What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-03-04 compared with 2025-12-09 · 116 added, 89 removed, 224 unchanged (48% of the section changed)

1 unchanged sentence

Cracker Barrel Old Country Store, Inc., and its subsidiaries (collectively, the “Company,” “our” or “we”) are principally engaged in the operation and development in the United States of the Cracker Barrel Old Country Store Ò (“Cracker Barrel”) concept.

As of October 31, 2025, we operated 656 Cracker Barrel stores in 43 states and 54 Maple Street Biscuit Company (“MSBC”) locations in ten states.

As of January 30, 2026, we operated 656 Cracker Barrel stores in 43 states and 54 Maple Street Biscuit Company (“MSBC”) locations in ten states.

All dollar amounts reported or discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are shown in thousands, except per share amounts and certain statistical information (e.g., number of stores).

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our ability to manage retail inventory and merchandise mix;

our ability to sustain or the effects of plans intended to improve operational or marketing execution and performance, including the Company’s multi-year strategic plan;

our ability to sustain or the effects of plans intended to improve operational or marketing execution and performance or liquidity;

the impact of adverse or extreme weather events on sales and customer travel;

the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention;

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the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations;

general or regional economic weakness, business and societal conditions and the weather impact on sales and customer travel;

general or regional economic weakness, business and societal conditions;

discretionary income or personal expenditure activity of our customers;

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Readers are advised, however, to consult any future public disclosures that we may make on related subjects in reports that we file with or furnish to the SEC or in our other public disclosures.

Management believes that Cracker Barrel’s brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy.

We believe that Cracker Barrel’s brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy.

Our long-term strategy is anchored on three overarching business imperatives:

driving relevancy, delivering food and experiences guests love, and growing profitability.

We believe there are significant challenges in the macroeconomic outlook for the coming quarters, including continued volatility of inflation and interest rates, high consumer debt levels and lower savings rates, as well as the potential uncertainty associated with the geopolitical environment and global trade, among other factors.

In the first quarter of 2026, we also experienced negative publicity to recent brand initiatives, including the launch of a new logo and modern test store remodels, to which we have responded by returning to our former logo and discontinuing the modern test store remodels.

Despite these challenges, we remain focused on delivering long-term growth and returns for shareholders.

Our multi-year strategic plan is built on the following five pillars of our strategy:

● Refining the brand :

We have established an updated brand identity anchored on “the goodness of country hospitality”, which has been applied in our marketing, products (food and retail) and physical content and assets.

We have also refined our partnership strategy and expanded our use of additional marketing channels.

● Enhancing the menu :

We have developed a robust product pipeline and introduced new craveable menu items, and we also plan to make targeted upgrades to existing items.

● Evolving the store and guest experience :

We have improved several operational speed metrics and implemented a new allocation software package to improve retail product management.

● Winning in digital and off-premise :

We have further leveraged our loyalty program by employing advanced technologies to deliver offers tailored to individual guests and optimized and expanded our off-premise business by updating our holiday and catering programs and improving our third-party sales strategies.

● Elevating the employee experience :

We are leveraging the Employee Value Proposition that we rolled out in 2025, and we believe it will drive better recruiting and retention.

We believe there are significant challenges in the macroeconomic outlook for the coming quarters, including continued inflation volatility, high consumer debt levels and lower savings rates, as well as the potential uncertainty associated with the geopolitical environment and global trade, among other factors.

In the second quarter of 2026, we continued to face challenges related to negative publicity from brand initiatives, including the launch of a new logo and modern test store remodels, to which we responded by returning to our former logo and discontinuing the modern test store remodels during the first quarter of 2026.

Our strategy is focused on improving the guest experience to drive an improvement in our traffic and includes enhancing our operations, connecting with guests through our menu, marketing and value proposition, and implementing cost savings to improve profitability.

Key Performance Indicators

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Quarter Ended

Six Months Ended

Total revenue

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Income (loss) before income taxes

Income tax benefit

Provision for income taxes (income tax benefit)

Net income (loss)

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Quarter Ended

Six Months Ended

Opened during the period:

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Total Revenue

Total revenue for the first quarter decreased 5.7% as compared to the same period in the prior year.

Total revenue for the second quarter and first six months of 2026 decreased 7.9% and 6.8%, respectively, as compared to the same periods in the prior year.

The following table highlights the key components of revenue for the specified periods:

Quarter Ended

Six Months Ended

Revenue in dollars:

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Comparable store sales and traffic exclude MSBC.

For the first quarter of 2026, our comparable store restaurant sales decrease resulted primarily from the guest traffic decrease partially offset by the average check increase.

For the first quarter of 2026, the average check increase included an average menu price increase of 4.1%.

For the second quarter and first six months of 2026, our comparable store restaurant sales decreases resulted primarily from the guest traffic decreases partially offset by the average check increases.

For the second quarter and first six months of 2026, the average check increases included average menu price increases of 4.2% in both periods.

Our retail sales are made substantially to our restaurant guests.

For the first quarter of 2026, our comparable store retail sales decrease resulted primarily from the guest traffic decrease.

The decrease in guest traffic is primarily the result of negative publicity to recent brand initiatives, including the launch of new logo and modern test store remodels, and lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher consumer debt levels and lower savings rates as well as the potential uncertainty associated with the geopolitical environment and global trade.

For the second quarter and first six months of 2026, our comparable store retail sales decreases resulted primarily from the guest traffic decreases.

The decreases in guest traffic are primarily the result of negative publicity and customer reactions to certain recent brand initiatives, including the launch of a new logo and modern test store remodels in the first quarter of 2026, and lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher consumer debt levels and lower savings rates as well as the potential uncertainty associated with the geopolitical environment and global trade.

Cost of Goods Sold (Exclusive of Depreciation and Rent)

The following table highlights the components of cost of goods sold (exclusive of depreciation and rent) in dollar amounts and as percentages of revenues for the specified periods:

Three Months Ended

Quarter Ended

Six Months Ended

Cost of Goods Sold in dollars:

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Cost of Goods Sold by percentage of revenue:

The increase in restaurant cost of goods sold as a percentage of restaurant revenue for the first quarter as compared to the same period in the prior year was primarily driven by higher food waste, increased discounts and commodity inflation partially offset by menu pricing.

Commodity inflation was 2.1% in the first quarter of 2026.

We presently expect the rate of commodity inflation to be 2.5% to 3.5% in 2026.

The increase in retail cost of goods sold as a percentage of retail revenue in the first quarter of 2026 as compared to the same period in the prior year resulted primarily from higher discounts, the change in the provision for obsolete inventory and lower initial margin which was driven primarily from tariffs.

Additional changes in tariff rates or trade policy could materially affect our operating results and financial condition, and this ongoing uncertainty introduces additional volatility and risk to our operations and financial condition and may affect consumer demand in ways that are difficult to predict.

First Quarter

The increases in restaurant cost of goods sold as a percentage of restaurant revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year were primarily driven by higher food waste, commodity inflation, increased discounts and a shift to higher cost menu items partially offset by menu pricing.

Commodity inflation was 1.3% and 1.7%, respectively, in the second quarter and first six months of 2026.

We presently expect the rate of commodity inflation to be between 2.0% and 2.5% in 2026.

The increase in retail cost of goods sold as a percentage of retail revenue in the second quarter of 2026 as compared to the same period in the prior year resulted primarily from lower initial margin which was driven primarily by tariffs, higher markdowns, higher discounts and inventory shrinkage.

Inventory shrinkage, as a percentage of total revenue, increased in the second quarter due to the decrease in the total revenue for the same period.

Second Quarter

Increase as Percentage

of Total Retail Revenue

Provision for obsolete inventory

Lower initial margin

Inventory shrinkage

The increase in retail cost of goods sold as a percentage of retail revenue in the first six months of 2026 as compared to the same period in the prior year resulted primarily from lower initial margin which was driven primarily by tariffs, higher discounts, higher markdowns, inventory shrinkage and the change in the provision for obsolete inventory.

Inventory shrinkage, as a percentage of total revenue, increased in the first six months due to the decrease in the total revenue for the same period.

First Six Months

Increase as a Percentage

of Total Retail Revenue

Lower initial margin

Inventory shrinkage

Provision for obsolete inventory

Labor and Related Expenses

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Quarter Ended

Six Months Ended

Labor and related expenses

This percentage change for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from the following:

First Quarter

These percentage changes for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from the following:

Second Quarter

First Six Months

Increase (Decrease)

as a Percentage of

Total Revenue

Store management compensation

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Employee health care expense

Payroll taxes

Store bonus expense

The increases in store hourly labor and store management compensation as a percentage of total revenue for the first quarter of 2026 as compared to the same periods in the prior year resulted primarily from the deleverage associated with the decrease in total revenue in the first quarter of 2026 as compared to the prior year quarter.

Additionally, the Company continued to invest in staffing levels to enhance the guest experience, resulting in lower productivity in the first quarter of 2026.

We presently expect the rate of wage inflation to be 3.0% to 4.0% in 2026.

The increase in employee health care expense as a percentage of total revenue for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from unfavorable claim experience.

The decrease in store bonus expense as a percentage of total revenue for the first quarter of 2026 as compared to the same period in the prior year resulted from lower performance against financial objectives in 2026 as compared to the prior year.

The increases in store hourly labor and store management compensation as a percentage of total revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from lower productivity and the deleverage associated with the decrease in total revenue in the second quarter and first six months of 2026 as compared to the same periods in the prior year.

We presently expect the rate of wage inflation to be between 2.5% and 3.0% in 2026.

The increases in employee health care expense as a percentage of total revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from unfavorable claim experience.

The increases in payroll taxes as a percentage of total revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from the deleverage associated with the decrease in total revenue in the second quarter and first six months of 2026 as compared to the same periods in the prior year.

The decreases in store bonus expense as a percentage of total revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted from lower performance against financial objectives in 2026 as compared to the prior year.

Other Store Operating Expenses

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Quarter Ended

Six Months Ended

Other store operating expenses

This percentage change for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from the following:

First Quarter

These percentage changes for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from the following:

Second Quarter

First Six Months

Increase as a Percentage

of Total Revenue

Store occupancy costs

Other store expenses

The increase in store occupancy costs as a percentage of total revenue for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from higher maintenance expenses and the decrease in total revenue in the first quarter of 2026 as compared to the prior year quarter.

The increase in advertising expense as a percentage of total revenue for the first quarter of 2026 as compared to the same period in the prior year period resulted primarily from higher media spending, investments related to our multi-year strategic plan and the decrease in total revenue in the first quarter of 2026 as compared to the prior year quarter.

The increase in other store operating expense as a percentage of total revenue for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from costs associated with our biennial general manager conference held in the first quarter of 2026.

We did not hold a general manager conference in 2025.

The increases in store occupancy costs as a percentage of total revenue for the second quarter and the first six months of 2026 as compared to the same periods in the prior year resulted primarily the decreases in total revenue and increases in maintenance expenses in the second quarter and first six months of 2026 as compared to the same periods in the prior year.

The increases in maintenance expenses included higher costs associated with snow removal due to adverse weather events in the second quarter and first six months of 2026 as compared to the same periods in the prior year.

The increases in advertising expense as a percentage of total revenue for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from higher media spending and the decreases in total revenue in the second quarter and the first six months of 2026 as compared to the same periods in the prior year.

General and Administrative Expenses

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Quarter Ended

Six Months Ended

General and administrative expenses

This percentage change for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from the following:

First Quarter

These percentage changes for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from the following:

Second Quarter

First Six Months

(Decrease) Increase

as a Percentage

of Total Revenue

Incentive compensation expense

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Payroll and related expense

The decrease in incentive compensation expense as a percentage of total revenue in the first quarter of 2026 as compared to the same period in the prior year resulted primarily from lower performance against financial objectives in 2026 as compared to the prior year period.

The decrease in professional fees as a percentage of total revenue in the first quarter of 2026 as compared to the same period in the prior year resulted primarily from lower legal fees and lower proxy contest expenses.

In the first quarter of 2026, we incurred $1,439 in costs related to a proxy contest in connection with the Company’s 2025 annual shareholders meeting held on November 20, 2025.

In the first quarter of 2025, we incurred $2,958 in costs related to a proxy contest in connection with the Company’s 2024 annual shareholders meeting held on November 21, 2024, as well as approximately $3,300 in connection with our settlement of wage-related disputes.

The increase in payroll and related expense as a percentage of total revenue in the first quarter of 2026 as compared to the same period in the prior year resulted primarily from severance costs related to a corporate restructuring.

The decreases in incentive compensation expense as a percentage of total revenue in the second quarter and the first six months of 2026 as compared to the same periods in the prior year resulted primarily from lower performance against financial objectives in 2026 as compared to the same periods in the prior year.

The decreases in professional fees as a percentage of total revenue in the second quarter and the first six months of 2026 as compared to the same periods in the prior year resulted primarily from lower proxy contest expenses and lower costs associated with the Company’s strategic initiatives.

In the second quarter and first six months of 2026, we incurred $2,633 and $4,072, respectively, in costs related to a proxy contest in connection with the Company’s 2025 annual shareholders meeting held on November 20, 2025.

In the second quarter of 2025 and first six months of 2025, we incurred $5,263 and $8,220, respectively, in costs related to a proxy contest in connection with the Company’s 2024 annual shareholders meeting held on November 21, 2024.

Costs associated with the Company’s strategic initiatives decreased by approximately $4,000 and $3,400, respectively, in the second quarter and first six months of 2026 as compared to the same periods in the prior year.

Additionally, in the first six months of 2025, we incurred approximately $3,300 in connection with our settlement of wage-related disputes.

The increase in payroll and related expense as a percentage of total revenue in the second quarter and the first six months of 2026 as compared to the same periods in the prior year resulted primarily from severance costs related to a corporate restructuring.

Impairment and Store Closing Costs

During the first quarter of 2026, we did not incur any impairment charges.

During the first quarter of 2026, one Cracker Barrel store and fourteen MSBC locations were closed because of poor operating performance, resulting in closing costs of $3,473 which included lease termination costs.

During the first quarter of 2025, we recorded impairment charges of $700 as a result of the deterioration in operating performance of two MSBC locations.

No stores were closed in the first quarter of 2025.

During the second quarter and first six months of 2026, impairment charges of $418 were recorded for three Maple Street Biscuit Company (“MSBC”) locations as a result of the Company’s decision to not extend the leases for these locations.

No stores were closed during the second quarter of 2026.

During the first six months of 2026, one Cracker Barrel store and fourteen MSBC locations were closed because of poor operating performance, resulting in closing costs of $3,473 which included lease termination costs.

During the second quarter and first six months of 2025, we recorded impairment charges of $2,163 and $2,863, respectively, as a result of the deterioration in operating performance of three MSBC locations and two Cracker Barrel locations.

One Cracker Barrel store was closed in the second quarter and first six months of 2025 resulting in closing costs of $288.

Operating Income (Loss)

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Quarter Ended

Six Months Ended

Operating income (loss)

In the first quarter of 2026, the decrease in operating income (loss) from the same period in the prior year was primarily attributable to the decrease in total revenue, higher advertising expenses, higher maintenance expenses and the costs associated with the biennial general managers conference partially offset by lower incentive compensation and lower professional fees.

In the second quarter and first six months of 2026, operating income (loss) decreased from the same periods in the prior year primarily due to the decreases in total revenue partially offset by lower cost of goods sold expenses, lower labor expenses, lower incentive compensation expense and lower professional fees.

Additionally, for the first six months of 2026, higher media advertising and higher maintenance expenses further contributed to the operating loss in 2026.

Interest Expense, Net

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Quarter Ended

Six Months Ended

Interest expense, net

The decrease in interest expense for the first quarter of 2026 as compared to the same period in the prior year resulted primarily from lower weighted average debt levels under our revolving credit facility partially offset by the interest related to the 2030 Notes.

Income Tax Benefit

The following table highlights the income tax benefit as a percentage of income (loss) before income taxes (“effective tax rate”) for the specified periods:

The decreases in interest expense for the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from lower weighted average debt levels under our revolving credit facility partially offset by the interest related to the 2030 Notes.

Provision for Income Taxes (Income Tax Benefit)

The following table highlights the provision for income taxes (income tax benefit) as a percentage of income (loss) before income taxes (“effective tax rate”) for the specified periods:

Quarter Ended

Six Months Ended

Effective tax rate

The increase in the effective tax rate in the first quarter of 2026 as compared to the same period in the prior year is primarily due to the disproportionate benefit of employment credits in relation to income (loss) before taxes in the prior year period.

The increases in the effective tax rate in the second quarter and first six months of 2026 as compared to the same periods in the prior year are primarily due to the impact of employment credits on losses before tax as compared to the same periods in the prior year periods.

1., also known as the One Big Beautiful Bill Act (the “OBBBA”), was enacted on July 4, 2025, with effective dates in 2025 through 2027.

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Key provisions include the permanent extension of several business tax benefits originally introduced under the 2017 Tax Cuts and Jobs Act.

The provisions effective for the first three months of 2026 did not have a significant impact on our financial position.

The provisions effective for the first six months of 2026 did not have a material impact on our financial position.

We will continue to assess the potential impacts on our financial position as additional guidance related to the OBBBA is released.

The Company records its interim income tax benefit using the discrete-period computation method, as of October 31, 2025 and November 01, 2024, as allowed under Accounting Standards Codification 740-240, Accounting for Income Taxes – Interim Reporting.

The Company records its interim income tax benefit using the discrete-period computation method, as of January 30, 2026 and January 31, 2025, as allowed under Accounting Standards Codification 740-240, Accounting for Income Taxes – Interim Reporting.

Use of the annualized effective tax rate (“AETR”) method would have resulted in an unreliable tax rate as small changes in the projected ordinary annual income would have resulted in significant changes in the AETR.

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Quarter Ended

Six Months Ended

Net income (loss)

The Company incurred a net loss in the first quarter of 2026 as compared to net income in the same period in the prior year primarily due to the decrease in operating income (loss) discussed above partially offset by a higher income tax benefit in the first quarter of 2026 as compared to the same period in the prior year as discussed above.

The decreases in net income in the second quarter and first six months of 2026 as compared to the same periods in the prior year resulted primarily from the decreases in operating income discussed above partially offset by a higher income tax benefit in the second quarter and first six months of 2026 as compared to the same periods in the prior year as discussed above.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under the 2025 Revolving Credit Facility.

Cash generated from operations, together with our borrowing capacity under the 2025 Revolving Credit Facility, were sufficient to finance all of our dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment obligations in the first three months of 2026.

We believe that cash on hand at October 31, 2025, along with cash expected to be generated from our operating activities and the borrowing capacity under our 2025 Revolving Credit Facility, will be sufficient to finance our continuing operations, our multi-year strategic plan, debt service, dividend payments, capital expenditures and working capital needs for the next twelve months and thereafter.

We believe that cash on hand at January 30, 2026, along with cash expected to be generated from our operating activities and the borrowing capacity under our 2025 Revolving Credit Facility, will be sufficient to finance our continuing operations, debt service, dividend payments, capital expenditures and working capital needs for the next twelve months and thereafter.

Our ability to draw on our 2025 Revolving Credit Facility is subject to the satisfaction of the provisions of the credit facility, as amended, and we believe we will be able to refinance our 2025 Revolving Credit Facility and other debt instruments prior to maturity.

Cash Used In Operations

Our operating activities used net cash of $53,430 for the first three months of 2026 as compared to $4,395 net cash used during the same period in the prior year.

This change was primarily driven by the operating loss in the first quarter of 2026 as well as the timing of payments for accounts payable and certain taxes and higher retail inventory.

Cash Generated From (Used In) Operations

Our operating activities used net cash of $2,169 for the first six months of 2026 as compared to $93,693 net cash provided during the same period in the prior year.

This change was primarily driven by the operating loss in the first six months of 2026 and the timing of payments for accounts payable.

Capital Expenditures

Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $34,165 for the first three months of 2026 as compared to $38,887 for the same period in the prior year.

Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and capital expenditures for strategic initiatives.

The decrease in capital expenditures in the first quarter of 2026 compared to the same period in the prior year resulted primarily from lower capital investments in existing stores.

Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $60,747 for the first six months of 2026 as compared to $76,986 for the same period in the prior year.

Our capital expenditures consisted primarily of capital investments for existing stores, capital expenditures for strategic initiatives and new store locations.

The decrease in capital expenditures in the first six months of 2026 compared to the same period in the prior year resulted primarily from lower capital investments in existing stores and reduced spending on strategic initiatives.

We currently expect capital expenditures to be approximately $105,000 to $115,000 in 2026.

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On May 16, 2025, the Company entered into a five-year $800,000 credit facility (the “2025 Credit Facility”).

The 2025 Credit Facility consists of a $550,000 revolving credit facility (the “2025 Revolving Credit Facility”), which includes a $25,000 swingline subfacility and a $75,000 letter of credit subfacility, and a $250,000 delayed draw term loan facility (the “Delayed Draw Term Facility”).

The Delayed Draw Term Facility was terminated on June 13, 2025 in connection with the Company’s issuance and sale of the 2030 Notes.

The 2025 Credit Facility also contains an option for the Company to increase the 2025 Credit Facility by $200,000.

At October 31, 2025, we had $65,000 of outstanding borrowings under the 2025 Revolving Credit Facility and $8,703 of standby letters of credit related to securing reserved claims under our workers’ compensation insurance, which reduce our borrowing availability under the 2025 Revolving Credit Facility.

At October 31, 2025, we had $476,297 in borrowing availability under our 2025 Revolving Credit Facility.

During the first three months of 2026, we borrowed $142,500 and repaid $77,500 under the 2025 Revolving Credit Facility.

Our 2025 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total leverage ratio and a minimum consolidated interest coverage ratio.

We were in compliance with the 2025 Revolving Credit Facility’s financial covenants at October 31, 2025.

We expect to be in compliance with the 2025 Credit Facility’s financial covenants for the term of the facility.

The 2025 Credit Facility also provides for an uncommitted accordion feature that allows the Company to increase the 2025 Revolving Credit Facility by up to $200,000, plus any additional amount that would not cause the Company to exceed a consolidated total leverage ratio of 3:50:1:00 (subject to securing additional commitments from existing lenders or new lending institutions).

The 2025 Credit Facility also provided for a $250,000 delayed draw term loan facility (the “Delayed Draw Term Facility”) which was terminated on June 13, 2025 in connection with the Company’s issuance and sale of the 2030 Notes.

At January 30, 2026, we had $45,500 of outstanding borrowings under the 2025 Revolving Credit Facility and $8,703 of standby letters of credit related to securing reserved claims under our workers’ compensation insurance, which reduce our borrowing availability under the 2025 Revolving Credit Facility.

At January 30, 2026, we had $495,797 in borrowing availability under our 2025 Revolving Credit Facility.

During the first six months of 2026, we borrowed $198,000 and repaid $152,500 under the 2025 Revolving Credit Facility.

Our 2025 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated senior secured leverage ratio and a minimum consolidated interest coverage ratio.

Under the 2025 Revolving Credit Facility, the maximum consolidated total leverage ratio financial covenant applies unless the Company elects the consolidated senior secured leverage ratio financial covenant in lieu of the consolidated total leverage ratio.

During the second quarter of 2026, the Company elected to implement the consolidated senior secured leverage ratio in accordance with the terms of the 2025 Revolving Credit Facility.

We were in compliance with the 2025 Revolving Credit Facility’s financial covenants at January 30, 2026.

We expect to be in compliance with the 2025 Revolving Credit Facility’s financial covenants for the term of the facility.

On June 13, 2025, we issued the 2030 Notes.

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notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, Cash Availability is at least $100,000, we may declare and pay cash dividends on shares of our common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.

During the first three months of 2026, we paid a regular dividend of $0.25 per share and declared a dividend of $0.25 per share that was subsequently paid on November 12, 2025, to shareholders of record on October 17, 2025.

In addition, in the second quarter of 2026, our Board of Directors approved a regular dividend payable on February 11, 2026 to shareholders of record as of January 16, 2026 of $0.25 per share.

During the first six months of 2026, we paid a regular dividend of $0.50 per share and declared a dividend of $0.25 per share that was subsequently paid on February 11, 2026, to shareholders of record on January 16, 2026.

In addition, in the third quarter of 2026, our Board of Directors approved a regular dividend payable on May 13, 2026 to shareholders of record as of April 10, 2026 of $0.25 per share.

Our criteria for share repurchases are that they be accretive to expected net income per share and are within the limits imposed by our debt commitments.

In the first quarter of 2026, our Board of Directors approved a share repurchase authorization to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $100,000.

We did not repurchase any shares of our common stock in the first quarter of 2026.

During the first three months of 2026, we issued 58,842 shares of our common stock resulting from the vesting of share-based compensation awards.

We did not repurchase any shares of our common stock in the first six months of 2026.

During the first six months of 2026, we issued 83,065 shares of our common stock resulting from the vesting of share-based compensation awards.

Related tax withholding payments on these share-based compensation awards resulted in a net use of cash of $1,934.

Litigation Settlement

In third quarter of 2026, the Company expects to receive and record approximately $47,400, net of legal fees, pursuant to a settlement agreement resolving interchange fee litigation.

Working Capital

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Like many other restaurant companies, we are able to, and often do, operate with negative working capital.

We had negative working capital of $288,285 at October 31, 2025 as compared to negative working capital of $312,491 at August 01, 2025.

The change in working capital at October 31, 2025 as compared to August 01, 2025 primarily resulted from lower incentive compensation accruals due to lower performance in the first quarter of 2026 and the payment of annual and long-term incentive bonuses, higher inventory levels which reflect our normal seasonal build to support our expected holiday sales and the timing of certain payments partially offset by the decrease in cash.

We had negative working capital of $297,266 at January 30, 2026 as compared to negative working capital of $312,491 at August 01, 2025.

The change in working capital at January 30, 2026 as compared to August 01, 2025 primarily resulted from lower accounts payable due to timing of payments and lower incentive compensation accruals due to lower performance in the first six months of 2026 partially offset by the decrease in cash and the increase in sales our gift cards during the holiday shopping season.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis