ensure your continuing
commitment to the Company and its business operations. Accordingly, in exchange
for your continuing commitment to the Company, and your energetic focus on
continually improving operations, the Company promises you the following
severance benefits if your employment with the Company is terminated in certain
circumstances:
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
1.1 "Cause" means any one of the following:
(a) personal dishonesty;
(b) willful misconduct;
(c) breach of fiduciary duty; or
(d) conviction of any felony or crime involving moral
turpitude.
1.2 "Change in Control" means: (a) that after the date of this
Agreement, a person becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding voting securities, unless that acquisition was
approved by a vote of at least 2/3 of the directors in office immediately prior
to the acquisition; (b) that during any period of 2 consecutive years following
the date of this Agreement, individuals who at the beginning of the period
<PAGE>
constitute members of the Board of Directors of the Company cease for any reason
to constitute a majority of the Board unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of at least 2/3 of the directors then still in office who were directors at
the beginning of the 2-year period; (c) a merger, consolidation or
reorganization of the Company (but this provision does not apply to a
recapitalization or similar financial restructuring which does not involve a
material change in ownership of equity of the Company and which does not result
in a change in membership of the Board of Directors); or (d) a sale of all or
substantially all of the Company's assets.
1.3 "Change in Control Period" means a 1-year year period beginning the
day after a Change in Control occurs.
2. TERMINATION OF EMPLOYMENT; SEVERANCE. Your immediate supervisor or the
Company's Board of Directors may terminate your employment, with or without
cause, at any time by giving you written notice of your termination, such
termination of employment to be effective on the date specified in the notice.
You also may terminate your employment with the Company at any time. The
effective date of termination (the "Effective Date") shall be the last day of
your employment with the Company, as specified in a notice by you, or if you are
terminated by the Company, the date that is specified by the Company in its
notice to you. The following subsections set forth your rights to severance in
the event of the termination of your employment in certain circumstances by
either the Company or you. Section 5 also sets forth certain restrictions on
your activities if your employment with the Company is terminated, whether by
the Company or you. That section shall survive any termination of this Agreement
or your employment with the Company.
2.1 Termination by the Company for Cause. If you are terminated for
Cause, the Company shall have no further obligation to you, and your
participation in all of the Company's benefit plans and programs shall cease as
of the Effective Date. In the event of a termination for Cause, you shall not be
entitled to receive severance benefits described in Section 3.
2.2 Termination by the Company Without Cause Other Than During a Change
in Control Period. If your employment with the Company is terminated by the
Company without Cause at a time other than during a Change in Control Period,
you shall be entitled to only those severance benefits provided by the Company's
severance policy or policies then in effect. You shall not be entitled to
receive benefits pursuant to Section 3 of this Agreement.
2.3 Termination by the Company Without Cause During a Change in Control
Period. If your employment with the Company is terminated by the Company without
Cause during a Change in Control Period, you shall be entitled to receive
Benefits pursuant to Section 3.
3. SEVERANCE BENEFITS. If your employment with the Company is terminated as
described in Section 2.3, you shall be entitled to the benefits specified in
subsections 3.1 and 3.2 for the period of time set forth in the applicable
section.
3.1 Salary Payment. You will be paid a lump sum equal to 18 months of
your base monthly salary, at the level in effect immediately preceding the
Effective Date. The determination of the amount of this payment shall be made by
the Company's payroll accountants and, absent manifest error, shall be final,
binding and conclusive upon you and the Company.
<PAGE>
3.2 Continuation of COBRA Benefits. For a period of 18 months, you
shall continue to receive the medical, prescription and dental benefits at the
levels to which you were entitled on the day preceding the Effective Date,
pursuant to COBRA, and the Company will continue to pay premiums following the
Effective Date for those benefits in the same amount as it did prior to the
Effective Date. However, if you become reemployed with another employer and
receive healthcare benefits under another employer-provided plan, these COBRA
premium subsidy benefits shall cease.
4. EFFECT OF TERMINATION ON STOCK OPTIONS AND RESTRICTED STOCK. In the
event of any termination of your employment, all stock options and restricted
stock held by you that are vested prior to the Effective Date shall be owned or
exercisable in accordance with their terms; all stock options and restricted
stock held by you that are not vested prior to the Effective Date shall lapse
and be void; however, if your employment with the Company is terminated as
described in Sections 2.3 or 2.4, then, if your option or restricted stock
grants provide for immediate vesting in the event of a Change in Control, the
terms of your option or restricted stock agreement shall control. If your option
or restricted stock agreement does not provide for immediate vesting, you shall
receive, within 30 days after the Effective Date, a lump sum cash distribution
equal to: (a) the number of shares of the Company's ordinary shares that are
subject to options or restricted stock grants held by you that are not vested as
of the Effective Date multiplied by (b) the difference between: (i) the closing
price of a share of the Company's ordinary shares on the NASDAQ National Market
System as reported by The Wall Street Journal as of the day prior to the
Effective Date (or, if the market is closed on that date, on the last preceding
date on which the market was open for trading), and (ii) the applicable exercise
prices or stock grant value of those non-vested shares.
5. DISCLOSURE OF INFORMATION. You recognize and acknowledge that, as a
result of your employment by the Company, you have or will become familiar with
and acquire knowledge of confidential information and certain trade secrets that
are valuable, special, and unique assets of the Company. You agree that all that
confidential information and trade secrets are the property of the Company.
Therefore, you agree that, for and during your employment with the Company and
continuing following the termination of your employment for any reason, all
confidential information and trade secrets shall be considered to be proprietary
to the Company and kept as the private records of the Company and will not be
divulged to any firm, individual, or institution, or used to the detriment of
the Company. The parties agree that nothing in this Section 6 shall be construed
as prohibiting the Company from pursuing any remedies available to it for any
breach or threatened breach of this Section 6, including, without limitation,
the recovery of damages from you or any person or entity acting in concert with
you.
<PAGE>
6. GENERAL PROVISIONS.
6.1 Other Plans. Nothing in this Agreement shall affect your rights
during your employment to receive increases in compensation, responsibilities or
duties or to participate in and receive benefits from any pension plan, benefit
plan or profit sharing plans except plans which specifically address benefits of
the type addressed in Sections 3 and 4 of this Agreement.
6.2 Death During Severance Period. If you die during the Severance
Period, any Benefits remaining to be paid to you shall be paid to the
beneficiary designated by you to receive those Benefits (or in the absence of
designation, to your surviving spouse or next of kin).
6.3 Notices. Any notices to be given under this Agreement may be
effected by personal delivery in writing or by mail, registered or certified,
postage prepaid with return receipt requested. Mailed notices shall be addressed
to the parties at the addresses appearing on the first page of this Agreement
(to the attention of the Secretary in the case of notices to the Company), but
each party may change the delivery address by written notice in accordance with
this Section 7.3. Notices delivered personally shall be deemed communicated as
of actual receipt; mailed notices shall be deemed communicated as of the second
day following deposit in the United States Mail.
6.4 Entire Agreement. This Agreement supersedes all previous oral or
written agreements, understandings or arrangements between the Company and you
regarding a termination of your employment with the Company or a change in your
status, scope or authority and the salary, benefits or other compensation that
you receive from the Company as a result of the termination of your employment
with the Company (the "Subject Matter"), all of which are wholly terminated and
canceled. This Agreement contains all of the covenants and agreements between
the parties with respect to the Subject Matter. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made with respect to the Subject Matter by any
party, or anyone acting on behalf of any party, which are not embodied in this
Agreement. Any subsequent agreement relating to the Subject Matter or any
modification of this Agreement will be effective only if it is in writing signed
by the party against whom enforcement of the modification is sought.
6.5 Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, and it shall be enforced or
challenged only in the courts of the State of Tennessee.
6.7 Waiver of Jury Trial. The Company and you expressly waive any right
to a trial by jury in any action or proceeding to enforce or defend any rights
under this Agreement, and agree that any such action or proceeding shall be
tried before a court and not a jury. You irrevocably waive, to the fullest
extent permitted by law, any objection that you may have now or hereafter to the
specified venue of any such action or proceeding and any claim that any such
action or proceeding has been brought in an inconvenient forum.
<PAGE>
6.8 Miscellaneous. Failure or delay of either party to insist upon
compliance with any provision of this Agreement will not operate as and is not
to be construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with the provision or to take remedial
steps to recover damages or other relief for noncompliance. Any express waiver
of any provision of this Agreement will not operate, and is not to be construed,
as a waiver of any subsequent breach, irrespective of whether occurring under
similar or dissimilar circumstances. You may not assign any of your rights under
this Agreement. The rights and obligations of the Company under this Agreement
shall benefit and bind the successors and assigns of the Company. The Company
agrees that if it assigns this Agreement to any successor company, it will
ensure that its terms are continued.
If all of the terms and conditions in this Agreement are agreed to by
you, please signify your agreement by executing the enclosed duplicate of this
letter and returning it to us. At the date of your return, this letter shall
constitute a fully enforceable agreement between us.
CBRL GROUP, INC.
By: /s/Dan W. Evins
---------------
Dan W. Evins
Chairman and Chief Executive Officer
The foregoing is fully agreed to and accepted by:
Company Employee's Signature: /s/Patrick A. Scruggs
---------------------
Please Print or Type Name: Patrick A. Scruggs
------------------
Please Print or Type Title: Assistant Treasurer
-------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>aex13fy03.txt
<DESCRIPTION>ANNUAL REPORT ON FORM 10-K
<TEXT>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands except per share data)
For each of the fiscal years ended
August 1, August 2, August 3, July 28, July 30,
2003 2002 2001(b)(c)(d) 2000(e) 1999(f)
- ----------------------------------------------------------------------------------------
OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
Total revenue $2,198,182 $2,071,784 $1,967,998 $1,777,119 $1,535,994
Cost of goods sold 703,915 677,738 664,332 614,472 538,051
Gross profit 1,494,267 1,394,046 1,303,666 1,162,647 997,943
Labor & other related
expenses 819,957 777,617 732,419 645,976 538,348
Other store operating
expenses 378,343 351,977 357,640 298,419 252,577
Store operating income 295,967 264,452 213,607 218,252 207,018
General and administrative 121,886 115,152 102,541 95,289 82,006
Amortization of goodwill -- -- 14,370 3,994 2,169
Operating income 174,081 149,300 96,696 118,969 122,843
Interest expense 8,892 6,769 12,316 24,616 11,324
Interest income 73 -- 84 352 1,319
Income before income taxes 165,262 142,531 84,464 94,705 112,838
Provision for income taxes 58,733 50,742 35,283 35,707 42,653
Net income $ 106,529 $ 91,789 $ 49,181 $ 58,998 $ 70,185
SHARE DATA Net income per share:
Basic $2.16 $1.69 $ .88 $1.02 $1.16
Diluted 2.09 1.64 .87 1.02 1.16
Dividends per share(a) $.02 $.02 $ .02 $ .01 $ .02
Weighted average
shares outstanding:
Basic 49,274 54,199 56,129 57,960 60,329
Diluted 50,998 56,091 56,799 58,041 60,610
FINANCIAL POSITION
Working capital $ (70,655) $ (54,245) $ (37,049)$ (25,079) $ (2,806)
Total assets 1,326,323 1,263,831 1,212,955 1,335,101 1,277,872
Property and equipment-net 1,040,315 984,817 955,028 1,075,134 1,020,055
Long-term debt 186,730 194,476 125,000 292,000 312,000
Other long-term
obligations 20,303 18,044 13,839 6,226 3,899
Shareholders' equity 794,896 782,994 846,108 828,970 791,007
====================================================================================
</TABLE>
(a)On November 24, 1999, CBRL Group, Inc.'s ("Company") Board of Directors
adopted a policy to consider and pay dividends, if declared, on an annual basis
each January in the future. This policy was intended to reduce
administrative and mailing costs related to dividends. On September 25, 2003,
the Company's Board of Directors adopted a new policy to consider and pay
dividends, if declared, on a quarterly basis, declared at $0.11 per share for
the initial quarter.
(b)Includes charges of $33,063 before taxes principally as a result of exiting
the Carmine Giardini's Gourmet Market(TM) business and closing four Cracker
Barrel Old Country Store(R) units and three Logan's Roadhouse(R) restaurants, as
well as an accrual for a settlement proposal for a collective action under the
Fair Labor Standards Act. See Management's Discussion and Analysis of Financial
Condition and Results of Operations. (See Notes 2 and 9 to the Company's
Consolidated Financial Statements.)
(c)The Company's fiscal year ended August 3, 2001 consisted of 53 weeks. As a
result, comparisons to fiscal 2002 and fiscal 2000 also reflect the impact of
having one more week in fiscal 2001 than in fiscal 2002 and fiscal 2000. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
(d)Includes a sale-leaseback transaction under which $138,300 of long-term debt
was paid down. (See Note 11 to the Company's Consolidated Financial Statements.)
<PAGE>
(e)Includes charges of $8,592 before taxes, principally as a result of
management changes and the resulting refocused operating priorities.
(f)The Company acquired Logan's Roadhouse, Inc. on February 16, 1999.
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The following table indicates the high and low sales prices of the
Company's common stock, as reported by The Nasdaq Stock Market (National
Market), and dividends paid.
Fiscal Year 2003 Fiscal Year 2002
---------------- ----------------
Prices Prices
------------- Dividends ------------- Dividends
Quarter High Low Paid High Low Paid
- ----------------------------------------------------------------------
First $27.95 $19.54 -- $25.96 $18.31 --
Second 32.85 22.35 $.02 31.88 23.55 $.02
Third 32.99 24.86 -- 32.75 26.25 --
Fourth 39.95 31.31 -- 34.10 24.85 --
- ---------------------------------------------------------------------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the Consolidated Financial
Statements and notes thereto. Except for specific historical information, the
matters discussed in this Annual Report to Shareholders, as well as the
Company's Form 10-K filed with the Securities and Exchange Commission for the
year ended August 1, 2003, contain forward-looking statements that involve
risks, uncertainties and other factors which may cause actual results and
performance of the Company to differ materially from those expressed or implied
by these statements. All forward-looking information is provided by the Company
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 "assumptions", "target", "guidance",
"outlook", "plans", "projection", "may", "will", "would", "expect", "intend",
"estimate", "anticipate", "believe", "potential" or "continue" (or the negative
or other derivatives of each of these terms) or similar terminology. Factors
which could materially affect actual results include, but are not limited to:
the effects of uncertain consumer confidence or general or regional economic
weakness on sales and customer travel activity; practical or psychological
effects of terrorist acts or war and military or government responses; consumer
behavior based on concerns over nutritional aspects of the Company's products or
restaurant food in general; competitive marketing and operational initiatives;
commodity, workers' compensation, group health and utility price changes; the
effects of plans intended to improve operational execution and performance; the
effects of increased competition at Company locations on sales and on labor
recruiting, cost, and retention; the ability of and cost to the Company to
recruit, train, and retain qualified restaurant hourly and management employees;
the ability of the Company to identify and acquire successful new lines of
retail merchandise; changes in foreign exchange rates affecting the Company's
future retail inventory purchases; the availability and cost of acceptable sites
for development and the Company's ability to identify such sites; changes in
accounting principles generally accepted in the United States of America or
changes in capital market conditions that could affect valuations of restaurant
companies in general or the Company's goodwill in particular; other
undeterminable areas of government or regulatory actions or regulations; changes
in interest rates affecting the Company's financing costs; increases in
construction costs; changes in or implementation of additional governmental or
regulatory rules, regulations and interpretations affecting accounting, tax,
wage and hour matters, health and safety, pensions and insurance; the actual
results of pending or threatened litigation or governmental investigations and
the costs and effects of negative publicity associated with these activities;
and other factors described from time to time in the Company's filings with the
Securities and Exchange Commission, press releases, and other communications.
All dollar amounts reported or discussed in Management's Discussion and
Analysis of Financial Condition and Results of Operations are shown in
thousands. References in Management's Discussion and Analysis of Financial
Condition and Results of Operations to a year are to the Company's fiscal year
unless otherwise noted.
The following table highlights operating results over the past three
years (immediately following the table are details of the impact of certain
charges taken in 2001 on the amounts shown in the table):
<TABLE>
<CAPTION>
Period to Period
Relationship to Total Revenue Increase(Decrease)
2003 2002 2001 2003 vs 2002 2002 vs 2001
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue 100.0% 100.0% 100.0% 6% 5%
Cost of goods sold 32.0 32.7 33.8 4 2
Gross profit 68.0 67.3 66.2 7 7
Labor & other related
expenses 37.3 37.5 37.2 5 6
Other store operating
expenses 17.2 17.0 18.2 7 (2)
Store operating income 13.5 12.8 10.8 12 24
General & administrative 5.6 5.6 5.2 6 12
Amortization of goodwill -- -- 0.7 - (100)
Operating income 7.9 7.2 4.9 17 54
Interest expense 0.4 0.3 0.6 31 (45)
Interest income -- -- -- - (100)
Income before income taxes 7.5 6.9 4.3 16 69
Provision for income taxes 2.7 2.5 1.8 16 44
Net income 4.8 4.4 2.5 16 87
=================================================================================
</TABLE>
<PAGE>
The Company recorded charges of $33,063 before taxes during the quarter
ended August 3, 2001, principally as a result of exiting the Carmine Giardini's
Gourmet Market(TM) ("Carmine's") business and the closing of four Cracker Barrel
Old Country Store(R) ("Cracker Barrel") units and three Logan's Roadhouse(R)
("Logan's") restaurants, as well as an accrual for a settlement proposal for a
certain collective action under the Fair Labor Standards Act. These charges
consisted primarily of $10,428 for the write-off of goodwill related to the
acquisition of Carmine's and $14,003 for the write-down of fixed assets of all
three Carmine's units, four Cracker Barrel units and three Logan's units in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121
(see Note 2 to the Company's Consolidated Financial Statements). These charges
also consisted of $1,234 for severance and related expenses for approximately
1,000 employees, consisting primarily of store personnel, and $3,898 for other
charges primarily consisting of lease termination costs, inventory write-downs
related to the closed units and other unit closing costs. Additionally, the
Company accrued $3,500 for a settlement proposal for a certain collective action
under the Fair Labor Standards Act (see Note 9 to the Company's Consolidated
Financial Statements). These charges affect line items in the Company's
Consolidated Statement of Income in dollars and as a percent of total revenue
for the year ended August 3, 2001, respectively, as follows: Cost of goods sold
$669, 0.0%; Labor and other related expenses $924, 0.0%; Other store operating
expenses $20,552, 1.1%; General and administrative $490, 0.0%; and Amortization
of goodwill $10,428, 0.6%. As of August 3, 2001, approximately $285 of the
severance costs and $620 of the other charges had been paid with no changes from
the original estimate. The Company paid substantially all of the remaining
severance in the first quarter of 2002 with no changes from the original
estimates. After taking into effect the property and equipment write-downs, the
Company's carrying value of the property and equipment associated with the
charges is approximately $457 as of August 1, 2003. As of August 1, 2003,
substantially all of the amounts previously recorded had been paid or settled
except for $1,179 accrued for certain lease termination costs.
The Company's year ended August 3, 2001 consisted of 53 weeks. As a
result, comparisons to 2002 and 2000 also reflect the impact of having one more
week in 2001 than in 2002 and 2000. The estimated impact of the additional week
was to increase consolidated 2001 results as follows: total revenue, $40,485;
store operating income, $9,006; operating income, $8,056; net income, $4,954;
and diluted net income per share, $0.09.
The following table highlights the components of total revenue by
percentage relationships to total revenue for the past three years:
2003 2002 2001
- ----------------------------------------------------------
Net sales:
Restaurant 79.7% 79.4% 78.5%
Retail 20.2 20.5 21.5
- ----------------------------------------------------------
Total net sales 99.9 99.9 100.0
Franchise fees and royalties 0.1 0.1 --
- ----------------------------------------------------------
Total revenue 100.0% 100.0% 100.0%
==========================================================
The following table highlights comparable store sales* results over the
past two years:
<TABLE>
<CAPTION>
Cracker Barrel Old Country Store Logan's Roadhouse
Period to Period Period to Period
Increase(Decrease) Increase
------------------ --------
2003 vs 2002 2002 vs 2001 2003 vs 2002 2002 vs 2001
(430 Stores) (414 Stores) (71 Stores) (59 Stores)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant 0.5% 5.3% 0.0% 2.4%
Retail (0.4) 2.3 -- --
Restaurant & retail 0.3 4.6 0.0 2.4
================================================================================
</TABLE>
*Comparable store sales consist of sales of stores open six full quarters at the
beginning of the year; and are measured on comparable calendar weeks.
<PAGE>
Cracker Barrel comparable store restaurant sales increased 0.5% for 2003
versus 2002. Comparable store restaurant sales increased 5.3% in 2002 versus the
comparable 52-weeks of 2001. The increase in comparable store restaurant sales
from 2002 to 2003 was due primarily to an increase in average check of 1.9%,
including 1.1% of menu pricing and 0.8% of product mix, and a decrease in guest
traffic of 1.4%.
Cracker Barrel comparable store retail sales decreased 0.4% for 2003 versus
2002. Comparable store retail sales increased 2.3% in 2002 versus the comparable
52-weeks of 2001. The comparable store retail sales decrease from 2002 to 2003
was primarily due to the restaurant guest traffic decrease.
In 2003 total net sales (restaurant and retail) in the 430 Cracker Barrel
comparable stores averaged $4,096. Restaurant sales were 77.1% of total net
sales in the comparable 430 stores in 2003 and 76.9% in 2002.
Logan's comparable store sales were flat for 2003 versus 2002 at an average
of $2,915 per store. Comparable store sales increased 2.4% for 2002 versus the
comparable 52 weeks of 2001. The unchanged comparable store sales from 2002 to
2003 was primarily due to an increase in average check of 1.7%, including 1.0%
of menu pricing and 0.7% of product mix (which reflected lower alcohol mix and
increased food and non-alcoholic beverage mix), offset by a decrease in guest
traffic of 1.7%.
Total revenue, which increased approximately 6% and 5% in 2003 and 2002,
respectively, benefited from the opening of 23, 20 and 15 new Cracker Barrel
stores in 2003, 2002 and 2001, respectively, and the opening of 12, 9 and 13 new
company-operated Logan's restaurants in 2003, 2002 and 2001, respectively.
Additionally, 2001 revenues benefited from a 53rd week, which accounted for
approximately 2% of total revenue. Average unit volumes, based on weeks of
operation, were approximately $60.9 per week for Cracker Barrel restaurants in
2003 (compared with $60.6 in 2002 and $57.5 in 2001), $18.2 for Cracker Barrel
retail (compared with $18.3 for 2002 and $17.9 for 2001), and $57.0 for Logan's
(compared with $56.6 for 2002 and $54.9 for 2001).
Cost of goods sold as a percentage of total revenue decreased in 2003 to
32.0% from 32.7% in 2002. Cracker Barrel has had various focused initiatives
aimed at improving cost of product from vendors. This decrease was due primarily
to lower commodity costs for orange juice and certain pork and dairy products
versus the prior year, higher menu pricing, higher initial mark-ons of retail
merchandise, lower retail shrink and in-store damages, a lower mix of retail
sales as a percent of total revenues (retail has a higher product cost than
restaurant) and improvements in restaurant-level execution. These decreases were
offset partially by higher markdowns of retail merchandise and higher commodity
costs for beef, eggs and butter versus the prior year. Food cost as a percentage
of net restaurant sales in 2003 decreased from 2002 primarily for reasons
described above.
Cost of goods sold as a percentage of total revenue decreased in 2002 to
32.7% from 33.8% in 2001. This decrease was primarily due to a higher average
check, an increased mix of restaurant sales, which have a lower cost of goods
than retail sales, improvements in store-level food cost execution, lower beef
and rib prices, higher initial mark-ons and lower markdowns of retail
merchandise, lower retail shrinkage and lower retail freight. These decreases
were partially offset by higher potato prices. Food cost as a percentage of net
restaurant sales in 2002 decreased from 2001 primarily for the reasons described
above.
Labor and other related expenses include all direct and indirect labor
and related costs incurred in store operations. Labor expenses as a percentage
of total revenue were 37.3%, 37.5% and 37.2% in 2003, 2002 and 2001,
respectively. The year to year decrease from 2002 to 2003 was due primarily to
higher menu pricing, lower hourly labor, including wage rates, decreased
compensation under unit-level bonus programs and decreased workers' compensation
costs offset partially by increases in manager wages and increased group health
costs versus the prior year. The year to year increase in labor and other
related expenses in 2002 versus 2001 was due primarily to increases in wages,
increases under the store-level bonus programs and increases in workers'
compensation costs. These increased workers' compensation costs reflected higher
than expected claims cost development (as determined annually by an independent
actuarial evaluation) from claims incurred in prior years. These increases were
partially offset by lower group health costs, higher average check and improved
volume.
<PAGE>
Other store operating expenses include all unit-level operating costs,
the major components of which are operating supplies, utilities, repairs and
maintenance, advertising, rent, depreciation and amortization. Other store
operating expenses as a percentage of total revenue were 17.2%, 17.0% and 18.2%
in 2003, 2002 and 2001, respectively. The increase from 2002 to 2003 was due
primarily to higher maintenance versus the prior year offset partially by higher
menu pricing versus the prior year. The year to year decrease in 2002 versus
2001 was due primarily to the non-recurrence of the charges in the fourth
quarter of 2001 of $20,552, which totaled 1.0% of total revenue, consisting
primarily of impairment losses of $14,003 (See Note 2 to the Company's
Consolidated Financial Statements). This decrease was also due to lower utility
costs, lower advertising spending, higher average check and improved volume
partially offset by higher general liability insurance costs and credit card
fees.
General and administrative expenses as a percentage of total revenue
were 5.6%, 5.6% and 5.2% in 2003, 2002 and 2001, respectively. Higher
professional fees, higher costs for store manager conferences and higher
corporate bonuses reflective of performance improvements versus a year ago were
offset by higher revenues from menu pricing and new stores versus the prior
year. General and administrative expenses as a percentage of total revenue
increased from 2001 to 2002 primarily due to bonus accruals reflective of
performance improvements, higher professional fees, and various staffing and
infrastructure changes. These increases were partially offset by a higher
average check, improved volume and the non-recurrence of the $490 in charges
related to management's decision during the fourth quarter of 2001 to exit the
Carmine's business and to close four Cracker Barrel units and three Logan's
units (see Note 2 to the Company's Consolidated Financial Statements).
Interest expense increased to $8,892 in 2003 from $6,769 in 2002 and
decreased from $12,316 in 2001. The increase from 2002 to 2003 resulted
primarily from higher average outstanding debt as compared to the prior year
offset partially by lower average interest rates as compared to the prior year.
The decrease from 2001 to 2002 was primarily due to lower interest rates (see
Note 4 to the Company's Consolidated Financial Statements).
Interest income increased to $73 in 2003 from $0 in 2002 and decreased from
$84 in 2001. The increase from 2002 to 2003 was due primarily to higher average
funds available for investment as compared to the prior year. The primary reason
for the decrease from 2001 to 2002 was lower average funds available for
investment.
Provision for income taxes as a percent of pretax income was 35.5% for
2003, 35.6% for 2002 and 41.8% for 2001. The primary reason for the decrease in
the tax rate from 2002 to 2003 was a decrease in effective state tax rates. The
primary reason for the decrease in the tax rate from 2001 to 2002 was the
non-deductibility of the $10,428 write-off of goodwill related to Carmine's in
2001. (See Note 2 to the Company's Consolidated Financial Statements.)
Impact of Recent Accounting Pronouncements Not Yet Adopted
In May 2003, The Financial Accounting Standards Board ("FASB") issued
SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity". SFAS No. 150 establishes standards for how a
Company classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that a company
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that freestanding financial instrument
embodies an obligation of the Company. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Company does not expect the adoption of this standard to have a
material effect on the Company's consolidated financial statements or its
financial position.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk. With certain instruments entered into for other
than trading purposes, the Company is subject to market risk exposure related to
changes in interest rates. As of October 15, 2003, the Company has in place a
$300,000 revolving credit facility, which matures February 21, 2008. The
facility bears interest, at the Company's election, either at the prime rate or
a percentage point spread from LIBOR based on certain financial ratios set forth
in the loan agreement. As of August 1, 2003, the Company had $7,000 outstanding
under the revolving credit facility at an interest rate of 2.36%. While changes
<PAGE>
in the prime rate or LIBOR would affect the cost of funds borrowed in the
future, the Company believes that the effect, if any, of reasonably possible
near-term changes in interest rates on the Company's consolidated financial
position, results of operations or cash flows would not be material. The impact
on the Company's annual results of operations of a one-point interest rate
change on the $7,000 outstanding under the Company's revolving credit facility
as of August 1, 2003 would be approximately $70. Based on discounted cash flows
of future payment streams, assuming rates equivalent to the Company's
incremental borrowing rate on similar liabilities, the fair value of the $7,000
outstanding under the revolving credit facility approximates carrying value as
of August 1, 2003.
Commodity Price Risk. Many of the food products purchased by the
Company are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside the control of the Company and which are
generally unpredictable. Three food categories (beef, pork and poultry) account
for the largest shares of the Company's food purchases at approximately 17%, 11%
and 11%, respectively. Other items affected by the commodities markets, such as
dairy, produce and coffee, may each account for as much as 10% of the Company's
food purchases. While the Company has some of its food items prepared to its
specifications, the Company's food items are based on generally available
products, and if any existing suppliers fail, or are unable to deliver in
quantities required by the Company, the Company believes that there are
sufficient other quality suppliers in the marketplace that its sources of supply
can be replaced as necessary. The Company also recognizes, however, that
commodity pricing is extremely volatile and can change unpredictably and over
short periods of time. Changes in commodity prices would affect the Company and
its competitors generally and often simultaneously. The Company also enters into
supply contracts for certain of its products in an effort to minimize volatility
of supply and pricing. In many cases, the Company believes it will be able to
pass through any increased commodity costs by adjusting its menu pricing. From
time to time, competitive circumstances may limit menu price flexibility, and in
those circumstances increases in commodity prices can result in lower margins
for the Company. Some of the Company's purchase contracts are used to hedge
commodity prices and may contain features that could be classified as derivative
financial instruments under SFAS Nos. 133, 137, 138 and 149. However, these
features that could be classified as derivative financial instruments are exempt
from fair value accounting based on the normal purchases exemption.
Additionally, the Company believes that any changes in commodity pricing which
cannot be adjusted for by changes in menu pricing or other product delivery
strategies would not be material.
Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows for
the last three years:
2003 2002 2001
Net cash provided by operating activities $ 240,586 $ 196,277 $ 147,859
Net cash (used in)/provided by investing
activities (118,953) (90,879) 49,844
Net cash (used in) financing activities (122,318) (102,131) (199,761)
--------- --------- ---------
Net (decrease) increase in cash
and cash equivalents $ (685) $ 3,267 $ (2,058)
========= ========= =========
The Company's cash generated from operating activities was $240,586 in
2003. Most of this cash was provided by net income adjusted by depreciation and
amortization, accretion on zero-coupon contingently convertible senior notes and
the tax benefit realized upon exercise of stock options. Decreases in prepaid
expenses and increases in accounts payable, taxes withheld and accrued, accrued
employee compensation, accrued employee benefits, other accrued expenses, other
long-term obligations and deferred income taxes were partially offset by
increases in receivables, inventories and other assets and decreases in income
taxes payable.
<PAGE>
The sale-leaseback transaction that the Company entered into at the
beginning of 2001 generated cash of $138,280 from the sale of 65 Cracker Barrel
units that was used to reduce the Company's borrowings under its revolving
credit facility. This transaction caused the change from net cash used in
investing activities to change to net cash provided by investing activities and
caused the significant increase from 2000 in net cash used in financing
activities. (See Note 11 to the Company's Consolidated Financial Statements.)
The Company had negative working capital of $70,655 at August 1, 2003
versus negative working capital of $54,245 at August 2, 2002. In the restaurant
industry, substantially all sales are either for cash or credit card. Like many
other restaurant companies, the Company is able to, and may from time to time,
operate with negative working capital. Restaurant inventories purchased through
the Company's principal food distributor are on terms of net zero days, while
restaurant inventories purchased locally generally are financed from normal
trade credit. Retail inventories purchased domestically generally are financed
from normal trade credit, while imported retail inventories generally are
purchased through letters of credit and wire transfers. These various trade
terms are aided by rapid turnover of the restaurant inventory. Employees
generally are paid on weekly, bi-weekly or semi-monthly schedules in arrears for
hours worked, and certain expenses such as certain taxes and some benefits are
deferred for longer periods of time.
Capital expenditures (purchase of property and equipment) were $120,921,
$96,692 and $91,439 in 2003, 2002 and 2001, respectively. Costs of new locations
accounted for substantially all of these expenditures.
The Company's internally generated cash, along with cash at August 2,
2002, the Company's new operating leases, proceeds from stock option exercises
and the Company's available revolver, were sufficient to finance all of its
growth, share repurchases and other cash payment obligations in 2003.
In April 2002, the Company issued $422,050 face value at maturity of
zero coupon convertible senior notes (the "Notes"), maturing on April 2, 2032,
and received proceeds totaling approximately $172,756 prior to debt issuance
costs. The Notes require no cash interest payments and were issued at a discount
representing a yield to maturity of 3.00% per annum. The Notes are redeemable at
the Company's option on or after April 3, 2007, and the holders of the Notes may
require the Company to redeem the Notes on April 3, 2005, 2007, 2012, 2017, 2022
or 2027, and in certain other circumstances. In addition, each $1 Note is
convertible into 10.8584 shares of the Company's common stock (approximately 4.6
million shares in the aggregate) under the following conditions: 1) If the
stock's market price exceeds a specified price (initially, 120% of the accreted
conversion price, and declining .08474% per quarter thereafter to approximately
110% of the accreted conversion price on the last day of the quarter ending
January 30, 2032); 2) If the Company exercises its option to redeem the Notes;
3) If the credit rating of the Notes is reduced by Moody's and Standard and
Poor's to or below both Ba3 and BB-, respectively; or 4) Upon the occurrence of
certain specified corporate transactions. The accreted conversion price is equal
to the issue price of the Note plus accrued original issue discount divided by
10.8584 shares. All subsidiaries of the Company have fully and unconditionally
guaranteed on a joint and several basis the obligations under the Notes. Each
guarantor directly or indirectly is a wholly-owned affiliate of the parent
company, CBRL Group, Inc., which has no independent assets or operations.
On February 21, 2003, the Company entered into a new five-year $300,000
revolving credit facility and terminated its existing $250,000 revolving credit
facility, which was set to expire on December 31, 2003. The new facility has
substantially the same terms as the prior facility; however, there is a slightly
more favorable credit spread grid, as well as certain less restrictive
covenants. The new $300,000 revolving credit facility will expire on February
21, 2008.
During 2003, the Company's Board of Directors authorized the repurchase
of up to 6 million shares of the Company's common stock under four separate
repurchase authorizations. The purchases are to be made from time to time in the
open market at prevailing market prices. The Company completed the 5 million
shares in the first three repurchase authorizations and 338,700 shares of the
fourth repurchase authorization during 2003 for total consideration of $166,632
or $31.21 per share. The Company presently expects to complete the remaining
661,300 shares of this fourth repurchase authorization during 2004, although
there can be no assurance that such repurchase actually will be completed in
that period of time.
<PAGE>
During 2003 the Company received proceeds of $59,649 from the exercise
of stock options on 2,922,783 shares of its common stock and tax benefit upon
exercise of stock options of $13,399. During the second quarter of 2003, the
Company declared and paid a dividend of $.02 per share.
On September 25, 2003 the Company's Board of Directors approved a new
quarterly dividend policy, declaring the first such quarterly dividend of $0.11
per common share payable on November 10, 2003 to shareholders of record on
October 17, 2003.
The Company estimates that its capital expenditures (purchase of
property and equipment) for 2004 will be approximately $140,000 to $145,000,
substantially all of which will be related to the construction of 24 new Cracker
Barrel stores and 11 new Logan's restaurants.
Management believes that cash at August 1, 2003, along with cash
generated from the Company's operating activities, stock option exercises and
its available revolving credit facility, will be sufficient to finance its
continued operations, its remaining share repurchase authorization, its
continued expansion plans and its dividend payments through 2004. At August 1,
2003, the Company had $293,000 available under its revolving credit facility.
The Company estimates that its net cash provided by operating activities in 2004
(most comparable measure under generally accepted principles in the United
States of America) less capital expenditures will generate excess cash of
approximately $55,000 to $60,000. The Company intends to use this excess cash
along with proceeds from the exercise of stock options in 2004 to apply toward
completing its remaining 661,300 share repurchase authorization, possible future
share repurchase authorizations, dividend payments, and possible debt reduction
or other purposes. The Company's principal criteria for share repurchases are
that they be accretive to earnings per share and that they do not unfavorably
affect the Company's investment grade debt rating and target capital structure.
Material Commitments
The Company's contractual cash obligations and commitments as of August
1, 2003, are summarized in the tables below:
Payments due by Year
----------------------------------
2005- 2007- After
Total 2004 2006 2008 2008
----- ---- ---- ---- ----
Convertible debt (a) $179,730 -- -- -- $179,730
Revolving credit facility 7,000 -- -- $7,000 --
-------- ------- ------- ------- --------
Long-term Debt 186,730 -- -- 7,000 179,730
Operating leases - excluding
billboards 446,068 $28,744 $56,532 55,629 305,163
Operating leases for billboards 33,611 17,993 15,443 175 --
Capital leases 451 100 247 104 --
-------- ------- ------- ------- --------
Total contractual cash
obligations $666,860 $46,837 $72,222 $62,908 $484,893
======== ======= ======= ======= ========
<TABLE>
<CAPTION>
Amount of Commitment Expirations by Year
----------------------------------
2005- 2007- After
Total 2004 2006 2008 2008
----- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Revolving credit facility $300,000 -- -- $300,000 --
Standby letters of credit 13,725 $13,725 -- -- --
Trade letters of credit 4,871 4,871 -- -- --
Guarantees (b) 4,924 451 $913 913 $2,647
-------- ------- ---- -------- ------
Total commitments $323,520 $19,047 $913 $300,913 $2,647
======== ======= ==== ======== ======
</TABLE>
(a) The convertible debt was issued at a discount representing a yield to
maturity of 3.00% per annum. The $179,730 balance is the accreted carrying
value of the debt at August 1, 2003. The convertible debt will continue to
accrete at 3.00% per annum and if held to maturity on April 2, 2032 the
obligation will total $422,050.
<PAGE>
(b)Consists solely of guarantees associated with properties that have been
subleased or assigned. The Company is not aware of any non-performance
under these arrangements that would result in the Company having to perform
in accordance with the terms of those guarantees
Critical Accounting Policies
The Company prepares its Consolidated Financial Statements in
conformity with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period (see Note 2 to the Company's Consolidated Financial
Statements). Actual results could differ from those estimates. Critical
accounting policies are those that management believes are both most important
to the portrayal of the Company's 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. The Company bases its estimates on historical experience,
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. Judgments and uncertainties affecting the application of those
policies may result in materially different amounts being reported under
different conditions or using different assumptions. The Company considers the
following policies to be most critical in understanding the judgments that are
involved in preparing its Consolidated Financial Statements.
Impairment of Long-Lived Assets and Provision for Asset Dispositions
The Company assesses the impairment of identifiable intangibles,
long-lived assets and goodwill whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Recoverability of
assets is measured by comparing the carrying value of the asset to the future
cash flows expected to be generated by the asset. If the total expected future
cash flows were less than the carrying amount of the asset, the carrying amount
is written down to the estimated fair value, and a loss resulting from
impairment is recognized by a charge to earnings. Judgments and estimates made
by the Company related to the expected useful lives of long-lived assets are
affected by factors such as changes in economic conditions and changes in
operating performance. As the Company assesses the ongoing expected cash flows
and carrying amounts of its long-lived assets, these factors could cause the
Company to realize a material impairment charge. From time to time the Company
has decided to exit from or dispose of certain operating units. Typically such
decisions are made based on operating performance or strategic considerations
and must be made before the actual costs of proceeds of disposition are known,
and management must make estimates of these outcomes. Such outcomes could
include the sale of a property or leasehold, mitigating costs through a tenant
or subtenant, or negotiating a buyout of a remaining lease term. In these
instances management evaluates possible outcomes, frequently using outside real
estate and legal advice, and records in the financial statements provisions for
the effect of such outcomes. The accuracy of such provisions can vary materially
from original estimates, and management regularly monitors the adequacy of the
provisions until final disposition occurs. In addition, at least annually the
Company assesses the recoverability of goodwill and other intangible assets
related to its restaurant concepts with assistance from an outside expert. The
impairment tests require the Company to estimate fair values of its restaurant
concepts by making assumptions regarding future cash flows and other factors.
This valuation may reflect, among other things, such external factors as capital
market valuation for public companies comparable to the operating unit. If these
assumptions change in the future, the Company may be required to record
impairment charges for these assets and such charges could be material.
<PAGE>
Insurance Reserves
The Company self-insures a significant portion of expected losses under
its workers' compensation, general liability and health insurance programs. The
Company has purchased insurance for individual claims that exceed $250 for
workers' compensation and general liability insurance prior to 2003, but has now
increased this amount to $500 for 2003 and to $1,000 for certain coverages for
2004 going forward. The Company has decided not to purchase such insurance for
its primary group health program, but its offered benefits are limited to not
more than $1,000 during the lifetime of any employee (including dependents) in
the program. The Company records a liability for workers' compensation and
general liability for all unresolved claims and for an estimate of incurred but
not reported claims at the anticipated cost to the Company based upon an
actuarially determined reserve as of the end of the Company's third quarter and
adjusting it by the actuarially determined losses and actual claims payments for
the fourth quarter. Those reserves and these losses are determined actuarially
from a range of possible outcomes within which no given estimate is more likely
than any other estimate. In accordance with SFAS No. 5, "Accounting for
Contingencies", the Company records the losses at the low end of that range and
discounts them to present value using a risk-free interest rate based on
actuarially projected timing of payments. The Company records a liability for
its group health program for all unpaid claims based primarily upon a loss
development analysis derived from actual group health claims payment experience
provided by the Company's third party administrator. The Company's accounting
policies regarding insurance reserves include certain actuarial assumptions or
management judgments regarding economic conditions, the frequency and severity
of claims and claim development history and settlement practices. Unanticipated
changes in these factors may produce materially different amounts of expense
that would be reported under these insurance programs.
Tax Provision
The Company must make estimates of certain items that comprise its
income tax provision. These estimates include employer tax credits for items
such as FICA taxes paid on employee tip income, Work Opportunity and Welfare to
Work, as well as estimates related to certain depreciation and capitalization
policies. These estimates are made based on the best available information at
the time of the provision and historical experience. The Company files its
income tax returns many months after its year end. These returns are subject to
audit by various federal and state governments years after the returns are filed
and could be subject to differing interpretations of the tax laws. The Company
then must assess the likelihood of successful legal proceedings or reach a
settlement, either of which could result in material adjustments to the
Company's Consolidated Financial Statements and its consolidated financial
position. The Internal Revenue Service has examined the Company's federal income
tax returns for 1997 through 2001. On August 1, 2002 the Company reached a
settlement with the Internal Revenue Service for these tax periods. Adjustments
related primarily to temporary or timing differences. The settlement had no
material effect on the Company's Consolidated Financial Statements.
Additionally, the Internal Revenue Service has examined the Company's federal
payroll tax filings for the calendar years ended December 31, 1997 through
December 31, 2001. This examination was completed on July 21, 2003 resulting in
no adjustment to the payroll taxes originally reported by the Company. See Note
7 to the Company's Consolidated Financial Statements.
Legal Proceedings
As more fully discussed in Note 9 to the Consolidated Financial
Statements, the Company's principal subsidiary, Cracker Barrel Old Country
Store, Inc., is a defendant in certain lawsuits, several of which have been
brought by the same plaintiffs' attorneys. Of the existing cases discussed in
Note 9, three are recent cases that appear to be directly related to one of the
previously existing cases, one is provisionally certified as a collective
action, and motions for decertification and other matters are pending, in one
the plaintiffs' attorneys never moved for class certification, and in two cases
the Court has issued its ruling denying class certification. With respect to the
cases in which class certification has been denied, the time to appeal the
court's ruling has expired in one case, and in the other case, the 11th Circuit
Court of Appeals has refused the plaintiffs' appeal. The Company believes that
its subsidiary has substantial defenses in these actions and it continues to
defend each of them vigorously. Nevertheless, the Company made offers totaling
$3,500 to resolve one of the cases, but those offers were not accepted by the
plaintiffs' attorneys. As a result, the Company recorded an accrual of this
amount in the fourth quarter of 2001 in accordance with SFAS No. 5. Except for
that accrual, there currently is no provision for any potential liability with
respect to these lawsuits in the Consolidated Financial Statements. If there
were to be an unfavorable outcome in any of these cases, beyond amounts covered
under the various insurance policies of the Company and its subsidiaries, if
applicable, the Company's results of operations, financial position and
liquidity could be materially and adversely affected.
<PAGE>
In addition to the litigation described in the preceding paragraph,
the Company and its subsidiaries are party to other legal proceedings incidental
to their business. In the opinion of management, based upon information
currently available, the ultimate liability with respect to these other actions
will not materially affect the Company's Consolidated Financial Statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
(In thousands except share data)
August 1, August 2,
Assets 2003 2002
- --------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 14,389 $ 15,074
Receivables 9,013 8,161
Inventories 136,020 124,693
Prepaid expenses 9,069 12,022
Deferred income taxes 7,568 11,632
- --------------------------------------------------------------------------
Total current assets 176,059 171,582
- --------------------------------------------------------------------------
Property and Equipment:
Land 273,831 261,857
Buildings and improvements 625,541 603,381
Buildings under capital leases 3,289 3,289
Restaurant and other equipment 331,065 321,544
Leasehold improvements 164,937 122,869
Construction in progress 19,268 16,106
- --------------------------------------------------------------------------
Total 1,417,931 1,329,046
Less: Accumulated depreciation and
amortization of capital leases 377,616 344,229
- --------------------------------------------------------------------------
Property and equipment - net 1,040,315 984,817
- --------------------------------------------------------------------------
Goodwill 92,882 92,882
Other Assets 17,067 14,550
- --------------------------------------------------------------------------
Total $1,326,323 $1,263,831
==========================================================================
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 82,172 $ 73,806
Current maturities of long-term debt
and other long-term obligations 100 87
Taxes withheld and accrued 32,103 28,681
Income taxes payable 11,952 18,519
Accrued employee compensation 50,153 43,462
Accrued employee benefits 38,782 33,421
Other accrued expenses 31,452 27,851
- --------------------------------------------------------------------------
Total current liabilities 246,714 225,827
- --------------------------------------------------------------------------
Long-term Debt 186,730 194,476
- --------------------------------------------------------------------------
Other Long-term Obligations 20,303 18,044
- --------------------------------------------------------------------------
Deferred Income Taxes 77,680 42,490
- --------------------------------------------------------------------------
Commitments and Contingencies (Note 9)
Shareholders' Equity:
Preferred stock - 100,000,000 shares of
$.01 par value authorized; no shares
issued -- --
Common stock - 400,000,000 shares of $.01
par value authorized; 2003 - 47,872,542
shares issued and outstanding; 2002 -
50,272,459 shares issued and outstanding 479 503
Retained earnings 794,417 782,491
- --------------------------------------------------------------------------
Total shareholders' equity 794,896 782,994
- --------------------------------------------------------------------------
Total $1,326,323 $1,263,831
==========================================================================
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(In thousands except share data)
Fiscal years ended
August 1, August 2, August 3,
2003 2002 2001
- -----------------------------------------------------------------------
Total revenue $2,198,182 $2,071,784 $1,967,998
Cost of goods sold 703,915 677,738 664,332
- -----------------------------------------------------------------------
Gross profit 1,494,267 1,394,046 1,303,666
- -----------------------------------------------------------------------
Labor & other related expenses 819,957 777,617 732,419
Other store operating expenses 378,343 351,977 357,640
- -----------------------------------------------------------------------
Store operating income 295,967 264,452 213,607
General and administrative 121,886 115,152 102,541
Amortization of goodwill -- -- 14,370
- -----------------------------------------------------------------------
Operating income 174,081 149,300 96,696
Interest expense 8,892 6,769 12,316
Interest income 73 -- 84
- -----------------------------------------------------------------------
Income before income taxes 165,262 142,531 84,464
Provision for income taxes 58,733 50,742 35,283
- -----------------------------------------------------------------------
Net income $ 106,529 $ 91,789 $ 49,181
=======================================================================
Net income per share - basic $2.16 $1.69 $.88
=======================================================================
Net income per share - diluted $2.09 $1.64 $.87
=======================================================================
Basic weighted average shares
outstanding 49,274,373 54,198,845 56,128,956
=======================================================================
Diluted weighted average shares
Outstanding 50,998,339 56,090,940 56,799,124
=======================================================================
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands except per share data)
Additional Total
Common Paid-In Retained Treasury Shareholders'
Stock Capital Earnings Stock Equity
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at July 28, 2000 $627 $284,429 $648,489 $(104,575) $828,970
Cash dividends - $.020 per
share -- -- (1,185) -- (1,185)
Exercise of stock options 3 5,152 -- -- 5,155
Tax benefit realized upon
exercise of stock options -- 431 -- -- 431
Purchases and retirement of
common and treasury stock (80) (140,939) -- 104,575 (36,444)
Net income -- -- 49,181 -- 49,181
- --------------------------------------------------------------------------------
Balances at August 3, 2001 550 149,073 696,485 -- 846,108
Cash dividends - $.020 per
share -- -- (1,163) -- (1,163)
Exercise of stock options 29 53,074 -- -- 53,103
Tax benefit realized upon
exercise of stock options -- 9,991 -- -- 9,991
Purchases and retirement of
common stock (76) (212,138) (4,620) -- (216,834)
Net income -- -- 91,789 -- 91,789
- --------------------------------------------------------------------------------
Balances at August 2, 2002 503 -- 782,491 -- 782,994
Cash dividends - $.020 per
share -- -- (1,043) -- (1,043)
Exercise of stock options 29 59,620 -- -- 59,649
Tax benefit realized upon
exercise of stock options -- 13,399 -- -- 13,399
Purchases and retirement of
common stock (53) (73,019) (93,560) -- (166,632)
Net income -- -- 106,529 -- 106,529
- --------------------------------------------------------------------------------
Balances at August 1, 2003 $479 $ -- $794,417 $ -- $794,896
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Fiscal years ended
August 1, August 2, August 3,
2003 2002 2001
- -------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 106,529 $ 91,789 $ 49,181
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 64,376 62,759 64,902
Loss (gain) on disposition of property
and equipment 903 (781) 671
Impairment loss -- -- 24,431
Accretion on zero-coupon contingently
convertible senior notes 5,254 1,720 --
Tax benefit realized upon
exercise of stock options 13,399 9,991 431
Changes in assets and liabilities:
Receivables (852) 2,040 1,369
Inventories (11,327) (8,103) (9,213)
Prepaid expenses 2,953 (1,920) (3,108)
Other assets (3,136) (813) (1,376)
Accounts payable 8,366 17,108 1,025
Taxes withheld and accrued 3,422 (1,153) 1,456
Income taxes payable (6,567) (3,146) 8,230
Accrued employee compensation 6,691 7,169 3,376
Accrued employee benefits 5,361 7,871 2,221
Other accrued expenses 3,601 5,769 1,753
Other long-term obligations 2,359 4,232 7,803
Deferred income taxes 39,254 1,745 (5,293)
- -------------------------------------------------------------------------------------------
Net cash provided by
operating activities 240,586 196,277 147,859
- -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and
equipment (120,921) (96,692) (91,439)
Proceeds from sale of property and
equipment 1,968 5,813 141,283
- -------------------------------------------------------------------------------------------
Net cash (used in) provided by investing
activities (118,953) (90,879) 49,844
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cash flows from financing activities:
<S> <C> <C> <C>
Proceeds from issuance of
long-term debt 353,200 591,756 355,600
Proceeds from exercise of
stock options 59,649 53,103 5,155
Principal payments under
long-term debt and other
long-term obligations (366,287) (524,140) (522,790)
Purchases and retirement of common stock (166,632) (216,834) (36,444)
Deferred financing costs (1,205) (4,853) (97)
Dividends on common stock (1,043) (1,163) (1,185)
- -------------------------------------------------------------------------------------------
Net cash used in financing activities (122,318) (102,131) (199,761)
- -------------------------------------------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (685) 3,267 (2,058)
Cash and cash equivalents,
beginning of year 15,074 11,807 13,865
- -------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 14,389 $ 15,074 $ 11,807
===========================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,604 $ 4,839 $ 12,739
Income taxes 15,229 43,340 32,642
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
1. Description Of The Business
CBRL Group, Inc. and its affiliates (collectively, in the Notes, the
"Company") are principally engaged in the operation and development in the
United States of the Cracker Barrel Old Country Store(R) ("Cracker Barrel")
restaurant and retail concept and the Logan's Roadhouse(R) ("Logan's")
restaurant concept. Logan's has two area development agreements and accompanying
franchise agreements covering development of its concept in all or part of five
states. The Company exited its Carmine Giardini's Gourmet Market(TM)
("Carmine's") concept at the end of fiscal 2001. (See Note 2.) CBRL Group, Inc.
Common Stock is traded on The Nasdaq Stock Market (National Market) under the
symbol CBRL.
2. Summary Of Significant Accounting Policies
Fiscal year - The Company's fiscal year ends on the Friday nearest July
31st and each quarter consists of thirteen weeks unless noted otherwise. The
Company's fiscal year ended August 3, 2001 consisted of 53 weeks and the fourth
quarter of fiscal 2001 consisted of 14 weeks. References in these Notes to a
year are to the Company's fiscal year unless otherwise noted.
Principles of consolidation - The Consolidated Financial Statements include
the accounts of the Company and its subsidiaries, all of which are wholly owned.
All significant intercompany transactions and balances have been eliminated.
Financial instruments - The fair values of cash and cash equivalents,
accounts receivable, accounts payable and amounts outstanding under the
Company's revolving credit facility included in long-term debt, $7,000 as of
August 1, 2003, approximate their carrying amounts due to their short duration.
The carrying value and fair value of the Company's zero-coupon contingently
convertible senior notes in long-term debt at August 1, 2003, were $179,730 and
$201,529, respectively. The fair value of the Company's zero-coupon contingently
convertible senior notes in long-term debt is determined based on market prices
using the average of the bid and ask prices as of August 1, 2003.
Cash and cash equivalents - The Company's policy is to consider all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
of restaurant inventory is determined by the first-in, first-out (FIFO) method.
Approximately 70% of retail inventories are valued using the retail inventory
method and the remaining 30% are valued using an average cost method. Valuation
provisions are included for retail inventory obsolescence, returns and
amortization of certain items.
Start-up costs - Start-up costs of a new store are expensed when incurred.
Property and equipment - Property and equipment are stated at cost. For
financial reporting purposes, depreciation and amortization on these assets are
computed by use of the straight-line and double-declining balance methods over
the estimated useful lives of the respective assets, as follows:
Years
- --------------------------------------------------------------------------------
Buildings and improvements 30-45
Buildings under capital leases 15-25
Restaurant and other equipment 3-10
Leasehold improvements 1-35
- --------------------------------------------------------------------------------
Depreciation expense was $62,552, $61,883 and $60,657 for 2003, 2002 and
2001, respectively. Accelerated depreciation methods are generally used for
income tax purposes.
Capitalized interest was $463, $364 and $851 for 2003, 2002 and 2001,
respectively.
Gain or loss is recognized upon disposal of property and equipment, and the
asset and related accumulated depreciation and amortization amounts are removed
from the accounts.
Maintenance and repairs, including the replacement of minor items, are
charged to expense, and major additions to property and equipment are
capitalized.
Impairment of long-lived assets - The Company evaluates for possible
impairment of long-lived assets and certain identifiable intangibles to be held
and used in the business whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment is
determined by comparing estimated undiscounted future operating cash flows to
<PAGE>
the carrying amounts of assets on a location by location basis. If an impairment
exists, the amount of impairment is measured as the sum of the estimated
discounted future operating cash flows of such asset and the expected proceeds
upon sale of the asset less its carrying amount. If applicable, assets held for
sale are reported at the lower of carrying amount or fair value less costs to
sell. During 2001, the Company's other store operating expense included
impairment losses of $14,003 and the Company's amortization of goodwill included
$10,428 in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Certain Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". These impairment losses consisted of
$10,428 for the write-off of goodwill related to the acquisition of Carmine's
and $14,003 for the write-down of fixed assets of all three Carmine's units,
four Cracker Barrel units and three Logan's restaurants.
Advertising - The Company expenses the costs of producing advertising the
first time the advertising takes place. Net advertising expense was $39,782,
$37,423 and $38,886 for 2003, 2002 and 2001, respectively.
Insurance - The Company self-insures a significant portion of expected
losses under its workers' compensation, general liability and health insurance
programs. The Company has purchased insurance for individual claims that exceed
$250 for workers' compensation and general liability insurance prior to 2003,
but has now increased this amount to $500 for 2003 and $1,000 for certain
coverages for 2004 going forward. The Company has decided not to purchase such
insurance for its primary group health program, but its offered benefits are
limited to not more than $1,000 during the lifetime of any employee (including
dependents) in the program. The Company records a liability for workers'
compensation and general liability for all unresolved claims and for an estimate
of incurred but not reported claims at the anticipated cost to the Company based
upon an actuarially determined reserve as of the end of the Company's third
quarter and adjusting it by the actuarially determined losses and actual claims
payments for the fourth quarter. Those reserves and these losses are determined
actuarially from a range of possible outcomes within which no given estimate is
more likely than any other estimate. In accordance with SFAS No. 5, "Accounting
for Contingencies", the Company records the losses at the low end of that range
and discounts them to present value using a risk-free interest rate based on
actuarially projected timing of payments. The Company records a liability for
its group health program for all unpaid claims based primarily upon a loss
development analysis derived from actual group health claims payment experience
provided by the Company's third party administrator. The Company's accounting
policies regarding insurance reserves include certain actuarial assumptions or
management judgments regarding economic conditions, the frequency and severity
of claims and claim development history and settlement practices. Unanticipated
changes in these factors may produce materially different amounts of expense
that would be reported under these insurance programs.
Goodwill - Goodwill represents the excess of the cost over the net tangible
and identifiable intangible assets from the Logan's acquisition. Prior to August
4, 2001, goodwill was stated at cost and was amortized, on a straight-line
basis, over the estimated future periods to be benefited (20-30 years). Prior to
August 4, 2001, on an annual basis the Company reviewed the recoverability of
goodwill based primarily upon an analysis of undiscounted cash flows from the
acquired businesses. Accumulated amortization was $8,291 at August 1, 2003,
August 2, 2002 and August 3, 2001. See Impairment of long-lived assets above
regarding the write-off of Carmine's goodwill. Effective August 4, 2001, the
Company elected early adoption of SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 eliminates the amortization for goodwill and other
intangible assets with indefinite lives. Intangible assets with lives restricted
by contractual, legal, or other means will continue to be amortized over their
useful lives. Goodwill and other intangible assets not subject to amortization
are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. SFAS No. 142 requires a
two-step process for testing impairment. First, the fair value of each reporting
unit is compared to its carrying value to determine whether an indication of
impairment exists. This valuation may reflect, among other things, such external
factors as capital market valuation for public companies comparable to the
<PAGE>
operating unit. If an impairment is indicated, then the implied fair value of
the reporting unit's goodwill is determined by allocating the unit's fair value
to its assets and liabilities (including any unrecognized intangible assets) as
if the reporting unit had been acquired in a business combination. The amount of
impairment for goodwill and other intangible assets is measured as the excess of
its carrying value over its implied fair value. The Company conducted the
initial test of the carrying value of its goodwill, as required by SFAS No. 142,
during the second quarter of 2002, which ended February 1, 2002, and concluded
that there was no current indication of impairment to goodwill. The Company
performed its annual assessment with assistance from an outside expert in the
second quarter ending January 31, 2003, and concluded that there was no current
indication of impairment. This annual assessment will be performed in the second
quarter of each year. Additionally, an assessment will be performed between
annual assessments if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount.
In accordance with SFAS No. 142, the Company discontinued amortization of
goodwill effective August 4, 2001. The pro forma effects of the adoption of SFAS
No. 142 on net income and basic and diluted net income per share is as follows:
2003 2002 2001
---- ---- ----
Net income, as reported $106,529 $91,789 $49,181
Intangible amortization,
net of $0 tax -- -- 3,994
-------- ------- -------
Net income, pro forma $106,529 $91,789 $53,175
======== ======= =======
Basic net income per share:
- ---------------------------
Net income, as reported $2.16 $1.69 $.88
Intangible amortization,
net of $0 tax -- -- .07
----- ----- ----
Net income, pro forma $2.16 $1.69 $.95
===== ===== ====
Diluted net income per share:
- -----------------------------
Net income, as reported $2.09 $1.64 $.87
Intangible amortization,
net of $0 tax -- -- .07
----- ----- ----
Net income, pro forma $2.09 $1.64 $.94
===== ===== ====
Revenue recognition - The Company records revenue from the sale of
products as they are sold. The Company provides for estimated returns based on
return history and sales levels. Initial fees received from a franchisee to
establish a new franchise are recognized as income when the Company has
performed all of its obligations required to assist the franchisee in opening a
new franchise restaurant, which is generally upon the opening of such
restaurant. Continuing royalties, which are a percentage of net sales of
franchised restaurants, are accrued as income when earned.
Unearned income - Unredeemed gift certificates and cards represent the
Company's only liability related to unearned income and are recorded at their
expected redemption value. When gift certificates and cards are redeemed, the
Company recognizes revenue and reduces the liability. These liability balances
were $15,635, $12,985 and $9,065 at August 1, 2003, August 2, 2002 and August 3,
2001, respectively, and were recorded in other accrued expenses.
Income taxes - Employer tax credits for FICA taxes paid on employee tip
income are accounted for by the flow-through method. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. (See Note 7.)
Net income per share - Basic net income per share is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the reporting period. Diluted net income per
share reflects the potential dilution that could occur if securities, options or
other contracts to issue common stock were exercised or converted into common
stock. The Company's zero-coupon contingently convertible senior notes ("Note")
had no effect on diluted shares in either 2002 or 2003, since the contingency,
relating to the price of the Company's common stock, had not been met. Each $1
Note (face value at maturity) will be convertible into 10.8584 shares of the
Company's common stock (approximately 4.6 million shares in the aggregate), with
an initial conversion price of $37.69 per share accreting at 3% per annum,
compounded semi-annually, if certain conversion contingencies are met. Those
contingencies are met under the following conditions: 1) If the closing price of
the Company's stock exceeds a specified price (initially, 120% of the accreted
conversion price, and declining .08474% per quarter thereafter to approximately
110% of the accreted conversion price on the last day of the quarter ending
January 30, 2032); 2) If the Company exercises its option to redeem the Notes;
3) If the credit rating of the Notes is reduced by Moody's and Standard and
Poor's to or below both Ba3 and BB-, respectively; or 4) Upon the occurrence of
certain specified corporate transactions. Outstanding stock options issued by
the Company represent the only dilutive effect reflected in diluted weighted
average shares.
<PAGE>
Comprehensive income - Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. Comprehensive income for 2003,
2002 and 2001 is equal to net income as reported.
Stock-based compensation - The Company accounts for its stock based
compensation under the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations, and has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (see Note
6) and below is providing disclosures required by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure". Under APB Opinion No. 25,
no stock-based compensation cost is reflected in net income for grants of stock
options to employees because the Company grants stock options with an exercise
price equal to the market value of the stock on the date of grant. The reported
stock-based compensation expense, net of related tax effects, in the table
represents the amortization of restricted stock grants to two executive officers
of the Company.
Had the Company used the fair value based accounting method for stock
compensation expense prescribed by SFAS Nos. 123 and 148, the Company's net
income and earnings per share for the past three years would have been reduced
to the pro-forma amounts illustrated as follows:
2003 2002 2001
---- ---- ----
Net Income - as reported $106,529 $91,789 $49,181
Add: Total stock-based employee
compensation included in reported
net income, net of related tax effects 298 397 44
Deduct: Total stock-based compensation
expense determined under fair-value based
method for all awards, net of tax effects (11,496) (12,709) (13,099)
------- ------- -------
Pro forma, net income $ 95,331 $79,477 $36,126
======== ======= =======
Net Income per share:
Basic - as reported $2.16 $1.69 $.88
===== ===== ====
Basic - pro forma $1.93 $1.47 $.64
===== ===== ====
Diluted - as reported $2.09 $1.64 $.87
===== ===== ====
Diluted - pro forma $1.87 $1.42 $.64
===== ===== ====
Segment Reporting - The Company accounts for its segment in accordance with
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information." SFAS No. 131 requires that a public company report annual and
interim financial and descriptive information about its reportable operating
segments. Operating segments, as defined, are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS No. 131 allows aggregation of similar operating
segments into a single operating segment if the businesses are considered
similar under the criteria established by SFAS No. 131. The Company primarily
operates restaurants under the Cracker Barrel Old Country Store(R) and Logan's
Roadhouse(R) brands. These two brands have similar investment criteria, customer
demographics and economic and operating characteristics. Therefore, the Company
has one reportable operating segment. (See Note 8.)
Derivative instruments and hedging activities - The Company adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," in the
first quarter of 2000 and its subsequent amendments, SFAS Nos. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133", and 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an Amendment of FASB Statement No.
133", in the first quarter of 2001 and SFAS No. 149, "Amendments of Statement
133 on Derivative Instruments and Hedging Activities", in the fourth quarter of
2003. These statements specify how to report and display derivative instruments
and hedging activities. The adoption of these statements did not have a material
effect on the Company's Consolidated Financial Statements. Upon adoption of
these statements on July 29, 2000, during 2001, 2002 and 2003 and at August 1,
2003, the Company had no derivative financial instruments that required hedge
accounting.
<PAGE>
The Company is exposed to market risk, such as changes in interest rates
and commodity prices. To manage the volatility relating to these exposures, the
Company nets the exposures on a consolidated basis to take advantage of natural
offsets. For the residual portion, the Company may enter into various derivative
financial instruments pursuant to the Company's policies in areas such as
counterparty exposure and hedging practices. The Company would review these
derivative financial instruments on a specific exposure basis to support hedge
accounting. The changes in fair value of these hedging instruments would be
offset in part or in whole by the corresponding changes in the fair value or
cash flows of the underlying exposures being hedged. The Company does not hold
or use derivative financial instruments for trading purposes. The Company's
historical practice has been not to enter into derivative financial instruments.
The Company's policy has been to manage interest cost using a mix of
fixed and variable rate debt. The Company has accomplished this objective
through the use of its Revolving Credit Facility, its sale-leaseback transaction
and its zero-coupon contingently convertible debt. In a sale-leaseback
transaction, the Company finances its operating facilities by selling them to a
third party and then leasing them back under a long-term operating lease at
fixed terms. The Company's zero-coupon convertible debt is fixed-rate, long-term
debt. (See Notes 4,9 and 11.)
Many of the food products purchased by the Company are affected by
commodity pricing and are, therefore, subject to price volatility caused by
weather, production problems, delivery difficulties and other factors which are
outside the control of the Company and which are generally unpredictable.
Changes in commodity prices would affect the Company and its competitors
generally and often simultaneously. In many cases, the Company believes it will
be able to pass through any increased commodity costs by adjusting its menu
pricing. From time to time, competitive circumstances may limit menu price
flexibility, and in those circumstances, increases in commodity prices can
result in lower margins for the Company. Some of the Company's purchase
contracts are used to hedge commodity prices and may contain features that could
be classified as derivative financial instruments under SFAS Nos. 133, 137, 138
and 149. However, these features that could be classified as derivative
financial instruments are exempt from fair value accounting based on the normal
purchases exemption.
Use of estimates - Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenues and expenses during the
reporting periods to prepare these Consolidated Financial Statements in
conformity with accounting principles generally accepted in the United States of
America. Actual results could differ from those estimates.
Recent accounting pronouncements not yet adopted - In May 2003, The
Financial Accounting Standards Board ("FASB") issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 establishes standards for how a Company classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that a company classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances) because that
freestanding financial instrument embodies an obligation of the Company. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The Company does not expect the adoption
of this standard to have a material effect on the Company's consolidated results
of operations or its financial position.
Reclassifications - Certain reclassifications have been made in the
2001 and 2002 financial statements to conform to the classifications used in
2003. Total revenues in 2001 and 2002 reflect reclassifications of $4,306 and
$4,892, respectively, of net return fees for the Cracker Barrel Book-on-Audio
program to net sales from other store operating expenses, where the Company
historically had reported the fees as a miscellaneous income credit to other
store operating expenses. This reclassification had no effect on net income.
Additionally, the balance sheet at August 2, 2002 and the cash flow statement
for 2002 and 2001 reflect certain other reclassifications. These certain other
reclassifications caused a net increase of $94 to total current assets and total
assets, while decreasing total current liabilities by $7,248 and increasing
other long-term obligations by $7,342 at August 2, 2002. The increase in other
long-term obligations is comprised of $5,599 for the Company's liability under
its non-qualified defined contribution retirement plan (see Note 10) and $1,743
for the Company's straight-line rent liability under SFAS No. 13, "Accounting
for Leases", (see Note 9). These certain other reclassifications had no net
effect on the net increase in cash and cash equivalents for either 2002 or 2001,
but did increase net cash provided by operating activities and decrease net cash
used in financing activities in 2002 and 2001 by $4,853 and $97, respectively,
related to the Company's deferred financing costs.
<PAGE>
3. Inventories
Inventories were composed of the following at:
August 1, August 2,
2003 2002
- --------------------------------------------------------------------------------
Retail $101,955 $ 93,066
Restaurant 17,091 16,799
Supplies 16,974 14,828
- --------------------------------------------------------------------------------
Total $136,020 $124,693
================================================================================
4. Debt
Long-term debt consisted of the following at:
August 1, August 2,
2003 2002
- --------------------------------------------------------------------------------
$300,000 Revolving Credit Facility payable on or before
February 21, 2008 (rate at 2.36% at August 1, 2003) $ 7,000 --
$250,000 Revolving Credit Facility payable on or before
December 31, 2003 replaced on February 21, 2003
(rates ranging from 3.06% to 4.75% at August 2, 2002) -- $20,000
3.0% Zero-Coupon Contingently Convertible Senior
Notes payable on or before April 2, 2032 179,730 174,476
- --------------------------------------------------------------------------------
Long-term debt $186,730 $194,476
================================================================================
The financial covenants related to the Revolving Credit Facility require
that the Company maintain an interest coverage ratio (as defined in the
Revolving Credit Facility) of 2.5 to 1.0, a lease adjusted funded debt to total
capitalization ratio (as defined in the Revolving Credit Facility) not to exceed
0.5 to 1.0 and a lease adjusted funded debt to EBITDAR (earnings before interest
expense, income taxes, depreciation and amortization and rent expense) ratio (as
defined in the Revolving Credit Facility) not to exceed 3.0 to 1.0. At August 1,
2003, the Company was in compliance with all covenants. All subsidiaries of the
Company have fully and unconditionally guaranteed on a joint and several basis
the obligations under the Revolving Credit Facility.
In April 2002, the Company issued $422,050 of zero coupon convertible
senior notes (the "Notes"), maturing on April 2, 2032, and received proceeds
totaling approximately $172,756 prior to debt issuance costs. The Notes require
no cash interest payments and were issued at a discount representing a yield to
maturity of 3.00% per annum. The Notes are redeemable at the Company's option on
or after April 3, 2007, and the holders of the Notes may require the Company to
redeem the Notes on April 3, 2005, 2007, 2012, 2017, 2022 or 2027, and in
certain other circumstances. In addition, each $1 Note is convertible into
10.8584 shares of the Company's common stock (approximately 4.6 million shares
in the aggregate) under the following conditions: 1) If the stock's market price
exceeds a specified price (initially, 120% of the accreted conversion price, and
declining .08474% per quarter thereafter to approximately 110% of the accreted
conversion price on the last day of the quarter ending January 30, 2032); 2) If
the Company exercises its option to redeem the Notes; 3) If the credit rating of
the Notes is reduced by Moody's and Standard and Poor's to or below both Ba3 and
BB-, respectively; or 4) Upon the occurrence of certain specified corporate
transactions. The accreted conversion price is equal to the issue price of the
Note plus accrued original issue discount divided by 10.8584 shares. All
subsidiaries of the Company have fully and unconditionally guaranteed on a joint
and several basis the obligations under the Notes. Each guarantor directly or
indirectly is a wholly-owned affiliate of the parent company, CBRL Group, Inc.,
which has no independent assets or operations.
The aggregate maturities of long-term debt subsequent to August 1, 2003 are
as follows:
Year
- --------------------------------------------------------------------------------
2004 --
2005 --
2006 --
2007 --
2008 $ 7,000
2009 and thereafter 179,730
- --------------------------------------------------------------------------------
Total $186,730
================================================================================
<PAGE>
5. Common Stock
During 1999 the Board of Directors granted a certain officer 4,100
restricted shares which were to vest over three years. In 2000 two executive
officers were granted a total of 39,000 restricted shares which were to vest
over five years. In 2002 one executive officer was granted 48,000 restricted
shares which were to vest over three years, subject to certain early vesting
provisions which did occur and resulted in early vesting at the end of 2003. The
officer granted 4,100 restricted shares in 1999 left the company in 2001 and
forfeited 4,100 restricted shares. The executive officer granted 19,000 of the
39,000 restricted shares granted in 2000 left the company in 2003 and forfeited
9,500 restricted shares. The Company's compensation expense, net of forfeitures,
for these restricted shares was $462, $616 and $69 in 2003, 2002 and 2001,
respectively.
During the second quarter of 2001, the Board of Directors authorized the
retirement of the Company's treasury stock and authorized the retirement of all
future repurchases of the Company's Common Stock. As a result of this
retirement, the Company's Treasury Stock at cost was reclassified to reduce
Common Stock and Additional Paid-in Capital at January 26, 2001. In the fourth
quarter of 2002, the Company reduced Retained Earnings by $4,620, since
Additional Paid-In Capital already was reduced to zero due to the retirement of
shares repurchased. In 2003, the Company reduced Retained Earnings by $93,559,
since Additional Paid-In Capital already was reduced to zero due to the
retirement of shares repurchased. These retired shares will remain as
authorized, but unissued, shares.
6. Stock Compensation Plans
The Company's employee stock option plans are administered by the
Compensation and Stock Option Committee (the "Committee"). Members of the
Committee are appointed by the Board of Directors. The Committee is authorized
to determine, at time periods within its discretion and subject to the direction
of the Board, which key employees shall be granted options, the number of shares
covered by the options granted to each, and within applicable limits, the terms
and provisions relating to the exercise of such options.
On September 26, 2002, the Board of Directors approved a new plan for
all employees and non-employee directors of the Company. That plan was
subsequently approved by shareholders at the Company's 2002 Annual Shareholders
Meeting on November 26, 2002. The new plan is known as the CBRL Group 2002
Omnibus Incentive Compensation Plan ("Omnibus Plan"). The Committee is
authorized by the Board of Directors to grant awards for an aggregate of
2,500,000 shares of the Company's common stock under the Omnibus Plan. The
Omnibus Plan authorizes the Committee to grant the following types of awards to
all eligible participants other than non-employee directors: stock options,
stock appreciation rights, stock awards, performance shares, cash bonuses,
qualified performance-based awards or any other type of award consistent with
the Omnibus Plan's purpose. Under the Omnibus Plan non-employee directors are
granted annually a stock option on the day of the Annual Shareholder Meeting to
purchase 5,000 shares of the Company's common stock with an option price per
share at least 100% of the fair market value of a share of the Company's common
stock based on the closing price on the day preceding the day the option is
granted. Additionally, non-employee directors newly elected or appointed between
the Annual Shareholders Meeting and July 31 of the next year receive a stock
option to purchase 5,000 shares of the Company's common stock with an option
price per share at least 100% of the fair market value of a share of the
Company's common stock based on the closing price on the day preceding the day
the option is granted. Options granted to date under the Omnibus Plan become
exercisable each year on a cumulative basis at a rate of 33% of the total shares
covered by the option beginning one year from the date of grant, to expire ten
years from the date of grant and to be transferable. At August 1, 2003, there
were 2,460,000 shares of unissued common stock reserved for issuance under the
Omnibus Plan.
On May 25, 2000, the Board of Directors approved a stock option plan
for employees who are not officers or directors of the Company. The new plan is
known as the CBRL Group, Inc. 2000 Non-Executive Stock Option Plan ("Employee
Plan"). As of August 1, 2003, the Committee is authorized by the Board of
Directors to grant options to purchase an aggregate of 4,750,000 shares of the
Company's common stock under the Employee Plan. The option price per share under
the Employee Plan must be at least 100% of the fair market value of a share of
the Company's common stock based on the closing price on the day preceding the
day the option is granted. Options granted to date under the Employee Plan
become exercisable each year on a cumulative basis at a rate of 33% of the total
shares covered by the option beginning one year from the date of grant, to
expire ten years from the date of grant and to be non-transferable. At August 1,
2003, there were 595,738 shares of unissued common stock reserved for issuance
under the Employee Plan.
<PAGE>
As of August 1, 2003, the Committee is authorized by the Company's
shareholders to grant options to purchase an aggregate of 17,525,702 shares of
the Company's common stock under the Company's Amended and Restated Stock Option
Plan ("the Plan"). At August 1, 2003, there were 1,592,028 shares of unissued
common stock reserved for issuance under the Plan. The option price per share
under the Plan must be at least 100% of the fair market value of a share of the
Company's common stock based on the closing price on the day preceding the day
the option is granted. Options granted to date under the Plan generally have
been exercisable each year on a cumulative basis at a rate of 33% of the total
number of shares covered by the option beginning one year from the date of
grant, expire ten years from the date of grant and are non-transferable. During
2000, a long-term incentive award was granted to certain officers, which
included stock options. The options granted under this award vest at the end of
five years after the grant (subject to earlier vesting upon accomplishments of
specified Company performance goals) and are non-transferable. As of August 1,
2003, options to purchase 261,826 shares of the Company's common stock vested
early and 181,368 are scheduled to vest on July 30, 2004 under the long-term
incentive award. The options have a six-month life following confirmation of
vesting by the Committee.
In 1989, the Board of Directors adopted the Cracker Barrel Old Country
Store, Inc. 1989 Stock Option Plan for Non-employee Directors ("Directors Plan")
for non-employee directors. The stock options were granted with an exercise
price equal to the fair market value of the Company's common stock as of the
date of grant and expire one year from the retirement of the director from the
board. An aggregate of 1,518,750 shares of the Company's common stock were
authorized by the Company's shareholders under this plan. Due to the overall
plan limit, no shares have been granted under this plan since 1994.
A summary of the status of the Company's stock option plans for 2003,
2002 and 2001, and changes during those years follows:
(Shares in thousands) 2003 2002 2001
- -------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Fixed Options Shares Price Shares Price Shares Price
- --------------------------------------------------------------------------------
Outstanding at
beginning of year 9,504 $20.23 10,504 $19.77 9,630 $20.89
Granted 1,907 23.85 2,506 20.13 2,481 14.76
Exercised (2,922) 20.90 (2,869) 18.67 (357) 14.23
Forfeited or canceled (890) 21.54 (637) 19.33 (1,250) 20.03
------ ------ ------
Outstanding at
end of year 7,599 20.73 9,504 20.23 10,504 19.77
====== ====== ======
Options exercisable
at year-end 3,696 20.69 5,148 22.58 5,919 23.16
Weighted-average fair
value per share of
options granted
during the year $10.20 $ 9.46 $ 7.16
- --------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2003, 2002 and 2001: dividend yield of 0.1%;
expected volatility of 41 to 45, 43 and 43 percent, respectively; risk-free
interest rate ranges of 2.2% to 3.8%, 4.0% to 4.9% and 4.8% to 5.9%; and
expected lives of five to eight years, six years and six years, respectively.
Expected volatility has been measured based on an average of past daily
fluctuations in the share price of the Company's common stock.
<PAGE>
The following table summarizes information about fixed stock options
outstanding at August 1, 2003:
<TABLE>
<CAPTION>
(Shares in thousands)
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------
Number Weighted-Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable verage
Exercise Prices at 8/01/03 Contractual Life Exercise Price at 8/01/03 Exercise Price
- ----------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 5.09 - 10.00 38 2.11 $ 7.63 38 $ 7.63
10.01 - 20.00 2,403 5.53 14.76 1,649 14.81
20.01 - 30.00 4,654 7.18 22.78 1,537 24.14
30.01 - 31.75 504 4.49 31.19 472 31.00
----- -----
$ 5.09 - 31.75 7,599 6.45 20.73 3,696 20.69
========================================================================================
</TABLE>
The Company recognizes a tax deduction upon exercise of non-qualified
stock options in an amount equal to the difference between the option price and
the fair market value of the common stock. These tax benefits are credited to
Additional Paid-In Capital.
7. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax liability
consisted of the following at:
August 1, August 2,
2003 2002
---------------------------------------------------------------------------
Deferred tax assets:
Financial accruals without
economic performance $20,252 $19,315
Other 8,284 5,567
---------------------------------------------------------------------------
Deferred tax assets 28,536 24,882
---------------------------------------------------------------------------
Deferred tax liabilities:
Excess tax depreciation over book 72,846 42,591
Other 25,802 13,149
---------------------------------------------------------------------------
Deferred tax liabilities 98,648 55,740
---------------------------------------------------------------------------
Net deferred tax liability $70,112 $30,858
===========================================================================
The Company provided no valuation allowance against deferred tax assets
recorded as of August 1, 2003 and August 2, 2002, as the "more-likely-than-not"
valuation method determined all deferred assets to be fully realizable in future
taxable periods.
The components of the provision for income taxes for each of the three
years were as follows:
2003 2002 2001
--------------------------------------------------------------------------
Current:
Federal $17,985 $45,955 $34,959
State 1,494 3,042 5,617
Deferred 39,254 1,745 (5,293)
--------------------------------------------------------------------------
Total income tax provision $58,733 $50,742 $35,283
===========================================================================
A reconciliation of the provision for income taxes as reported and the
amount computed by multiplying the income before the provision for income taxes
by the U.S. federal statutory rate of 35% was as follows:
2003 2002 2001
---------------------------------------------------------------------------
Provision computed at federal
statutory income tax rate $57,842 $49,886 $29,562
State and local income taxes,
net of federal benefit 4,410 4,635 4,169
Amortization of goodwill and
acquisition costs 4 4 5,034
Employer tax credits for FICA taxes
paid on employee tip income (4,323) (3,875) (3,420)
Other-net 800 92 (62)
--------------------------------------------------------------------------
Total income tax provision $58,733 $50,742 $35,283
===========================================================================
<PAGE>
The Internal Revenue Service has examined the Company's federal income
tax returns for 1997 through 2001. On August 1, 2002 the Company reached a
settlement with the Internal Revenue Service for these tax periods. Adjustments
related primarily to temporary or timing differences. The settlement had no
material effect on the Company's Consolidated Financial Statements.
Additionally, the Internal Revenue Service has examined the Company's federal
payroll tax filings for the calendar years ended December 31, 1997 through
December 31, 2001. This examination was completed on July 21, 2003 resulting in
no adjustment to the payroll taxes originally reported by the Company.
8. Segment Information
The Company operates restaurants under the Cracker Barrel Old Country Store
and Logan's Roadhouse brands. These two brands have similar investment criteria
and economic and operating characteristics. Accordingly, the Company has one
reportable operating segment. The following data is presented in accordance with
SFAS No. 131 for all periods presented.
2003 2002 2001
- ------------------------------------------------------------------------------
Net sales in Company-Owned Stores:
Restaurant $1,753,361 $1,645,696 $1,543,815
Retail 443,397 424,949 423,410
- ------------------------------------------------------------------------------
Total net sales 2,196,758 2,070,645 1,967,225
- ------------------------------------------------------------------------------
Franchise fees and royalties 1,424 1,139 773
- ------------------------------------------------------------------------------
Total revenue $2,198,182 $2,071,784 $1,967,998
==============================================================================
9. Commitments and Contingencies
The Company's Cracker Barrel Old Country Store, Inc. subsidiary ("Cracker
Barrel") is involved in certain lawsuits, four of which are filed by the same
plaintiffs' attorneys, among others, and are not ordinary routine litigation
incidental to its business: Serena McDermott and Jennifer Gentry v. Cracker
Barrel Old Country Store, Inc., 4:99-CV-0001-HLM, a collective action under the
federal Fair Labor Standards Act ("FLSA"), was served on Cracker Barrel on May
3, 1999; Kelvis Rhodes, Maria Stokes et al. v. Cracker Barrel Old Country Store,
Inc., 4:99-CV-217-HLM, an action under Title VII of the Civil Rights Act of 1964
and Section 1981 of the Civil Rights Act of 1866, was served on Cracker Barrel
on September 15, 1999; Flounice Stanley, Calvin Slack et al. v. Cracker Barrel
Old Country Store, Inc., 4:01-CV-326-HLM, a collective action under the FLSA,
was served on Cracker Barrel on April 12, 2002; and the National Association for
the Advancement of Colored People ("NAACP"), Betty Thomas et al. v. Cracker
Barrel Old Country Store, Inc., 4:01-CV-325-HLM, an action under Title II of the
Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866, was
served on Cracker Barrel on April 12, 2002. All of these cases are filed, and
are pending, in the United States District Court for the Northern District of
Georgia, Rome Division.
The McDermott case alleges that certain tipped hourly employees were
required to perform excessive non-serving duties without being paid the minimum
wage or overtime compensation for that work and that certain hourly employees
were required to wait "off the clock," without pay for the wait. The McDermott
case seeks recovery of unpaid wages and overtime wages related to those claims.
On March 17, 2000, the Court granted the plaintiffs' motion in the McDermott
case to send notice to a provisional class of plaintiffs, defined as all persons
employed as servers and all second-shift hourly employees at Cracker Barrel Old
Country Store restaurants since January 4, 1996, and 10,838 potential plaintiffs
filed "opt-in" forms to the McDermott case. The Court could subsequently amend
the definition of the collective group, and if amended, the scope of the
collective action could either be reduced or increased or, if appropriate, the
Court could dismiss the collective aspects of the case entirely. In that last
situation, each opt-in plaintiff would have to decide whether or not to pursue
an independent action. Extensive discovery with respect to the merits of
individual claims has been conducted in the McDermott case. Following completion
of an extended period of discovery and briefing of motions, rulings on the
parties' motions with respect to class certification and other issues are
expected to be made in late calendar year 2003 or early calendar year 2004.
The Stanley case was initially a purported collective action, but the
plaintiffs did not timely move the court for class certification. This case was
filed by current and former employees asserting three claims based upon alleged
violations of the FLSA: (1) that Personal Achievement Responsibility (PAR) IV
level employees are routinely required to perform quasi-managerial duties or
duties related to training without receiving minimum wage or overtime
compensation for that work, (2) that employees classified as trainers routinely
work off the clock to prepare for training sessions at home or on store premises
and to conduct pre-training activities, and (3) that store opener employees were
mis-classified as salaried exempt and are due overtime compensation. The
individual plaintiffs in Stanley seek unpaid compensation and back pay,
liquidated damages, prejudgment interest, attorneys' fees and costs, and
unspecified injunctive relief. No express amount of monetary damages is claimed
in the Stanley case and no substantial discovery has taken place in that case.
After rulings and consents dismissing certain plaintiffs, only three individuals
remain in this case.
<PAGE>
The Rhodes case sought certification as a company-wide class action, a
declaratory judgment to redress an alleged systemic pattern and practice of
racial discrimination in employment opportunities, an order to effect certain
hiring and promotion goals and back pay and other related monetary damages. In
May 2002, the Rhodes plaintiffs filed a motion for class certification proposing
a class of all current and former employees and applicants for employment who
might have suffered discrimination in hiring, promotion, job assignment and
cross-training. The court has denied certification of a class in the Rhodes
case. The plaintiffs' appeal of this ruling was denied by the 11th Circuit Court
of Appeals. There are now 13 individual plaintiffs continuing the claims
asserted in the Rhodes case.
The NAACP/Thomas case is an alleged race discrimination class action
filed by the NAACP and customers of Cracker Barrel alleging that Cracker Barrel
has a pattern and practice of race-based discriminatory treatment of
African-American customers and white customers when accompanied by
African-American customers, that sought certification as a class action.
Plaintiffs and their counsel have denied that they seek to recover compensatory
damages, instead claiming to seek only nominal, actual and punitive damages.
Plaintiffs also seek unspecified declaratory and injunctive relief and demanded
an award of punitive and nominal damages in the amount of $100,000, plus
reasonable attorneys' fees and costs. On October 1, 2002, the District Court
granted defendant's Rule 23 (c) Motion and denied class certification. The
plaintiffs did not appeal this ruling. There are now 34 individual plaintiffs
continuing the claims they asserted in the Thomas case.
In addition, three lawsuits have been filed recently in Arkansas, in
North Carolina and in Mississippi. It appears that these lawsuits are related to
the Thomas case, because they reiterate claims made in the Thomas Case on behalf
of certain individuals in those states.
In August 2002, Cracker Barrel received a letter from the Department of
Justice ("DOJ") informing Cracker Barrel that it was the subject of a DOJ
investigation pursuant to Title II of the Civil Rights Act of 1964. On August
20, 2002, DOJ sent a request for information to Cracker Barrel seeking basic
information about locations of restaurants and broad based data about customer
complaints and company policies. The DOJ is empowered to investigate matters
under Title II of the Civil Rights Act of 1964, and Cracker Barrel has provided
all requested information to the DOJ. Pursuant to Title II, DOJ remedies are
limited to injunctive or preventive relief. Remedies for public accommodation
claims typically relate to implementation or revision of policies and procedures
for responding to, and methods for monitoring, customer complaints. If the
Company and DOJ were not able to agree informally to resolve any concerns
raised, then the DOJ could seek to intervene in the pending Title II action. It
is not possible at this time to provide an opinion as to how likely it is that
the DOJ will have any concerns or will pursue them in court, or as to any other
likely outcome of the investigation.
The Company believes that its Cracker Barrel subsidiary has substantial
defenses to the claims made in each of these cases, and each of these cases
is being defended vigorously. Because discovery has not been completed in some
of these cases, and none of these cases are yet ready for trial, neither the
likelihood of an unfavorable outcome nor the amount of ultimate liability, if
any, with respect to these cases or the investigation can be determined at this
time. The Company has established a reserve of $3,500 with respect to the
McDermott case based on offers of judgment to those plaintiffs. None of those
offers of judgment was accepted. With the exception of that reserve, no
provision for any potential liability has been made in the consolidated
financial statements of the Company with respect to these lawsuits or the DOJ
investigation. In the event of an unfavorable result in any of these cases or in
the DOJ investigation, beyond amounts covered under various insurance policies
of the Company and its subsidiaries, if applicable, the Company's consolidated
results of operations and financial condition could be materially and adversely
affected.
In addition to the litigation and investigation described in the
preceding paragraphs, the Company and its subsidiaries are parties to other
legal proceedings incidental to its business. In the opinion of management,
based upon information currently available, the ultimate liability with respect
to these other actions will not materially affect the Company's Consolidated
Financial Statements.
<PAGE>
The Company makes trade commitments in the course of its normal
operations. As of August 1, 2003 the Company was contingently liable for
approximately $4,871 under outstanding trade letters of credit issued in
connection with purchase commitments. These letters of credit have terms of 3
months or less and are used to collateralize obligations to third parties for
the purchase of a portion of the Company's imported retail inventories.
Additionally, the Company was contingently liable pursuant to standby letters of
credit as credit guarantees to insurers. As of August 1, 2003 the Company had
$13,725 of standby letters of credit related to workers' compensation and
commercial general liability insurance. All standby letters of credit are
renewable annually.
The Company is secondarily liable for lease payments under the terms of
an operating lease that has been assigned to a third party. The operating lease
has a remaining life of approximately 10.2 years with annual lease payments of
approximately $350. The Company's performance is only required if the assignee
fails to perform his obligations as lessee. At this time, the Company has no
reason to believe that the assignee will not perform and, therefore, no
provision has been made in the accompanying consolidated financial statements
for amounts to be paid as a result of non-performance by the assignee.
The Company also is secondarily liable for lease payments under the
terms of another operating lease that has been sublet to a third party less than
one year ago. The operating lease has a remaining life of approximately 13.2
years with annual lease payments of approximately $100. The Company's
performance is only required if the sublessee fails to perform his obligations
as lessee. The Company has a liability of approximately $500 in the accompanying
consolidated financial statements for estimated amounts to be paid in case of
non-performance by the sublessee.
The Company maintains insurance coverage for various aspects of its
business and operations. The Company has elected, however, to retain all or a
portion of losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the Company
to some future liability for which it is only partially insured, or completely
uninsured. The Company intends to mitigate any such future liability by
continuing to exercise prudent business judgment in negotiating the terms and
conditions of its contracts. See Note 2 for a further discussion of insurance
and insurance reserves.
As of August 1, 2003, the Company operated 132 Cracker Barrel stores and 44
Logan's Roadhouse restaurants from leased facilities and also leased certain
land and advertising billboards. (See Note 11.) These leases have been
classified as either capital or operating leases. The interest rates for capital
leases vary from 10% to 17%. Amortization of capital leases is included with
depreciation expense. A majority of the Company's lease agreements provide for
renewal options and some of these options contain escalation clauses.
Additionally, certain store leases provide for contingent lease payments based
upon sales volume in excess of specified minimum levels.
The following is a schedule by year of future minimum lease payments under
capital leases, together with the present value of the minimum lease payments as
of August 1, 2003:
Year
- ------------------------------------------------------------------------
2004 $ 153
2005 153
2006 152
2007 70
2008 43
- ------------------------------------------------------------------------
Total minimum lease payments 571
Less amount representing interest 120
- ------------------------------------------------------------------------
Present value of minimum lease payments 451
Less current portion 100
- ------------------------------------------------------------------------
Long-term portion of capital lease obligations $ 351
========================================================================
The following is a schedule by year of the future minimum rental payments
required under noncancelable operating leases, excluding leases for advertising
billboards, as of August 1, 2003:
Year
- ------------------------------------------------------------------------
2004 $ 28,744
2005 28,557
2006 27,975
2007 27,791
2008 27,838
Later years 305,163
- ------------------------------------------------------------------------
Total $446,068
========================================================================
<PAGE>
The following is a schedule by year of the future minimum rental payments
required under operating leases for advertising billboards as of August 1, 2003:
Year
- ------------------------------------------------------------------------
2004 $17,993
2005 10,186
2006 5,257
2007 175
- ------------------------------------------------------------------------
Total $33,611
========================================================================
Rent expense under operating leases, excluding leases for advertising
billboards, for each of the three years was:
Minimum Contingent Total
- -------------------------------------------------------------------------
2003 $28,881 $753 $29,634
2002 26,158 776 26,934
2001 25,264 592 25,856
Rent expense under operating leases for billboards for each of the
three years was:
Minimum Contingent Total
- ----------------------------------------------------------------------------
2003 $22,811 -- $22,811
2002 21,442 -- 21,442
2001 19,565 -- 19,565
The Company reclassified its straight-line rent liability under SFAS
No. 13 for 2002 from other accrued expenses to agree to its 2003 presentation in
other long-term liabilities. The amount of this reclassification at August 2,
2002 was $1,743.
10. Employee Savings Plans
The Company sponsors a qualified defined contribution retirement plan
("Plan I") covering salaried and hourly employees who have completed one year of
service and have attained the age of twenty-one. Plan I allows eligible
employees to defer receipt of up to 16% of their compensation, as defined in the
plan, and contribute such amounts to various investment funds at the employee's
discretion. Such contributions, including the Company matching contribution
described below, may not be invested in the Company's common stock. The Company
matches 25% of employee contributions for each participant up to 6% of the
employee's compensation. Employee contributions vest immediately while Company
contributions vest 20% annually beginning on the participant's first anniversary
of employment. In 2003, 2002, and 2001, the Company contributed approximately
$1,524, $1,609, and $1,545, respectively.
The Company sponsors a non-qualified defined contribution retirement
plan ("Plan II") covering highly compensated employees, as defined in the plan.
Plan II allows eligible employees to defer receipt of up to 50% of their base
compensation and 100% of their eligible bonuses, as defined in the plan, and
contribute such amounts to various investment funds at the employee's
discretion. Such contributions, including the Company matching contribution
described below, may not be invested in the Company's common stock. The Company
matches 25% of employee contributions for each participant up to a total of 6%
of the employee's compensation when combined with the employee's Plan I match.
Employee contributions vest immediately while Company contributions vest 20%
annually beginning on the participant's first anniversary of employment. In
2003, 2002, and 2001, the Company contributed approximately $280, $203, and
$116, respectively, and this amount is included in other store operating
expenses. At the inception of Plan II, the Company established a Rabbi Trust to
fund Plan II obligations. The market value of the trust assets is included in
other assets and the liability to Plan II participants is included in other
long-term obligations. The market value of the liability to Plan II participants
was reclassified in 2003 from accrued employee compensation. The amount of the
reclassification was $5,599 at August 2, 2002.
<PAGE>
11. Sale-Leaseback
On July 31, 2000, the Company, through its Cracker Barrel Old Country
Store, Inc. subsidiary, completed a sale-leaseback transaction involving 65 of
its owned Cracker Barrel Old Country Store units. Under the transaction, the
land, buildings and building improvements at the locations were sold for net
consideration of $138,325 and have been leased back for an initial term of 21
years. Equipment was not included. The leases include specified renewal options
for up to 20 additional years and have certain financial covenants related to
fixed charge coverage for the leased units. At August 1, 2003 and August 2,
2002, the Company was in compliance with all covenants. Net rent expense during
the initial term is $14,963 annually, and the assets sold and leased back
previously had depreciation expense of approximately $2,707 annually. The gain
on the sale is being amortized over the initial lease term of 21 years. Net
proceeds from the sale were used to reduce outstanding borrowing under the
Company's revolving credit facility.
12. Quarterly Financial Data (Unaudited)
Quarterly financial data for 2003 and 2002 are summarized as follows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------
2003
Total revenue $527,539 $563,119 $527,189 $580,335
Gross profit 361,574 373,007 361,811 397,875
Income before income
taxes 35,635 38,181 36,277 55,169
Net income 22,985 24,626 23,399 35,519
Net income per
share - basic .46 .50 .48 .74
Net income per
share - diluted .45 .48 .46 .70
- --------------------------------------------------------------------------
2002
Total revenue $496,356 $523,599 $506,127 $545,702
Gross profit 333,156 341,867 344,865 374,158
Income before income
taxes 30,603 32,916 31,724 47,288
Net income 19,647 21,132 20,557 30,453
Net income per
share - basic .36 .38 .38 .59
Net income per
share - diluted .35 .37 .36 .56
- --------------------------------------------------------------------------
13. Subsequent Event
On September 25, 2003, the Company's Board of Directors approved a new
quarterly dividend policy, declaring the first such quarterly dividend of $0.11
per common share payable on November 10, 2003 to shareholders of record on
October 17, 2003.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of CBRL Group, Inc.:
We have audited the accompanying consolidated balance sheets of CBRL
Group, Inc. and subsidiaries (the "Company") as of August 1, 2003 and August 2,
2002, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the three fiscal years in the
period ended August 1, 2003. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the Company at
August 1, 2003 and August 2, 2002, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended August 1,
2003, in conformity with accounting principles generally accepted in the United
States of America.
As discussed in Note 2, the Company adopted certain provisions of
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets effective August 4, 2001, which resulted in the Company
changing the method in which it accounts for goodwill and other intangible
assets.
\s\Deloitte & Touche LLP
Nashville, Tennessee
September 10, 2003
(September 25, 2003 as to Note 13)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>aex21fy03.txt
<DESCRIPTION>SUBSIDIARY LIST
<TEXT>
EXHIBIT 21
Subsidiaries of the Registrant
The following is a list of the significant subsidiaries of the Registrant as of
August 1, 2003, all of which are wholly-owned:
State of
Parent Incorporation
- ------ --------------
CBRL Group, Inc. Tennessee
Subsidiaries
- ------------
Cracker Barrel Old Country Store, Inc. Tennessee
Logan's Roadhouse, Inc. Tennessee
CBOCS Distribution, Inc.
(dba Cracker Barrel Old Country Store) Colorado
CBOCS General Partnership Michigan
CBOCS Michigan, Inc.
(dba Cracker Barrel Old Country Store) Michigan
CBOCS West, Inc.
(dba Cracker Barrel Old Country Store) Nevada
Roadhouse Promotions, Inc. Tennessee
Rocking Chair, Inc. Nevada
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>aex23fy03.txt
<DESCRIPTION>INDEPENDENT AUDITORS CONSENT
<TEXT>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-86602, 33-15775, 33-37567, 33-45482, 333-01465, 333-63442, 333-71384 and
333-81063 of CBRL Group, Inc. on Form S-8 and Registration Statement Nos.
33-59582, 333-90996-02 and 333-90996-13 on Form S-3 of our report dated
September 10, 2003 (September 25, 2003 as to Note 13), appearing in and
incorporated by reference in the Annual Report on Form 10-K of CBRL Group, Inc.
for the year ended August 1, 2003.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
October 15, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>9
<FILENAME>aex31fy03.txt
<DESCRIPTION>RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
<TEXT>
EXHIBIT 31 A CERTIFICATION
I, Michael A. Woodhouse certify that:
1. I have reviewed this Annual Report on Form 10-K of CBRL Group, 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) 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) 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
(c) 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 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: October 15, 2003
/s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse, President and
Chief Executive Officer
<PAGE>
EXHIBIT 31 B CERTIFICATION
I, Lawrence E. White certify that:
1. I have reviewed this Annual Report on Form 10-K of CBRL Group, 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) 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) 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
(c) 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 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: October 15, 2003
/s/ Lawrence E. White
---------------------
Lawrence E. White, Senior Vice President, Finance and
Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>10
<FILENAME>aex32fy03.txt
<DESCRIPTION>SECTION 1350 CERTIFICATIONS
<TEXT>
Exhibit 32 A
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 Annual Report of CBRL Group, Inc. (the "Issuer") on Form
10-K for the fiscal year ended August 1, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Michael A. Woodhouse,
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: October 15, 2003 By: /s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse,
President and Chief Executive
Officer
<PAGE>
Exhibit 32 B
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 Annual Report of CBRL Group, Inc. (the "Issuer") on Form
10-K for the fiscal year ended August 1, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Lawrence E. White,
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: October 15, 2003 By: /s/ Lawrence E. White
---------------------
Lawrence E. White,
Senior Vice President, Finance
and Chief Financial Officer
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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