Cracker Barrel Reports Results for Third Quarter Fiscal 2014

  Cracker Barrel Reports Results for Third Quarter Fiscal 2014           Adjusted EPS increased 20.6% over EPS in prior year quarter  Business Wire  LEBANON, Tenn. -- May 28, 2014  Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq:CBRL) today reported financial results for the third quarter of fiscal 2014 ended May 2, 2014.  Third-Quarter Fiscal 2014 Highlights    *Tenth consecutive quarter of outperformance of the Knapp-Track^TM casual     dining index   *Compared to the prior-year third quarter, total sales increased 0.5%,     comparable store restaurant sales decreased 0.6% and comparable store     retail sales increased 0.9%.   *On a GAAP basis, operating income margin was 7.0% of total revenue, or     7.2% when adjusted for expenses associated with the Special Meeting of     Cracker Barrel Shareholders, compared with 6.9% in the prior year quarter.     (See non-GAAP reconciliation below.)   *On a GAAP basis, earnings per diluted share were $1.20, or $1.23 when     adjusted for special meeting expenses, a 20.6% increase over earnings per     diluted share of $1.02 in the prior year quarter.   *As previously disclosed, the Board approved a quarterly dividend increase     of 33% to $1.00 per share.  Commenting on the third-quarter results, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran said, “Like many in our industry, Cracker Barrel continued to face headwinds during the quarter from severe winter weather, a challenging consumer environment and an increasingly promotional competitive landscape. Nevertheless, we continued to outperform our peers in the Knapp-Track casual dining index for the tenth consecutive quarter, while our field teams focused on controlling costs and preserving our operating margins.”  Third-Quarter Fiscal 2014 Results  Revenue  The Company reported total revenue of $643.3 million for the third quarter of fiscal 2014, representing an increase of 0.5% over the third quarter of the prior year. Comparable store restaurant sales decreased 0.6%, as a 2.9% decline in customer traffic was partially offset by a 2.3% increase in average check. The average menu price increase for the quarter was approximately 1.8%. Comparable store retail sales increased 0.9% for the quarter. The Company opened two stores during the third quarter, for a total of three new store openings year-to-date.  Comparable store restaurant traffic, average check, and comparable store restaurant and retail sales for the fiscal months of February, March and April and for the third quarter were as follows:                                  February   March   April   Third                                                                    Quarter Comparable restaurant traffic   -4.9%      -4.0%   -0.4%   -2.9% Average check                     2.2%         2.0%      2.6%      2.3% Comparable restaurant sales       -2.7%        -2.0%     2.2%      -0.6% Comparable retail sales           -5.8%        -5.0%     11.0%     0.9%                                                                      Operating Income  GAAP operating income in the third quarter was $45.2 million, or 7.0% of total revenue. Adjusted for special meeting expenses, adjusted operating income was $46.3 million, or 7.2% of total revenue, compared with operating income of $44.2 million, or 6.9% of total revenue, in the prior year quarter. Reductions in cost of goods sold and general and administrative expenses as a percent of total revenue were partially offset by an increase in other store operating expenses.  Diluted Earnings per Share  On a GAAP basis, earnings per diluted share in the second quarter of fiscal 2014 were $1.20. Adjusted for special meeting expenses, adjusted earnings per diluted share were $1.23, representing a 20.6% increase compared with earnings per diluted share of $1.02 in the prior year quarter.  Fiscal 2014 Outlook  Based upon year-to-date financial performance, the Company expects to report earnings per diluted share for the 2014 fiscal year of between $5.50 and $5.60, which implies adjusted EPS for the fourth quarter of between $1.50 and $1.60. The Company now expects total revenue for the year of approximately $2.7 billion and an operating income margin between 7.7% and 7.9% of total revenue. The revenue projection for fiscal 2014 reflects the expected opening of seven new Cracker Barrel stores, projected increases in comparable store restaurant sales of approximately 0.5%, and approximately flat comparable store retail sales. The Company’s projections are based upon expected food commodity inflation of approximately 2% for the year, and 2.5% for the fourth quarter. The Company expects annual depreciation expense between $68 million and $70 million; net interest expense between $17 million and $18 million; and an effective tax rate of between 31% and 32%. The Company expects capital expenditures for fiscal 2014 to be between $90 million and $100 million.  The Company notes that its annual earnings guidance does not include expenses related to the proxy contest at its annual shareholders meeting held on November 13, 2013 or expenses associated with the special shareholders meeting held on April 23, 2014. The Company reminds investors that its outlook for fiscal 2014 reflects a number of assumptions, many of which are outside the Company’s control.  Fiscal 2014 Third-Quarter Conference Call  As previously announced, the live broadcast of Cracker Barrel’s quarterly conference call will be available to the public online at investor.crackerbarrel.com on May 28, 2014 beginning at 11:00 a.m. (Eastern Time). An online replay will be available at 2:00 p.m. (Eastern Time) and continue through June 11, 2014.  About Cracker Barrel  Cracker Barrel Old Country Store provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America’s country heritage…all at a fair price. The restaurants serve up delicious, home-style country food such as meatloaf and homemade chicken n’ dumplins as well as our signature biscuits using an old family recipe. The authentic old country retail store is fun to shop and offers unique gifts and self-indulgences.  Cracker Barrel Old Country Store, Inc.(Nasdaq:CBRL) was established in 1969 in Lebanon, Tenn.and operates 627 company-owned locations in42 states. Every Cracker Barrel store is open seven days a week with hours Sunday through Thursday, 6 a.m. – 10 p.m., and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com.  CBRL-F  Except for specific historical information, certain of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These, and similar statements are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause the actual performance of Cracker Barrel Old Country Store, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is subject to completion of our financial procedures for Q3 FY14 and is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "trends," "assumptions," "target," "guidance," "outlook," "opportunity," "future," "plans," "goals," "objectives," "expectations," "near-term," "long-term," "projection," "may," "will," "would," "could," "expect," "intend," "estimate," "anticipate," "believe," "potential," "regular," "should," "projects," "forecasts," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology and include the expected effects of operational improvement initiatives, such as new menu items and retail offerings. Factors which could materially affect actual results include, but are not limited to: the effects of uncertain consumer confidence, higher costs for energy, general or regional economic weakness, weather on sales and customer travel, and discretionary income or personal expenditure activity of our customers; our ability to identify, acquire and sell successful new lines of retail merchandise and new menu items at our restaurants; our ability to successfully implement or sustain plans intended to improve operational or marketing execution and performance; changes in or implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, pensions, insurance or other undeterminable areas; our ability to successfully implement plans intended to promote or protect our brands and products; commodity price increases; the ability of and cost to us to recruit, train, and retain qualified hourly and management employees in an escalating wage environment; the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention; workers' compensation, group health and utility price changes; consumer behavior based on negative publicity or concerns over nutritional or safety aspects of our food or products or those of the restaurant industry in general, including concerns about pandemics, as well as the possible effects of such events on the price or availability of ingredients used in our restaurants; the effects of our substantial indebtedness and associated restrictions on our financial and operating flexibility and ability to execute or pursue our operating plans and objectives; changes in interest rates or capital market conditions affecting our financing costs and ability to refinance all or portions of our indebtedness; the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations; the availability and cost of suitable sites for restaurant development and our ability to identify those sites; changes in land, building materials and construction costs; the actual results of pending, future or threatened litigation or governmental investigations and the costs and effects of negative publicity associated with these activities; practical or psychological effects of natural disasters or terrorist acts or war and military or government responses; disruptions to our restaurant or retail supply chain; changes in foreign exchange rates affecting our future retail inventory purchases; implementation of new or changes in interpretation of existing accounting principles generally accepted in the United States of America; and other factors described from time to time in our filings with the Securities and Exchange Commission, press releases, and other communications.  Any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which made. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.   CRACKER BARREL OLD COUNTRY STORE, INC. CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited) (In thousands, except share and per share amounts, percentages and ratios)                    Third Quarter Ended                                Nine Months Ended                      5/2/14           5/3/13           Percentage     5/2/14           5/3/13           Percentage                                                            Change                                               Change Total revenue        $ 643,298          $ 640,407          1%             $ 1,990,930        $ 1,970,529        1% Cost of goods         201,507          201,982         0               650,451          644,027         1 sold Gross profit           441,791            438,425          1                1,340,479          1,326,502        1 Labor and other related          242,977            241,864          1                718,466            719,474          0 expenses Other store operating             121,060          116,408         4               374,501          354,859         6 expenses Store operating              77,754             80,153           (3)              247,512            252,169          (2) income General and administrative        32,541           35,981          (10)            99,356           105,492         (6) expenses Operating              45,213             44,172           2                148,156            146,677          1 income Interest              4,327            10,194          (58)            13,205           31,199          (58) expense Pretax income          40,886             33,978           20               134,951            115,478          17 Provision for         12,158           9,376           30              42,008           32,516          29 income taxes Net income           $ 28,728          $ 24,602          17             $ 92,943          $ 82,962          12                                                                                                                  Earnings per         $ 1.21            $ 1.04            16             $ 3.90            $ 3.50            11 share – Basic: Earnings per share –              $ 1.20            $ 1.02            18             $ 3.88            $ 3.47            12 Diluted:                                                                                                                  Weighted average shares: Basic                  23,820,309         23,760,589       0                23,816,841         23,683,133       1 Diluted                23,978,474         24,006,821       0                23,958,058         23,913,226       0                                                                                                                  Ratio Analysis Total revenue: Restaurant             81.4       %       81.6       %                      79.1       %       78.9       % Retail                18.6             18.4                            20.9             21.1        Total revenue          100.0              100.0                             100.0              100.0 Cost of goods         31.3             31.5                            32.7             32.7        sold Gross profit           68.7               68.5                              67.3               67.3 Labor and other related          37.8               37.8                              36.1               36.5 expenses Other store operating             18.8             18.2                            18.8             18.0        expenses Store operating              12.1               12.5                              12.4               12.8 income General and administrative        5.1              5.6                             5.0              5.4         expenses Operating              7.0                6.9                               7.4                7.4 income Interest              0.6              1.6                             0.6              1.5         expense Pretax income          6.4                5.3                               6.8                5.9 Provision for         1.9              1.5                             2.1              1.7         income taxes Net income            4.5        %      3.8        %                     4.7        %      4.2        %                                                                                                                    CRACKER BARREL OLD COUNTRY STORE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands, except share amounts)                                                5/2/14       5/3/13 Assets Cash and cash equivalents                        $ 88,239       $ 58,457 Property held for sale                           0              884 Accounts receivable                              16,402         14,406 Income tax receivable                            3,570          1,435 Inventory                                        147,378        134,131 Prepaid expenses                                 13,148         16,016 Deferred income taxes                            4,339          7,407 Property and equipment, net                      1,034,834      1,016,811 Other long-term assets                           60,625         60,126 Total assets                                     $1,368,535     $1,309,673                                                                  Liabilities and Shareholders’ Equity Accounts payable                                 $ 71,971       $ 72,732 Other current liabilities                        240,024        183,127 Long-term debt                                   381,250        400,000 Interest rate swap liability                     7,908          16,888 Other long-term obligations                      122,223        119,855 Deferred income taxes                            57,956         61,739 Shareholders’ equity, net                        487,203        455,332 Total liabilities and shareholders’ equity       $1,368,535     $1,309,673                                                                  Common shares issued and outstanding             23,820,500     23,757,956                                                                    CRACKER BARREL OLD COUNTRY STORE, INC. CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Unaudited and in thousands)                                                 Nine Months Ended                                                   5/2/14        5/3/13 Cash flows from operating activities: Net income                                        $ 92,943        $ 82,962 Depreciation and amortization                       50,601         49,000 Loss on disposition of property and                 3,159           2,324 equipment Share-based compensation, net of excess tax         5,520           9,035 benefit (Decrease) increase in inventories                  (691    )       9,136 (Decrease) in accounts payable                      (38,666 )       (28,539  ) Net changes in other assets and liabilities        (11,669 )      (17,219  ) Net cash provided by operating activities          101,197       106,699   Cash flows from investing activities: Purchase of property and equipment, net of          (62,337 )       (45,738  ) insurance recoveries Proceeds from sale of property and                 1,572         550       equipment Net cash used in investing activities              (60,765 )      (45,188  ) Cash flows from financing activities: Net payments for credit facilities and              (1      )       (125,087 ) other long-term obligations (Taxes withheld) and proceeds from exercise         (8,430  )       5,195 of share-based compensation awards, net Excess tax benefit from share-based                 612             1,961 compensation Purchases and retirement of common stock            (12,473 )       (3,570   ) Dividends on common stock                          (53,619 )      (33,515  ) Net cash used in financing activities              (73,911 )      (155,016 )                                                                    Net (decrease) in cash and cash equivalents         (33,479 )       (93,505  ) Cash and cash equivalents, beginning of            121,718       151,962   period Cash and cash equivalents, end of period          $ 88,239       $ 58,457                                                                                    CRACKER BARREL OLD COUNTRY STORE, INC. Supplemental Information (Unaudited)                                                                                              Third Quarter Ended         Nine Months Ended                   5/2/14      5/3/13             5/2/14       5/3/13                                                                               Units in operation: Open at beginning         625           621                624            616 of period Opened during            2             1                  3              6 period Open at end       627           622                627            622 of period                                                                               Total revenue: (In thousands) Restaurant        $523,557      $522,642           $1,573,895     $1,555,111 Retail            119,741       117,765            417,035        415,418 Total             $643,298      $640,407           $1,990,930     $1,970,529 revenue                                                                               Cost of goods sold: (In thousands) Restaurant        $141,757      $141,617           $432,735       $423,138 Retail            59,750        60,365             217,716        220,889 Total cost of goods          $201,507      $201,982           $650,451       $644,027 sold Average unit volume: (In thousands) Restaurant        $836.5        $840.8             $2,517.9       $2,506.5 Retail            191.3         189.4              667.2          669.6 Total             $ 1,027.8     $                  $3,185.1       $3,176.1                                 1,030.2                                                                               Operating         8,137         8,081              24,378         24,197 weeks:                                                                                                                       Q3 2014 vs. Q3      9 mo. 2014 vs. 9                                         2013                  mo. 2013                                                                Comparable store sales period to period (decrease) increase: Restaurant                              -0.6%                 0.5%  Retail                                  0.9%                  -0.2%                                                                Number of locations in comparable       616                   609 store base                                                                                     CRACKER BARREL OLD COUNTRY STORE, INC.                     Reconciliation of GAAP basis operating                 results to adjusted non-GAAP operating results                          (Unaudited and in thousands)  The Company makes reference in this release to “adjusted store operating income,” “adjusted operating income,” “adjusted net income,” “adjusted earnings per diluted share,” and “adjusted general and administrative expenses,” excluding the impact of severance, special meeting and proxy contest expenses and the retroactive restatement of the work opportunities tax credit. The Company believes that excluding these items and their related tax effects from its financial results reflects operating results that are more indicative of the Company's ongoing operating performance while improving comparability to prior periods, and as such, may provide investors with an enhanced understanding of the Company's past financial performance and prospects for the future. This information is not intended to be considered in isolation or as a substitute for operating income, net income, or earnings per share or expense information prepared in accordance with GAAP.                    Third Quarter ended May 2, 2014     Third Quarter ended May 3, 2013                      As         Adjust    As           As         Adjust    As                      Reported                 Adjusted     Reported                 Adjusted                                   (1)                                                                                      Store operating            $ 77,754     -           $ 77,754     $ 80,153     -           $ 80,153 income General and administrative       32,541     (1,113)   31,428       35,981              35,981 expenses Operating            45,213       1,113       46,326       44,172       -           44,172 income Interest             4,327      -         4,327        10,194     -         10,194 Expense Pretax income        40,886       1,113       41,999       33,978       -           33,978 Provision for        12,158     346       12,504       9,376               9,376 income taxes Net income           $ 28,728   $ 767     $ 29,495     $ 24,602   $ -       $ 24,602                                                                                      Earning per          $ 1.21       $ 0.03      $ 1.24       $ 1.04       $ -         $ 1.04 share - Basic Earning per share -              $ 1.20       $ 0.03      $ 1.23       $ 1.02       $ -         $ 1.02 Diluted                                                                                                                                                                                                Nine months ended May 2, 2014         Nine months ended May 3, 2013                      As           Adjust      As           As           Adjust      As                      Reported                 Adjusted     Reported                 Adjusted                                   (1)                                   (1) (2)                                                                         (3)                                                                                      Store                $                        $            $                        $ operating            247,512      -           247,512      252,169      -           252,169 income General and administrative       99,356     (4,313)   95,043       105,492    (5,634)   99,858 expenses Operating            148,156      4,313       152,469      146,677      5,634       152,311 income Interest             13,205     -         13,205       31,199     -         31,199 Expense Pretax income        134,951      4,313       139,264      115,478      5,634       121,112 Provision for        42,008     1,343     43,351       32,516     3,847     36,363 income taxes Net income           $ 92,943   $ 2,970   $ 95,913     $ 82,962   $ 1,787   $ 84,749                                                                                      Earning per          $ 3.90       $ 0.12      $ 4.02       $ 3.50       $ 0.08      $ 3.58 share - Basic Earning per share -              $ 3.88       $ 0.12      $ 4.00       $ 3.47       $ 0.07      $ 3.54 Diluted                                                                                        (1) Charges and tax effects of the special meeting of shareholders or proxy contest at the annual shareholders meeting. (2) Severance, other charges and tax effects related to organizational changes. (3) Provision for taxes adjusted to exclude the $2.1 million prior year favorable effect of the retroactive reinstatement of the work opportunity tax credit.   Contact:  Cracker Barrel Old Country Store Investors: Lawrence E. Hyatt, 615-235-4432 or Media: Andy Merrill, 212-886-9304  
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