What changed in this filing

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Item 1. Financial Statements

2020-06-02 compared with 2020-02-25 · 162 added, 85 removed, 427 unchanged (37% of the section changed)

17 unchanged sentences

Accounts payable

Deferred revenue

Taxes withheld and accrued

Accrued employee compensation

Current operating lease liabilities

12 unchanged sentences

Common stock – 400,000,000 shares of $ 0.01 par value authorized;

23,943,248 shares issued and outstanding at January 31, 2020, and 24,049,240 shares issued and outstanding at August 2, 2019

23,693,981 shares issued and outstanding at May 1, 2020, and 24,049,240 shares issued and outstanding at August 2, 2019

Additional paid-in capital

6 unchanged sentences

CRACKER BARREL OLD COUNTRY STORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except share data)

Quarter Ended

Six Months Ended

Nine Months Ended

Total revenue

3 unchanged sentences

General and administrative expenses

Operating income

Interest expense

Income before income taxes

Provision for income taxes

Operating income (loss)

Interest expense, net

Income (loss) before income taxes

Provision for income taxes (income tax benefit)

Loss from unconsolidated subsidiary

Net income per share:

Net income (loss)

Net income (loss) per share:

Weighted average shares:

1 unchanged sentence

CRACKER BARREL OLD COUNTRY STORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited and in thousands)

Quarter Ended

Six Months Ended

Nine Months Ended

Net income (loss)

Other comprehensive loss before income tax benefit:

2 unchanged sentences

Other comprehensive loss, net of tax

Comprehensive income

Comprehensive income (loss)

See Notes to unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(Unaudited and in thousands, except share data)

For the Nine Month Period Ended May 1, 2020

Comprehensive

18 unchanged sentences

Balances at January 31, 2020

Comprehensive Loss:

Other comprehensive loss, net of tax

Total comprehensive loss

Cash dividends declared - $ 1.30 per share

Share-based compensation

Issuance of share-based compensation awards

Purchases and retirement of common stock

Balances at May 1, 2020

See Notes to unaudited Condensed Consolidated Financial Statements.

CRACKER BARREL OLD COUNTRY STORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited and in thousands, except share data)

For the Nine Month Period Ended May 3, 2019

Comprehensive

2 unchanged sentences

Balances at August 3, 2018

Comprehensive Income (Loss):

Comprehensive Income:

Other comprehensive income, net of tax

11 unchanged sentences

Balances at February 1, 2019

Comprehensive Income (Loss):

Other comprehensive income (loss), net of tax

Total comprehensive income (loss)

Cash dividends declared - $ 1.25 per share

Share-based compensation

Issuance of share-based compensation awards, net of shares withheld for employee taxes

Balances at May 3, 2019

See Notes to unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(Unaudited and in thousands)

Six Months Ended

Nine Months Ended

Cash flows from operating activities:

Net income (loss)

Net loss from unconsolidated subsidiary

7 unchanged sentences

Accounts payable

Accrued employee compensation

Other current liabilities

Long-term operating lease liabilities

Deferred income taxes

Other long-term assets and liabilities

14 unchanged sentences

Dividends on common stock

Net cash used in financing activities

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

23 unchanged sentences

References to a year in these Notes to Condensed Consolidated Financial Statements are to the Company’s fiscal year unless otherwise noted.

COVID-19 Impact

In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) to be a pandemic.

In an effort to contain and mitigate the spread of COVID-19, federal, state and local governmental authorities have imposed unprecedented restrictions on travel, group gatherings and non-essential activities, such as “social distancing” guidance, shelter-in-place orders and limitations on or full prohibitions of dine-in services.

In response to the business disruption caused by the COVID-19 pandemic, the Company has taken the following actions.

Operating Initiatives

In response to the COVID-19 pandemic and the orders and guidance from U.S.

federal and applicable state and local governmental authorities, in March 2020, the Company temporarily closed the dining rooms in all of its restaurants and operated with pick-up or delivery only.

As part of the Company’s efforts to support an off-premise-only business model, the Company implemented various changes to its Cracker Barrel offerings, including a limited menu and multi-serving takeout Family Meal Baskets, the expansion of third-party delivery services and the implementation of various operating model changes, including contactless curbside delivery.

As of the end of March 2020, all of the Company’s restaurant operations were limited to pick-up and delivery only with no dine-in service.

In late April 2020, certain state and municipal authorities began to remove or modify existing restrictions on dine-in restaurant operations in certain jurisdictions, and the Company has been able to resume dine-in services at a limited number of its restaurants;

however, the Company’s dine-in services have been and continue to be limited to occupancy levels well below capacity, and some are yet to open at all for dine-in service.

The Company is taking a cautious approach to reopening dining rooms and is instituting operational protocols to comply with applicable regulatory requirements and to monitor developing health authority recommendations in order to protect the health and foster the confidence of employees and guests in these communities.

The adverse impacts of the COVID-19 pandemic resulted in the Company testing its restaurant long-lived assets for recoverability.

As a result of this analysis, the Company recorded impairment charges of $ 18,336 due to the expected deterioration in operating performance of certain Cracker Barrel stores.

Expense Reductions

The Company has made significant reductions in operating expenses to reflect reduced operations and sales levels as well as eliminating non-essential spending where feasible.

The Company furloughed employees and eliminated a significant number of positions at all levels of the Company, both at the corporate headquarters and in the field.

Severance expenses of $ 3,122 related to the elimination of 450 positions were recorded in the third quarter of 2020.

The Company also implemented pay reductions for the remainder of the fiscal year for corporate officers and reduced cash retainers payable to the Company’s Board of Directors.

Additionally, the Company has adapted its labor model, instituted inventory management measures and negotiated revised terms with landlords and vendors.

Liquidity Initiatives

As a precautionary measure and in order to increase the Company’s cash position and provide financial flexibility given the uncertainty in the market caused by the COVID-19 pandemic, the Company borrowed $ 415,000 under the Company’s 2019 Revolving Credit Facility (as defined herein), leaving approximately $ 3,271 in borrowing availability.

To further preserve available cash, the payment of the dividend that was declared on March 3, 2020 was deferred until September 2, 2020 and the Company has suspended all further dividend payments until further notice.

The Company has also temporarily suspended all future share repurchases under its previously announced $ 25,000 share repurchase program.

In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, the Company has decided not to invest further resources or otherwise provide additional funding to PBS HoldCo, LLC (see Note 3, “Equity Investment” for further information regarding the Company’s strategic relationship with PBS HoldCo, LLC).

The Company continues to explore additional measures to enhance liquidity as the COVID-19 pandemic and related events develop.

Additionally, on March 27, 2020, P.L.

116-136, the Coronavirus Aid, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, contains several provisions offering liquidity to businesses.

The Company has benefited and will continue to benefit from two of these provisions, including recovering a portion of qualifying retention pay and health expenses paid to furloughed employees, and deferring a portion of employment taxes until calendar 2021 and calendar 2022.

Recent Accounting Pronouncements Adopted

28 unchanged sentences

The adoption of this accounting guidance in the first quarter of 2020 had no impact on the Company’s consolidated financial position or results of operations.

In March 2020, the FASB issued optional accounting guidance in order to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by this accounting guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 if certain criteria are met.

The Company has certain contracts and hedging relationships which reference LIBOR for which the Company has elected to use the optional accounting guidance.

The Company elected to apply this accounting guidance for contract modifications prospectively as of February 1, 2020.

Additionally, the Company elected to apply this accounting guidance to eligible hedging relationships existing as of February 1, 2020 and to any new hedging relationships entered into during the effective period of the accounting guidance.

The adoption of this accounting guidance in the third quarter of 2020 had no impact on the Company’s consolidated financial position or results of operations.

Recent Accounting Pronouncements Not Adopted

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Goodwill and other intangibles will be evaluated for impairment annually during each fourth quarter period and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value.

Effective October 10, 2019, the Company acquired 100 % ownership of Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept, for a purchase price of $ 36,000 , of which $ 32,000 was paid to the sellers in cash with the remaining $ 4,000 being held as security for the satisfaction of indemnification obligations.

The unused portion held as security, if any, will be paid in two installments with $ 1,500 due to the principal seller on the one-year anniversary of closing and the remaining amount due to the sellers on the two-year anniversary of closing.

The Company believes that this investment supports its strategic initiative to extend the brand by becoming a market leader in the breakfast and lunch-focused fast casual dining segment of the restaurant industry and by providing a platform for growth.

At January 31, 2020, MSBC had 28 company-owned and five franchised fast casual locations across seven states.

At May 1, 2020, MSBC had 28 company-owned and six franchised fast casual locations across seven states.

The goodwill of $ 6,364 arising from the acquisition consists largely of the Company’s determination of the value of MSBC’s future free cash flows less the value of the identifiable tangible and intangible assets and liabilities.

None of the goodwill recognized is expected to be deductible for income tax purposes.

Acquisition-related costs of $ 1,269 were recorded in general and administrative expenses in the condensed consolidated statement of income in the quarter ended November 1, 2019.

Acquisition-related costs of $ 1,269 were recorded in the general and administrative expenses line in the Condensed Consolidated Statement of Income (Loss) in the quarter ended November 1, 2019.

The following table summarizes the consideration paid for MSBC and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

15 unchanged sentences

Effective July 18, 2019, the Company purchased approximately 58.6 % of the economic ownership interest, and approximately 49.7 % of the voting interest, in PBS HoldCo, LLC (“PBS HC”).

PBS HC and its subsidiaries develop, own, and operate food, beverage and entertainment establishments under the name of Punch Bowl Social (“PBS”).

Prior to suspending all restaurant operations in response to the COVID-19 pandemic as further detailed below, PBS HC and its subsidiaries developed, owned, and operated food, beverage and entertainment establishments under the name of Punch Bowl Social (“PBS”).

The Company does not have the power to unilaterally direct any activities of PBS HC, a variable interest entity, that most significantly impact PBS HC’s economic performance.

As a result, the Company’s investment in PBS HC, for which it has the ability to exercise significant influence, but not control and is not the primary beneficiary, is accounted for using the equity method.

Accordingly, the Company recognizes its proportionate share of the reported earnings or losses of PBS HC adjusted for basis differences on its consolidated statements of income and as an adjustment to the Company’s investment in unconsolidated subsidiary on the consolidated balance sheet.

The Company will assess the impairment of its equity investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

The Company’s investment in PBS HC was valued at $ 79,536 and $ 89,100 , respectively at January 31, 2020 and August 2, 2019, and is recorded on the Company’s condensed consolidated balance sheet as investment in unconsolidated subsidiary.

As a result, the Company’s investment in PBS HC, for which it has the ability to exercise significant influence, but not control and is not the primary beneficiary, was accounted for using the equity method.

Accordingly, the Company recognized its proportionate share of the reported earnings or losses of PBS HC adjusted for basis differences on its consolidated statements of income (loss) and as an adjustment to the Company’s investment in unconsolidated subsidiary on the consolidated balance sheet.

The Company’s investment in PBS HC was valued at $ 89,100 at August 2, 2019, and was recorded on the Company’s Condensed Consolidated Balance Sheet as investment in unconsolidated subsidiary.

Additionally, as part of the purchase transaction, the Company purchased promissory notes of PBS HC in principal amount of $ 6,900 along with the related interest on the notes and provided additional funding of $ 8,000 to PBS HC in exchange for a promissory note.

As part of the purchase agreement with PBS HC, the Company agreed to fund PBS HC up to $ 51,000 through calendar 2020, of which the Company has funded $ 45,500 and $ 12,500 , respectively, as of January 31, 2020 and August 2, 2019.

The related promissory notes are included in other assets on the condensed consolidated balance sheet.

As part of the purchase agreement with PBS HC, the Company agreed to fund PBS HC up to $ 51,000 through calendar 2020, of which the Company had funded $ 48,000 and $ 12,500 , respectively, as of May 1, 2020 and August 2, 2019.

The related promissory notes were included in the other assets line on the Condensed Consolidated Balance Sheet.

The Company’s exposure to risk of loss in PBS HC is generally limited to its investment in the ownership interest and its receivable related to the promissory notes.

The Company assesses the impairment of its equity investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

As a result of the COVID-19 pandemic, PBS HC’s wholly-owned subsidiary, in March 2020, PBS BrandCo, LLC (“Brandco”) suspended all operations at each of its 19 locations and laid off substantially all restaurant and corporate employees.

On March 20, 2020, the primary lender under Brandco’s secured credit facility provided notice of the lender’s intention to foreclose on its collateral interest in all equity and/or assets of Brandco unless the Company repaid or unconditionally guaranteed the indebtedness.

In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, and in light of the substantial uncertainties surrounding the PBS business coming out of the COVID-19 pandemic, the Company decided not to invest further resources to prevent foreclosure or otherwise provide additional capital to PBS HC.

In the third quarter of 2020, the Company recorded a loss of $ 132,878 , which represented its equity investment in PBS HC and its receivable related to the principal and accumulated interest amounts related to the promissory notes.

This loss was recorded in the net loss in unconsolidated subsidiary line on the Condensed Consolidated Statement of Income (Loss) in the third quarter of 2020.

Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis at January 31, 2020 were as follows:

The Company’s assets and liabilities measured at fair value on a recurring basis at May 1, 2020 were as follows:

Cash equivalents*

18 unchanged sentences

The fair values of the Company’s accounts receivable and accounts payable approximate their carrying amounts because of their short duration.

The fair value of the Company’s variable rate debt, based on quoted market prices, which are considered Level 1 inputs, approximates its carrying amount at January 31, 2020 and August 2, 2019.

The fair value of the Company’s variable rate debt, based on quoted market prices, which are considered Level 1 inputs, approximates its carrying amount at May 1, 2020 and August 2, 2019.

Assets Measured at Fair Value on a Nonrecurring Basis

8 unchanged sentences

As noted in Note 2 above, the amounts recorded for these assets are estimated.

See Note 2 for further information in regards to the determination of goodwill.

See Note 2 for further information in regard to the determination of goodwill.

The fair value of the property and equipment was determined by using the cost approach.

3 unchanged sentences

Assumptions used under this approach included an approximate 2.5 % royalty rate and a discount rate of 12.0 %.

During the quarter ended May 1, 2020, five leased Cracker Barrel stores were determined to be impaired.

Fair value of the leased stores was determined by using a cash flow model.

Assumptions used in the cash flow model included projected annual revenue growth rates and projected cash flows, which can be affected by economic conditions and management’s expectations.

The Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs, and thus, are considered Level 3 inputs.

Based on its analysis, the Company recorded an estimated impairment charge of $ 18,336 , which is included in the impairment line on the Condensed Consolidated Statement of Income (Loss).

Inventories were comprised of the following at:

January 31, 2020

August 2, 2019

1 unchanged sentence

The 2019 Revolving Credit Facility also contains an option to increase the revolving credit facility by $ 300,000 .

At January 31, 2020 and August 2, 2019, the Company had $ 460,000 and $ 400,000 , respectively, of outstanding borrowings under the 2019 Revolving Credit Facility.

At January 31, 2020, the Company had $ 6,879 of standby letters of credit, which reduce the Company’s borrowing availability under the 2019 Revolving Credit Facility (see Note 13 for more information on the Company’s standby letters of credit).

At January 31, 2020, the Company had $ 483,121 in borrowing availability under the 2019 Revolving Credit Facility.

Subsequent to May 1, 2020, we have drawn an additional $ 39,400 under this option.

At May 1, 2020 and August 2, 2019, the Company had $ 940,000 and $ 400,000 , respectively, of outstanding borrowings under the 2019 Revolving Credit Facility.

At May 1, 2020, the Company had $ 6,729 of standby letters of credit, which reduce the Company’s borrowing availability under the 2019 Revolving Credit Facility (see Note 13 for more information on the Company’s standby letters of credit).

At May 1, 2020, the Company had $ 3,271 in borrowing availability under the 2019 Revolving Credit Facility.

In accordance with the 2019 Revolving Credit Facility, outstanding borrowings bear interest, at the Company’s election, either at LIBOR or prime plus a percentage point spread based on certain specified financial ratios under the 2019 Revolving Credit Facility.

At January 31, 2020, $ 400,000 of the Company’s outstanding borrowings were swapped at a weighted average interest rate of 3.61 % (see Note 7 for information on the Company’s interest rate swaps).

At January 31, 2020, the weighted average interest rate on the remaining $ 60,000 of the Company’s outstanding borrowings was 3.13 %.

At May 1, 2020, $ 400,000 of the Company’s outstanding borrowings were swapped at a weighted average interest rate of 3.61 % (see Note 7 for information on the Company’s interest rate swaps).

At May 1, 2020, the weighted average interest rate on the remaining $ 540,000 of the Company’s outstanding borrowings was 2.22 %.

The 2019 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total leverage ratio and a minimum consolidated interest coverage ratio.

At January 31, 2020, the Company was in compliance with all financial covenants.

At May 1, 2020, the Company was in compliance with all financial covenants.

As a result of the uncertainty regarding the impact of the COVID-19 pandemic on the Company’s financial position and results of operations, the Company has obtained a waiver for the financial covenants for the fourth quarter of 2020 and the first and second quarters of 2021.

The 2019 Revolving Credit Facility also imposes restrictions on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase.

7 unchanged sentences

The interest rates on the portion of the Company’s outstanding debt covered by its interest rate swaps are fixed at the rates in the table below plus the Company’s credit spread.

The Company’s credit spread at January 31, 2020 was 1.25 %.

The Company’s credit spread at May 1, 2020 was 1.25 %.

All of the Company’s interest rate swaps are accounted for as cash flow hedges.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings and is presented in the same statement of income line item as the earnings effect of the hedged item.

Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness, if any, will be recognized currently in earnings in the same statement of income line item as the earnings effect of the hedged item.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings and is presented in the same statement of income (loss) line item as the earnings effect of the hedged item.

Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness, if any, will be recognized currently in earnings in the same statement of income (loss) line item as the earnings effect of the hedged item.

The Company does not hold or use derivative instruments for trading purposes.

4 unchanged sentences

If, on a net basis, the Company owes the counterparty, the Company regards its credit exposure to the counterparty as being zero.

A summary of the Company’s interest rate swaps at January 31, 2020 is as follows:

A summary of the Company’s interest rate swaps at May 1, 2020 is as follows:

Effective Date

11 unchanged sentences

August 7, 2019

The estimated fair value of the Company’s derivative instruments as of January 31, 2020 and August 2, 2019 were as follows:

The estimated fair value of the Company’s derivative instruments as of May 1, 2020 and August 2, 2019 were as follows:

Balance Sheet Location

January 31, 2020

August 2, 2019

2 unchanged sentences

Total liabilities

** These interest rate swap liabilities are recorded gross at both January 31, 2020 and August 2, 2019 since there were no offsetting assets under the Company’s master netting agreements.

The estimated fair value of the Company’s interest rate swap liabilities incorporate the Company’s non-performance risk (see Note 4).

The adjustment related to the Company’s non-performance risk at January 31, 2020 and August 2, 2019 resulted in reductions of $ 358 and $ 399 , respectively, in the fair value of the interest rate swap liabilities.

** These interest rate swap liabilities are recorded gross at both May 1, 2020 and August 2, 2019 since there were no offsetting assets under the Company’s master netting agreements.

The estimated fair value of the Company’s interest rate swap liabilities incorporates the Company’s non-performance risk (see Note 4).

The adjustment related to the Company’s non-performance risk at May 1, 2020 and August 2, 2019 resulted in reductions of $ 1,547 and $ 399 , respectively, in the fair value of the interest rate swap liabilities.

The offset to the interest rate swap liabilities are recorded in accumulated other comprehensive loss (“AOCL”), net of the deferred tax asset, and will be reclassified into earnings over the term of the underlying debt.

As of January 31, 2020, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $ 1,721 .

Cash flows related to the interest rate swaps are included in interest expense in the Condensed Consolidated Statements of Income and in operating activities in the Condensed Consolidated Statements of Cash Flows.

The following table summarizes the pre-tax effects of the Company’s derivative instruments on AOCL for the six months ended January 31, 2020 and the year ended August 2, 2019:

As of May 1, 2020, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $ 5,385 .

Cash flows related to the interest rate swaps are included in the interest expense line in the Condensed Consolidated Statements of Income (Loss) and in operating activities in the Condensed Consolidated Statements of Cash Flows.

The following table summarizes the pre-tax effects of the Company’s derivative instruments on AOCL for the nine months ended May 1, 2020 and the year ended August 2, 2019:

Amount of Loss Recognized

AOCL on Derivatives

Six Months Ended

January 31, 2020

in AOCL on Derivatives

Nine Months Ended

August 2, 2019

1 unchanged sentence

Interest rate swaps

The following table summarizes the pre-tax effects of the Company’s derivative instruments on income for the quarters and six-month periods ended January 31, 2020 and February 1, 2019:

The following table summarizes the pre-tax effects of the Company’s derivative instruments on income for the quarters and nine-month periods ended May 1, 2020 and May 3, 2019:

Location of Loss

5 unchanged sentences

Quarter Ended

Six Months Ended

Nine Months Ended

Cash flow hedges:

1 unchanged sentence

Interest expense

The following table summarizes the amounts reclassified out of AOCL related to the Company’s interest rate swaps for the quarter and six months ended January 31, 2020:

The following table summarizes the amounts reclassified out of AOCL related to the Company’s interest rate swaps for the quarter and nine months ended May 1, 2020:

Amount Reclassified from AOCL

1 unchanged sentence

Quarter Ended

Six Months Ended

Nine Months Ended

Condensed Consolidated

3 unchanged sentences

Interest expense

Provision for income taxes

No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings for the six months ended January 31, 2020.

The following table summarizes the changes in AOCL, net of tax, related to the Company’s interest rate swaps for the six months ended January 31, 2020:

Provision for income taxes (income tax benefit)

No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings for the nine months ended May 1, 2020.

The following table summarizes the changes in AOCL, net of tax, related to the Company’s interest rate swaps for the nine months ended May 1, 2020:

Changes in AOCL

3 unchanged sentences

Other comprehensive loss, net of tax

AOCL balance at January 31, 2020

AOCL balance at May 1, 2020

Historically, the net income of the Company has been lower in the first and third quarters and higher in the second and fourth quarters.

4 unchanged sentences

Therefore, the results of operations for any interim period cannot be considered indicative of the operating results for an entire year.

Currently, the Company is not able to predict the impact that the COVID-19 pandemic may have on these historical consumer demand patterns or, as a result, on the seasonality of its business generally.

Segment Information

6 unchanged sentences

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest, retail customer or other customer.

The Company’s policy is to present sales in the Condensed Consolidated Statements of Income on a net presentation basis after deducting sales tax.

The Company’s policy is to present sales in the Condensed Consolidated Statements of Income (Loss) on a net presentation basis after deducting sales tax.

Disaggregation of revenue

1 unchanged sentence

Quarter Ended

Six Months Ended

Nine Months Ended

Total revenue

11 unchanged sentences

A certain number of gift cards will not be fully redeemed.

Management estimates unredeemed balances and recognizes gift card breakage revenue for these amounts in the Company's Condensed Consolidated Statements of Income over the expected redemption period.

Management estimates unredeemed balances and recognizes gift card breakage revenue for these amounts in the Company’s Condensed Consolidated Statements of Income (Loss) over the expected redemption period.

Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines that there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction.

1 unchanged sentence

The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage over the period of estimated redemption.

For the quarter and six months ended January 31, 2020, gift card breakage was $ 2,422 and $ 3,660 .

For the quarter and six months ended February 1, 2019, gift card breakage was $ 2,451 and $ 3,656 .

Deferred revenue related to the Company’s gift cards was $ 106,959 and $ 80,073 , respectively, at January 31, 2020 and August 2, 2019.

Revenue recognized in the Condensed Consolidated Statements of Income for the six months ended January 31, 2020 and February 1, 2019, respectively, for the redemption of gift cards which were included in the deferred revenue balance at the beginning of the fiscal year was $ 29,751 and $ 52,696 .

For the quarter and nine months ended May 1, 2020, gift card breakage was $ 1,574 and $ 5,234 .

For the quarter and nine months ended May 3, 2019, gift card breakage was $ 1,699 and $ 5,355 .

Deferred revenue related to the Company’s gift cards was $ 95,829 and $ 80,073 , respectively, at May 1, 2020 and August 2, 2019.

Revenue recognized in the Condensed Consolidated Statements of Income (Loss) for the nine months ended May 1, 2020 and May 3 , 2019, respectively, for the redemption of gift cards which were included in the deferred revenue balance at the beginning of the fiscal year was $ 33,937 and $ 36,815 .

The Company has ground leases for its leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases.

8 unchanged sentences

The leases for these stores include specified renewal options for up to 20 additional years and certain financial covenants which include maintenance of a minimum fixed charge coverage for the leased stores.

At January 31, 2020 and August 2, 2019, the Company was in compliance with these covenants.

At May 1, 2020 and August 2, 2019, the Company was in compliance with these covenants.

To determine whether a contract is or contains a lease, the Company determines at contract inception whether it contains the right to control the use of an identified asset for a period of time in exchange for consideration.

7 unchanged sentences

The Company has entered into agreements for real estate leases that are not recorded as right-of-use assets or lease liabilities as we have not yet taken possession.

These leases are expected to commence in the in 2021 with undiscounted future payments of $ 15,900 .

These leases are expected to commence in 2021 with undiscounted future payments of $ 15,898 .

As further discussed in Note 1 under the lease discussion in the “Recent Accounting Standards Adopted” section, the Company has elected to not separate lease and non-lease components.

3 unchanged sentences

Assumptions used in determining the Company’s incremental borrowing rate include the Company’s implied credit rating and an estimate of secured borrowing rates based on comparable market data.

The following table summarizes the components of lease cost for operating leases for the quarter and six months ended January 31, 2020:

The following table summarizes the components of lease cost for operating leases for the quarter and nine months ended May 1, 2020:

Quarter Ended

January 31, 2020

Six Months Ended

January 31, 2020

Nine Months Ended

Operating lease cost

2 unchanged sentences

Total lease cost

The following table summarizes supplemental cash flow information and non-cash activity related to the Company’s operating leases for the quarter and six months ended January 31, 2020:

The following table summarizes supplemental cash flow information and non-cash activity related to the Company’s operating leases for the quarter and nine months ended May 1, 2020:

Quarter Ended

January 31, 2020

Six Months Ended

January 31, 2020

Nine Months Ended

Operating cash flow information:

4 unchanged sentences

Lease modifications removing right-of-use assets

The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of January 31, 2020:

The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of May 1, 2020:

Weighted-average remaining lease term

Weighted-average discount rate

The following table summarizes the maturities of undiscounted cash flows reconciled to the total lease liability as of January 31, 2020:

The following table summarizes the maturities of undiscounted cash flows reconciled to the total lease liability as of May 1, 2020:

Remainder of 2020

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Quarter Ended

Six Months Ended

Net income per share numerator

Net income per share denominator:

Nine Months Ended

Net income (loss) per share numerator

Net income (loss) per share denominator:

Weighted average shares

6 unchanged sentences

Related to its workers’ compensation insurance coverage, the Company is contingently liable pursuant to standby letters of credit as credit guarantees to certain insurers.

As of January 31, 2020, the Company had $ 6,879 of standby letters of credit related to securing reserved claims under workers’ compensation insurance.

As of May 1, 2020, the Company had $ 6,729 of standby letters of credit related to securing reserved claims under workers’ compensation insurance.

All standby letters of credit are renewable annually and reduce the Company’s borrowing availability under its 2019 Revolving Credit Facility (see Note 6).

At January 31, 2020, the Company is secondarily liable for lease payments associated with two properties occupied by a third party.

The Company is not aware of any non-performance under these lease arrangements that would result in the Company having to perform in accordance with the terms of these guarantees;

and therefore, no provision has been recorded in the Condensed Consolidated Balance Sheets for amounts to be paid in case of non-performance by the primary obligor under such lease arrangements.

At May 1, 2020, the Company is secondarily liable for lease payments associated with two properties occupied by a third party.

Prior to the third quarter of 2020, the Company was not aware of any non-performance under these lease arrangements that would result in the Company having to perform in accordance with the terms of these guarantees;

and therefore, no provision had been recorded in the Condensed Consolidated Balance Sheets for amounts to be paid in case of non-performance by the primary obligor under such lease arrangements.

During the third quarter of 2020, the Company received notice regarding non-performance by the primary obligor under these lease arrangements.

At May 1, 2020, the Company has recorded a provision of $ 324 in the Condensed Consolidated Balance Sheet for amounts to be paid as of result of non-performance by the primary obligor.

The Company enters into certain indemnification agreements in favor of third parties in the ordinary course of business.

The Company believes that the probability of incurring an actual liability under such indemnification agreements is sufficiently remote that no such liability has been recorded in the Condensed Consolidated Balance Sheet as of January 31, 2020.

On July 31, 2000, the Company entered into a sale-leaseback transaction involving 65 of its owned Cracker Barrel stores.

In 2020, the Company entered into an agreement to purchase the properties from the landlord for $ 200,835 .

In connection with the purchase, the Company made an earnest money deposit of $ 6,000 which is included in the prepaid expenses and other current assets line on the Condensed Consolidated Balance Sheet as of May 1, 2020.

The Company’s intent is to enter into an agreement in the fourth quarter of 2020 to assign its right of title and interest as purchaser to another party.

The closing on the purchase of the property is subject to customary closing conditions and is currently scheduled to occur on or before July 29, 2020, at which time the existing leaseback will terminate, and new lease agreements will be entered with the assigned party.

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 1. Financial Statements