CRACKER BARREL OLD COUNTRY STORE, INC 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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® (“Cracker Barrel”) concept. At May 1, 2020, we operated 664 Cracker Barrel stores in 45 states. Additionally, effective October 10, 2019, we acquired Maple Street Biscuit Company (“MSBC”). As of May 1, 2020, MSBC had 28 company-owned and six franchised fast casual locations across seven states. As of May 1, 2020, we are in the process of converting our six former Holler & Dash Biscuit House TM locations (“Holler & Dash”) into MSBC locations. Our Holler & Dash locations operate in the same states as MSBC. 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). References to years in MD&A are to our fiscal year unless otherwise noted. MD&A provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. MD&A should be read in conjunction with the (i) condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and (ii) audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 2, 2019 (the “2019 Form 10-K”). Except for specific historical information, many of the matters discussed in this report may express or imply projections of items such as revenues or expenditures, estimated capital expenditures, compliance with debt covenants, plans and objectives for future operations, inventory shrinkage, growth or initiatives, expected future economic performance or the expected outcome or impact of pending or threatened litigation. These and similar statements regarding events or results which we expect will or may occur in the future are forward-looking statements that, by their nature, involve risks, uncertainties and other factors which may cause our actual results and performance to differ materially from those expressed or implied by such statements. All forward-looking information 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 risks, uncertainties and other 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,” “should,” “projects,” “forecasts” or “continue” (or the negative or other derivatives of each of these terms) or similar terminology. We believe the assumptions underlying any forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in or implied by the forward-looking statements. In addition to the risks of ordinary business operations, and those discussed or described in this report or in information incorporated by reference into this report, factors and risks that may result in actual results differing from this forward-looking information include, but are not limited to, those contained in Part I, Item 1A of the 2019 Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as the factors described under “Critical Accounting Estimates” on pages 36-39 of this report or, from time to time, in our filings with the Securities and Exchange Commission (“SEC”), press releases and other communications. Readers are cautioned not to place undue reliance on forward-looking statements made in this report because the statements speak only as of the report’s date. Except as may be required by law, we have no obligation or intention to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. 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. 23 Index Overview In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, have imposed unprecedented restrictions on travel, group gatherings and non-essential activities, including orders and guidance issued by U.S. federal, state and local governmental authorities, such as “social distancing” guidance and shelter-in-place orders and limitations on or full prohibitions of dine-in services. There have also been significant business closures and substantial reduction in economic activity in the United States as a result of the COVID-19 pandemic. The impacts of the COVID-19 pandemic have had a significant negative impact on our results of operations and cash flows for the third quarter of 2020. 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, we temporarily closed the dining rooms in all our restaurants and operated with pick-up or delivery only. As part of our efforts to support an off-premise-only business model, we implemented various changes to our 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. 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 we have been able to resume dine-in services at a limited number of our restaurants; however, our dine-in services have been and will continue to be limited to occupancy levels well below capacity, and some are yet to open at all. In addition, both our off-premise and resumed dine-in operations are being conducted under additional health and safety procedures and practices that are intended to ensure the safety and comfort of our employees and guests, and these additional measures have had and will continue to have adverse effects on our operating costs. As of May 20, 2020, 356 of our restaurants (including two Holler & Dash locations that have reopened as MSBC locations as of May 20, 2020,) have re-opened on a restricted basis with the remaining 338 open for pick-up or delivery only. We have taken a number of actions to preserve liquidity during the COVID-19 pandemic. In mid-March 2020, we borrowed the remaining available amount under our 2019 Revolving Credit Facility so that as of May 1, 2020 a total of approximately $946,729 (including $6,729 of standby letters of credit) was outstanding under our 2019 Revolving Credit Facility. In May 2020, we borrowed an additional $39,400 under an accordion feature of our 2019 Revolving Credit Facility. In addition, we deferred payment of the dividend that was declared on March 3, 2020, which was scheduled for May 5, 2020 to shareholders of record on April 17, 2020, until a later payment date of September 2, 2020 to shareholders of record on August 14, 2020, and we suspended all further dividend payments under our historical dividend program until further notice. We also temporarily suspended all future share repurchases under our previously announced $25,000 share repurchase program. Depending on the duration of the COVID-19 pandemic and the associated business interruptions, we may continue to seek other sources of liquidity and other ways of preserving liquidity. No assurance can be made that sources of additional liquidity will be readily available or that we will be successful in obtaining additional liquidity or preserving liquidity. Further, no assurance can be made that sources of additional liquidity will be available on terms that are favorable to us. To further preserve available cash during the COVID-19 pandemic, we have modified work hours, furloughed employees, eliminated positions at all levels of the Company, and reduced compensation payable to our corporate officers and cash retainers payable to our Board of Directors. As of May 1, 2020, we have incurred severance expenses of $3,122 related to the elimination of 450 positions. We have also instituted inventory management measures, negotiated and continue to negotiate revised payment terms with our landlords and vendors, and undertaken other cost saving measures throughout our operations, which have resulted in certain cost savings and benefits and deferral of various payables. We may continue to initiate additional cost saving measures if the COVID-19 pandemic continues. The COVID-19 pandemic has also adversely affected our ability to open new restaurants and remodel existing restaurants. Due to the uncertainty in the economy and to preserve liquidity, we have paused substantially all construction of new restaurants and certain capital expenditures at existing restaurants. 24 Index 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. We have 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. Operations Strategy Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage that strength. We remain focused on our 2020 priorities, such as accelerating our off-premise business, introducing craveable signature food, and improving the employee and guest experience. Due to the impacts of the COVID-19 pandemic, we have added additional 2020 priorities including the following: ● Instituting operational protocols to comply with applicable regulatory requirements to protect the health and safety of our employees and guests: ● Implementing various strategies to support the recovery of our business as dining rooms reopen and as traffic recovers; and ● Ensuring we maintain sufficient liquidity to manage through this uncertain environment. Key Performance Indicators Management uses a number of key performance measures to evaluate our operational and financial performance, including the following: ● Comparable store restaurant sales consist of restaurant sales of stores open at least six full quarters at the beginning of the year and are measured on comparable calendar weeks. This measure excludes the impact of new store openings. This measure also excludes sales related to MSBC since MSBC was acquired by the Company in the first quarter of 2020. Comparable store restaurant sales are expressed as a percentage of an increase or decrease in restaurant sales versus the same period in the prior year. Total comparable store restaurant sales for the current year period are subtracted from total comparable store restaurant sales for the prior year period to calculate the absolute dollar change. The absolute dollar change is divided by the prior year comparable store restaurant sales. This amount, expressed as a percentage, is the comparable store restaurant sales discussed in MD&A. See the section below entitled “Total Revenue” for the comparable store restaurant sales percentages for the third quarter and first nine months of 2020 as well as the same periods in the prior year. Management uses comparable store restaurant sales as a measure of sales growth to evaluate how established stores have performed over time. We believe this measure is useful for investors to provide a consistent comparison of restaurant sales results and trends across periods within our core, established restaurant base, unaffected by results of store openings, closings, and other transitional changes. ● Comparable store retail sales consist of retail sales of stores open at least six full quarters at the beginning of the year and are measured on comparable calendar weeks. This measure excludes the impact of new store openings. Comparable store retail sales are expressed as a percentage of an increase or decrease in retail sales versus the same period in the prior year. Total comparable store retail sales for the current year period are subtracted from total comparable store retail sales for the prior year period to calculate the absolute dollar change. The absolute dollar change is divided by the prior year comparable store retail sales. This amount, expressed as a percentage, is the comparable store retail sales discussed in MD&A. See the section below entitled “Total Revenue” for the comparable store retail sales percentages for the third quarter and first nine months of 2020 as well as the same periods in the prior year. Management uses comparable store retail sales as a measure of sales growth to evaluate how established stores have performed over time. We believe this measure is also useful for investors to provide a consistent comparison of retail sales results and trends across periods within our core, established store base, unaffected by results of store openings, closings and other transitional changes. 25 Index ● Comparable restaurant guest traffic reflects both dine-in and off-premise occasions. Traffic growth is measured as the change in entrees sold, which includes entrees sold in our dine-in and off-premise business. Comparable restaurant guest traffic consists of entrees sold in stores open at least six full quarters at the beginning of the year and are measured on comparable calendar weeks. This measure excludes guest traffic related to MSBC since MSBC was acquired by the Company in the first quarter of 2020. Comparable restaurant guest traffic is expressed as a percentage of an increase or decrease in restaurant guest traffic versus the same period in the prior year. This amount, expressed as a percentage, is the guest traffic discussed in MD&A. See section below entitled “Total Revenue” for the restaurant guest traffic percentages for the third quarter and first nine months of 2020 as well as the same periods in the prior year. Management uses this measure to evaluate how established stores have performed over time excluding growth achieved through menu price and sales mix change. We believe this measure is useful for investors because an increase in comparable restaurant guest traffic represents an increase in guests purchasing from our established restaurants as well as an increase in the likelihood of a retail sales conversion for guests intending to dine, while also providing an indicator as to the development of our brand and the effectiveness of our marketing strategy. ● Average check per guest is an indicator which management uses to analyze the dollars spent per guest in our stores on restaurant purchases. Average check is calculated using the comparable store restaurant sales (as defined above) divided by comparable restaurant guest traffic (as defined above). Average check is expressed as a percentage of an increase or decrease in average check versus the same period in the prior year. Average check for the current year period is subtracted from average check for the prior year period to calculate the absolute dollar change. The absolute dollar change is divided by the prior year average check number. This amount, expressed as a percentage, is the average check number discussed in MD&A. This measure aids management in identifying trends in guest preferences as well as the effectiveness of menu price increases and other menu changes. We believe this measure is useful for investors to evaluate per guest expenditures as well as our pricing and menu strategies. See the section below entitled “Total Revenue” for the average check percentages for the third quarter and first nine months of 2020 as well as the same periods in the prior year. Results of Operations The following table highlights our operating results by percentage relationships to total revenue for the quarter and nine months ended May 1, 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Total revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of goods sold (exclusive of depreciation and rent) 31.7 29.3 31.0 30.8 Labor and other related expenses 43.7 36.2 36.4 35.1 Other store operating expenses 32.1 20.7 23.3 20.3 General and administrative expenses 6.5 5.0 5.3 4.9 Impairment 4.3 — 0.9 — Operating income (loss) (18.3 ) 8.8 3.1 8.9 Interest expense 1.2 0.6 0.6 0.5 Income (loss) before income taxes (19.5 ) 8.2 2.5 8.4 Provision for income taxes (income tax benefit) (12.8 ) 1.4 (1.7 ) 1.5 Net loss from unconsolidated subsidiary (30.7 ) — (7.0 ) — Net income (loss) (37.4 %) 6.8 % (2.8 %) 6.9 % 26 Index The following table sets forth the change in the number of Company-owned and franchised units in operation during the quarters and nine months ended May 1, 2020 and May 3, 2019 as well as the number of Company-owned and franchised units at the end of the quarters and nine months ended May 1, 2020 and May 3, 2019: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Net change in units: Company-owned - Cracker Barrel 3 2 4 6 Company-owned – MSBC — — 28 — Company-owned - Holler & Dash (6 ) — (7 ) — Franchise – MSBC 1 — 1 — Units in operation at end of the period Company-owned - Cracker Barrel 664 659 664 659 Company-owned – MSBC 28 — 28 — Company-owned - Holler & Dash — 7 — 7 Total Company-owned units at end of the period 692 666 692 666 Franchise – MSBC 6 — 6 — Effective October 10, 2019, we acquired MSBC. We are currently in the process of converting our former Holler & Dash locations into MSBC locations and expect to complete this conversion in the fourth quarter of 2020. These six locations were temporarily closed during the third quarter of 2020. Total Revenue Total revenue for the third quarter and first nine months of 2020 decreased 41.5% and 11.3%, respectively, compared to the same periods in the prior year. The total revenue decreases for the third quarter and first nine months of 2020 were primarily the result of a significant decline in restaurant guest traffic as a result of restrictions mandated by federal, state and local governments in the United States to mitigate the spread of COVID-19 and the related changes in consumer behavior. The following table highlights the key components of revenue for the quarter and nine months ended May 1, 2020 as compared to the quarter and nine months ended May 3, 2019: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Revenue in dollars: Restaurant $ 360,379 $ 610,120 $ 1,630,501 $ 1,832,273 Retail 72,165 129,483 397,226 452,580 Total revenue $ 432,544 $ 739,603 $ 2,027,727 $ 2,284,853 Total revenue by percentage relationships: Restaurant 83.3 % 82.5 % 80.4 % 80.2 % Retail 16.7 % 17.5 % 19.6 % 19.8 % Average unit volumes (1) : Restaurant $ 535.7 $ 923.9 $ 2,442.9 $ 2,783.0 Retail 108.7 196.5 600.5 689.0 Total revenue $ 644.4 $ 1,120.4 $ 3,043.4 $ 3,472.0 Comparable store sales increase (decrease) (2) : Restaurant (41.7 %) 1.3 % (11.8 %) 2.2 % Retail (45.5 %) (2.6 %) (12.7 %) 0.0 % Restaurant and retail (42.3 %) 0.6 % (12.0 %) 1.8 % Average check increase 1.9 % 3.1 % 3.1 % 3.2 % (1) Average unit volumes include sales of all stores except for MSBC and Holler & Dash. (2) Comparable store sales exclude MSBC. 27 Index Comparable store restaurant sales, comparable retail sales and comparable restaurant guest traffic were negatively affected by the COVID-19 pandemic as all dining rooms were closed beginning the week of March 27, 2020 with five restaurants resuming dine-in operations with limited capacity on April 28, 2020 and ten restaurants resuming dine-in operations with limited capacity on April 30, 2020. As of May 20, 2020, 356 of our restaurants (including two Holler & Dash locations that have reopened as MSBC locations as of May 20, 2020,) have re-opened on a restricted basis with the remaining 338 open for pick-up or delivery only. For the third quarter of 2020, our comparable store restaurant sales decrease resulted from a 43.6% guest traffic decrease partially offset by a 1.9% average check increase (which consisted entirely of the average menu price increase) compared to the prior year third quarter. For the first nine months of 2020, our comparable store restaurant sales decrease resulted from a 14.9% guest traffic decrease partially offset by a 3.1% average check increase (including a 2.1% average menu price increase) as compared to the prior year period. Our retail sales are made substantially to our restaurant guests. For the third quarter of 2020 and first nine months of 2020, our comparable store retail sales decreases resulted from the guest traffic decline and the impact of the COVID-19 pandemic as compared to the same periods in the prior year. 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 third quarter and first nine months of 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Cost of Goods Sold in dollars: Restaurant $ 94,231 $ 153,947 $ 416,364 $ 468,996 Retail 42,907 63,126 212,795 235,549 Total Cost of Goods Sold $ 137,138 $ 217,073 $ 629,159 $ 704,545 Cost of Goods Sold by percentage of revenue: Restaurant 26.1 % 25.2 % 25.5 % 25.6 % Retail 59.5 % 48.8 % 53.6 % 52.0 % The increase in restaurant cost of goods sold as a percentage of restaurant revenue in the third quarter of 2020 as compared to the same period in the prior year primarily resulted from an increase in employee discounts, commodity inflation of 1.0% and higher food waste partially offset by our menu price increase referenced above. Higher employee discounts accounted for an increase of 0.9% as a percentage of restaurant revenue for the third quarter of 2020 as compared to the same period in the prior year and were a direct result of our response to the COVID-19 pandemic. Higher food waste accounted for an increase of 0.7% in restaurant cost of goods sold as a percentage of restaurant revenue for the third quarter of 2020 as compared to the same period in the prior year. Higher food waste resulted from dining room closures due to the COVID-19 pandemic. Restaurant cost of goods sold as a percentage of restaurant revenue in the first nine months of 2020 as compared to the same period in the prior year decreased slightly. We presently expect the rate of commodity inflation to be approximately 1.0% in 2020 as compared to 2019. The increase in retail cost of goods sold as a percentage of retail revenue in the third quarter of 2020 as compared to the third quarter of 2019 resulted primarily from lower initial margin, higher employee discounts as a result of our response to the COVID-19 pandemic, higher markdowns and the change in the provision for obsolete inventory. Third Quarter Increase as a Percentage of Total Revenue Lower initial margin 6.5% Employee discounts 2.0% Markdowns 1.8% Provision for obsolete inventory 0.6% 28 Index The increase in retail cost of goods sold as a percentage of retail revenue in the first nine months of 2020 as compared to the first nine months of 2019 resulted primarily from higher markdowns, higher employee discounts as a result of our response to the COVID-19 pandemic and higher freight expense. First Nine Months Increase as a Percentage of Total Revenue Markdowns 0.7% Employee discounts 0.5% Freight expense 0.3% Labor and Related Expenses Labor and related expenses include all direct and indirect labor and related costs incurred in store operations. The following table highlights labor and related expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Labor and related expenses 43.7% 36.2% 36.4% 35.1% This percentage change resulted from the following: Third Quarter Increase (Decrease) as a Percentage of Total Revenue Store management compensation 5.7% Miscellaneous wages 2.3% Employee health care expenses 1.5% Payroll taxes 0.4% Workers’ compensation expense 0.3% Store bonus expense (1.8%) Store hourly labor (0.9%) This percentage change resulted primarily from the following: First Nine Months Increase (Decrease) as a Percentage of Total Revenue Store management compensation 1.0% Miscellaneous wages 0.4% Employee health care expenses 0.4% Store bonus expense (0.4%) Store hourly labor (0.3%) In general, for the third quarter and first nine months of 2020, labor and other related expenses as percentage of total revenue were materially increased by the significant reduction in total revenue and reduced operations caused by the impact of the COVID-19 pandemic. In particular, the increases in store management compensation, payroll taxes and workers’ compensation expense as a percentage of total revenue for the third quarter of 2020 as well as store management compensation as a percentage of total revenue for the first nine months of 2020 were all primarily driven by this decrease in revenue. The increases in miscellaneous wages as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted primarily from retention pay for our field employees due to reduced operations as a result of the COVID-19 pandemic. 29 Index Higher employee health care expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted primarily from higher claims activity, higher enrollment in calendar 2020 plans as compared to the calendar 2019 plans and the reduction in revenue in 2020 as discussed above. The decreases in store bonus expense as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted from lower performance against financial objectives in the third quarter and first nine months of 2020 as compared to the same periods in the prior year due to the impact of the COVID-19 pandemic. The decreases in store hourly labor costs as a percentage of total revenue for the third quarter of 2020 and first nine months of 2020 as compared to the same periods in the prior year resulted primarily from lower usage of hourly employees due to reduced operations caused by the COVID-19 pandemic. Other Store Operating Expenses Other store operating expenses include all store-level operating costs, the major components of which are utilities, preopening expenses excluding labor, operating supplies, repairs and maintenance, depreciation and amortization, advertising, rent, credit and gift card fees, real and personal property taxes, general insurance and costs associated with our bi-annual manager conference and training event. The following table highlights other store operating expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Other store operating expenses 32.1% 20.7% 23.3% 20.3% This percentage change resulted from the following: Third Quarter Increase as a Percentage of Total Revenue Depreciation expense 2.8% Rent expense 1.5% Other store expenses 1.4% Utilities expense 1.4% Maintenance expense 1.3% Advertising expense 1.3% Supplies expense 1.0% Real and personal property taxes 0.7% This percentage change resulted from the following: First Nine Months Increase as a Percentage of Total Revenue Depreciation expense 0.8% Other store expenses 0.5% Advertising expense 0.5% Rent expense 0.3% Utilities expense 0.3% Supplies expense 0.2% Maintenance expense 0.2% Real and personal property taxes 0.2% 30 Index In general, for the third quarter and first nine months of 2020, other store operating expenses as percentage of total revenue were materially increased by the significant reduction in total revenue and reduced operations caused by the impact of the COVID-19 pandemic. In particular, the increases in rent expense, utilities expense, maintenance expense, supplies expense, advertising expense and real and personal property taxes as a percentage of total revenue for the third quarter and first nine months of 2020 were all primarily driven by this decrease in revenue. The increases in depreciation expense as a percentage of total revenue for the third quarter and first nine months 2020 as compared to the same periods in the prior year resulted primarily from capital expenditures with accelerated depreciation methods. The increases in other store expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted from costs associated with the growth in our off-premise business and the nonrecurrence of proceeds received in the third quarter of 2019 for the sale of certain technology assets and a hurricane-related insurance settlement. General and Administrative Expenses The following table highlights general and administrative expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 General and administrative expenses 6.5 % 5.0 % 5.3 % 4.9 % This percentage change resulted from the following: Third Quarter Increase (Decrease) as a Percentage of Total Revenue Payroll and related expenses 2.4% Other expenses 0.7% Depreciation expense 0.4% Incentive compensation expense (2.0%) This percentage change resulted from the following: First Nine Months Increase (Decrease) as a Percentage of Total Revenue Payroll and related expenses 0.7% Other expenses 0.2% Incentive compensation expense (0.5%) The increases in payroll and related expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted primarily from the decreases in revenue in the third quarter and first nine months of 2020 as compared to the same periods in the prior year and severance expenses recorded in the third quarter of 2020 as part of the elimination of positions in the corporate headquarters and in the field. The increase in depreciation expense as a percentage of total revenue for the third quarter of 2020 as compared to the same period in the prior year resulted primarily from the decrease in revenue in the third quarter as compared to the same period in the prior year. The increases in other expenses as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted primarily from the decreases in revenue in the third quarter and first nine months of 2020 as compared to the same periods in the prior year. 31 Index The decreases in incentive compensation as a percentage of total revenue for the third quarter and first nine months of 2020 as compared to the same periods in the prior year resulted from lower performance against financial objectives in the third quarter and first nine months of 2020 as compared to the same periods in the prior year due to the impact of the COVID-19 pandemic. Impairment During the third quarter of 2020, we determined that five leased Cracker Barrel stores were impaired, resulting in impairment charges of $18,336. Each of these leased stores was impaired because of declining operating performance and resulting negative cash flow projections as a result of the impact of the COVID-19 pandemic. It is possible that we may recognize additional impairment as a result of the unknown impacts of the COVID-19 pandemic and our response. Interest Expense, net The following table highlights interest expense, net in dollars for the third quarter and first nine months of 2020 as compared to the same periods in the prior year: Quarter Ended Nine Months Ended May 1, 2020 May 3, 2019 May 1, 2020 May 3, 2019 Interest expense, net $ 5,298 $ 4,111 $ 12,383 $ 12,637 The increase in interest expense for the third quarter of 2020 as compared to the same period in the prior year resulted primarily from materially higher debt levels caused by our borrowing the remaining available amount under our 2019 Revolving Credit Facility in March 2020 in response to the COVID-19 pandemic. The decrease in interest expense for the first nine months of 2020 as compared to the same period in the prior year resulted primarily from the interest income on the PBS promissory notes and lower weighted average interest rates partially offset by higher debt levels. Additionally, as part of our debt refinancing in the first quarter of 2019, we incurred additional interest expense of $166 related to the write-off of deferred financing costs. We expect higher interest expense for the fourth quarter of 2020 as result of the additional borrowings discussed above and the additional $39,400 borrowed in May 2020. Provision for Income Taxes (Income Tax Benefit) Provision for income taxes (income tax benefit) as a percentage of income before income taxes (the “effective tax rate”) was 65.5% and 17.3% in the third quarters of 2020 and 2019, respectively. The effective tax rate was (66.0%) and 17.0% in the first nine months of 2020 and 2019, respectively. The increase in the effective rate in the quarter and the decrease in the first nine months of 2020 as compared to the prior year periods are primarily due to the recognition of loss on investment in Punch Bowl Social (“PBS”), which is excluded from income when calculating the effective tax rate partially offset by the tax benefits recorded for the FICA Tip and Work Opportunity federal tax credits. The Company’s quarterly tax provision (benefit) for income taxes has historically been calculated using the annual effective tax rate method (“AETR method”), which applies an estimated annual effective tax rate to pre-tax income or loss. However, the Company recorded its interim income tax provision (benefit) using the discrete method as of May 1, 2020, as allowed under Accounting Standards Codification (“ASC”) 740-270, Accounting for Income Taxes - Interim Reporting. The Company used the discrete method, rather than the AETR method, due to significant variations in income tax expense, relative to projected annual pre-tax income (loss). Use of the AETR method would have resulted in a disproportionate and unreliable tax rate. 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, permits NOL carrybacks to offset 100% of taxable income of prior years. We are currently evaluating the impact of the CARES Act, and presently expect that the NOL carryback provisions may result in a modest cash benefit to us. 32 Index Presently, we are unable to determine an effective tax rate for 2020. Significant fluctuations in income tax expense relative to annual projected pre-tax income (loss) produce an unreliable tax rate. Liquidity and Capital Resources Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our 2019 Revolving Credit Facility. Our internally generated cash, along with cash on hand at August 2, 2019 and borrowings under our 2019 Revolving Credit Facility, was sufficient to finance all of our growth, dividend payments, share repurchases, working capital needs and other cash payment obligations in the first nine months of 2020. The impacts of the COVID-19 pandemic have adversely affected our results of operations and cash flows. In response to the business disruption caused by the COVID-19 pandemic, we have taken the following actions, which management expects will enable it to meet its obligations over the next twelve months. ● In March 2020, we temporarily closed the dining rooms in all of our restaurants and operated with pick-up or delivery only. Beginning in late April, we have been able to resume dine-in operations in certain jurisdictions. As of May 20, 2020, 356 of our restaurants (including two Holler & Dash locations that have reopened as MSBC locations as of May 20, 2020,) have re-opened dine-in service on a limited capacity basis, with the remaining 338 open for pick-up or delivery only. ● We have made significant reductions in operating expenses to reflect reduced operations and sales levels as well as eliminating non-essential spending. ● We furloughed employees, eliminated a significant number of positions at all levels of the Company, both at the corporate headquarters and in the field and reduced compensation payable to our corporate officers and cash retainers payable to our Board of Directors. ● We have negotiated revised terms with landlords and vendors to reduce and/or defer these expenses. ● We borrowed the remaining available amount under our 2019 Revolving Credit Facility and drew down additional amounts from the accordion feature under our 2019 Revolving Credit Facility. ● We deferred payment of the dividend that was declared on March 3, 2020 until September 2, 2020 and have suspended all further dividend payments until further notice. ● We have temporarily suspended all future share repurchases. ● We continue to explore additional measures to enhance liquidity as the COVID-19 pandemic and related events develop. Cash Generated From Operations Our operating activities provided net cash of $87,232 for the first nine months of 2020, representing a decrease from the $252,586 net cash provided during the first nine months of 2019. This decrease primarily reflected the negative impact on our operations caused by the COVID-19 pandemic and the timing of payments for accounts payable. Borrowing Capacity and Debt Covenants On September 5, 2018, we entered into a five-year $950,000 revolving credit facility (“2019 Revolving Credit Facility”) which replaced our $750,000 revolving credit facility of which $400,000 in borrowings was outstanding. The 2019 Revolving Credit Facility also contains an option to increase the revolving credit facility by $300,000. Subsequent to May 1, 2020, we have drawn an additional $39,400 under this option. In the first quarter of 2019, we paid $3,022 in deferred financing costs related to the debt refinancing. 33 Index During the nine months ended May 1, 2020, we borrowed $762,000 under the 2019 Revolving Credit Facility to fund our dividend payments, acquisition of MSBC, other working capital needs and to provide flexibility as a result of the uncertain times caused by the COVID-19 pandemic. During the nine months ended May 1, 2020, we repaid $222,000 of the borrowings. At May 1, 2020, we had $940,000 of outstanding borrowings under the 2019 Revolving Credit Facility and we had $6,729 of standby letters of credit related to securing reserved claims under our workers’ compensation insurance which reduce our borrowing availability under the 2019 Revolving Credit Facility. At May 1, 2020, we had $3,271 in borrowing availability under our 2019 Revolving Credit Facility. See Note 6 to our Condensed Consolidated Financial Statements for further information on our long-term debt. 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 May 1, 2020, we were in compliance with all financial covenants. As a result of the negative impact of the COVID-19 pandemic on our financial position and results of operations, we have obtained a waiver for the financial covenants for the fourth quarter of 2020 and the first and second quarters of 2021. Capital Expenditures Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $82,645 for the first nine months of 2020 as compared to $103,259 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 during the first nine months of 2020 as compared to the first nine months of 2019 resulted primarily from lower capital expenditures for strategic initiatives as well as our decreases in new store construction, store remodels and other similar expenditures in response to the COVID-19 pandemic. We estimate that our capital expenditures during 2020 will be approximately $100,000, which represents a decrease from our previously disclosed estimate of $125,000, primarily as a result of our conservative cash management in response to the COVID-19 pandemic. This estimate includes the acquisition of sites and construction costs of new Cracker Barrel stores and new MSBC locations that have opened or that we continue to expect to open during 2020, as well as for acquisition and construction costs for store locations that we continue to plan to be opened in 2021. We intend to fund our capital expenditures with cash on our balance sheet (including the proceeds from our borrowing the remaining availability under our 2019 Revolving Credit Facility, cash flows from operations and any additional measures taken to obtain cash, as necessary. Maple Street Biscuit Company Effective October 10, 2019, we acquired 100% ownership of 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 of the amounts held for 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. We also incurred acquisition-related costs of $1,269. We are currently converting our existing six Holler & Dash locations into MSBC locations and expect this conversion to be completed during the fourth quarter of 2020. We believe that the investment in MSBC supports our 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. Punch Bowl Social Effective July 18, 2019, we entered into a strategic relationship with PBS, a food, beverage and entertainment concept, by purchasing a non-controlling interest in the concept. As part of the transaction, we agreed to fund PBS up to $51,000 through calendar 2020 of which we funded $35,500 during the first nine months of 2020, for a total of $48,000. We believed the investment in PBS provided us with a growth vehicle to deliver additional shareholder value. However, as a result of the COVID-19 pandemic, PBS Holdco’s wholly-owned subsidiary, 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 Brandco unless we repaid or unconditionally guaranteed the indebtedness. 34 Index In keeping with our strategy of concentrating our resources on our core business during the COVID-19 pandemic, and in light of the substantial uncertainties surrounding PBS business coming out of the COVID-19 pandemic, we decided not to invest further resources to prevent foreclosure or otherwise provide additional capital to PBS. In the third quarter of 2020, we recorded a loss of $132,878, which represented our equity investment in PBS and the principal and accumulated interest under the outstanding unsecured indebtedness of PBS held by the Company. This loss was recorded in the net loss in unconsolidated subsidiary line on our Condensed Consolidated Statement of Income (Loss) in the third quarter of 2020. Dividends, Share Repurchases and Share-Based Compensation Awards The 2019 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of shares we are permitted to repurchase. Under the 2019 Revolving Credit Facility, provided there is no default existing and the total of our availability under the 2019 Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the “cash availability”), we may declare and pay cash dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if, at the time the dividend or the repurchase is made, our consolidated total leverage ratio is 3.00 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if our consolidated total leverage ratio is greater than 3.00 to 1.00 at the time the dividend or repurchase is made; 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 nine months of 2020, we paid a regular dividend of $3.90 per share and declared a dividend of $1.30 per share that was originally scheduled to be paid on May 5, 2020 to shareholders of record on April 17, 2020. To preserve available cash during the COVID-19 pandemic and in light of the uncertainties as to its duration and economic impact, we previously announced a deferred payment of such dividend until September 2, 2020 to shareholders of record on August 14, 2020. Additionally, we have suspended all further dividend payments under the Company’s historical dividend program until further notice. Previously, our Board of Directors authorized the repurchase of up to $50,000 of our common stock during 2020. In the third quarter of 2020, upon the completion of this repurchase authorization, our Board of Directors approved the repurchase of up to an additional $25,000 of our common stock. During the first nine months of 2020, we repurchased 378,974 shares of our common stock in the open market at an aggregate cost of $55,007. In response to the COVID-19 pandemic, we have temporarily suspended all future share repurchases. During the first nine months of 2020, we issued 23,715 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 $2,005. Working Capital In the restaurant industry, virtually all sales are either for cash or third-party credit or debit card. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while restaurant inventories purchased locally are generally financed from normal trade credit. Because of our retail gift shops, which have a lower product turnover than the restaurant business, we carry larger inventories than many other companies in the restaurant industry. Retail inventories purchased domestically are generally financed from normal trade credit, while imported retail inventories are generally purchased through wire transfers. These various trade terms are aided by the rapid turnover of the restaurant inventory. Employees generally are paid on weekly or semi-monthly schedules in arrears for hours worked except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses, such as certain taxes and some benefits, are deferred for longer periods of time. We had positive working capital of $203,982 at May 1, 2020 versus negative working capital of $150,094 at August 2, 2019. The change in working capital from August 2, 2019 to May 1, 2020 primarily resulted from the increase in cash and the timing of accounts payable partially offset by the recognition of lease liabilities due to the adoption at August 3, 2019 of accounting guidance for leases. 35 Index Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. Material Commitments There have been no material changes in our material commitments other than in the ordinary course of business since the end of 2019. Refer to the sub-section entitled “Material Commitments” under the section entitled “Liquidity and Capital Resources” presented in the MD&A of our 2019 Form 10-K for additional information regarding our material commitments. Recent Accounting Pronouncements Adopted See Note 1 to the accompanying Condensed Consolidated Financial Statements for a discussion of recent accounting guidance adopted. With the exception of the accounting guidance for leases, the adopted accounting guidance discussed in Note 1 did not have a significant impact on our consolidated financial position or results of operations. Regarding the accounting guidance for leases, the adoption of the accounting guidance had a material impact on our consolidated balance sheet. See Notes 1 and 11 for additional information regarding leases. Regarding the accounting guidance not yet adopted, we are still evaluating the impact of adopting the accounting guidance. Critical Accounting Estimates We prepare our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends, outside advice from parties believed to be experts in such matters, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results could differ from those assumptions and estimates, and such differences could be material. Our significant accounting policies are discussed in Note 2 to the Consolidated Financial Statements contained in the 2019 Form 10-K with the exception of the newly adopted lease accounting guidance and the valuation of goodwill and other intangibles. See Notes 1 and 11 above for further information regarding the accounting policies for leases under the newly adopted accounting guidance. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Critical accounting estimates are those that: ● management believes are most important to the accurate portrayal of both our financial condition and operating results, and ● require managemet’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We consider the following accounting estimates to be most critical in understanding the judgments that are involved in preparing our Consolidated Financial Statements: ● Impairment of Long-Lived Assets ● Insurance Reserves ● Retail Inventory Valuation ● Lease Accounting ● Goodwill and Other Intangibles Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. 36 Index Impairment of Long-Lived Assets We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total expected future cash flows are less than the carrying amount of the asset, the carrying value is written down, for an asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the fair value, net of estimated costs of disposal. Any loss resulting from impairment is recognized by a charge to income. Judgments and estimates that we make related to the expected useful lives of long-lived assets and future cash flows are affected by factors such as changes in economic conditions and changes in operating performance. The accuracy of such provisions can vary materially from original estimates and management regularly monitors the adequacy of the provisions until final disposition occurs. We have not made any material changes in our methodology for assessing impairments during the first nine months of 2020, and we do not believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used by us in the future to assess impairment of long-lived assets. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and fair values of long-lived assets, we may be exposed to losses that could be material. During the first quarter of 2020, we recorded an impairment charge of $664 related to the transition from Holler & Dash locations to MSBC locations. During the third quarter of 2020, we recorded impairment charges of $18,336 related to five leased Cracker Barrel stores. It is possible that we may recognize additional impairment as a result of the unknown impacts of the COVID-19 pandemic and our response. Insurance Reserves We self-insure a significant portion of our expected workers’ compensation and general liability insurance programs. We purchase insurance for individual workers’ compensation claims that exceed $250, $750 or $1,000 depending on the state in which the claim originated. We purchase insurance for individual general liability claims that exceed $500. We record a reserve for workers’ compensation and general liability for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. These reserves and estimates of IBNR claims are based upon a full scope actuarial study which is performed annually at the end of our third quarter and is adjusted by the actuarially determined losses and actual claims payments for the fourth quarter. Additionally, we perform limited scope actuarial studies on a quarterly basis to verify and/or modify our reserves. The reserves and losses in the actuarial study represent a range of possible outcomes within which no given estimate is more likely than any other estimate. As such, we record the losses in the lower half of that range and discount them to present value using a risk-free interest rate based on projected timing of payments. We also monitor actual claims development, including incurrence or settlement of individual large claims during the interim periods between actuarial studies as another means of estimating the adequacy of our reserves. Our group health plans combine the use of self-insured and fully-insured programs. Benefits for any individual (employee or dependents) in the self-insured group health program are limited. We record a liability for the self-insured portion of our group health program for all unpaid claims based upon a loss development analysis derived from actual group health claims payment experience. Additionally, we record a liability for unpaid prescription drug claims based on historical experience. Our accounting policies regarding insurance reserves include certain actuarial assumptions and management judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. We have not made any material changes in the methodology used to establish our insurance reserves during the first nine months of 2020 and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate the insurance reserves. However, changes in these actuarial assumptions, management judgments or claims experience in the future may produce materially different amounts of expense that would be reported under these insurance programs. 37 Index Retail Inventory Valuation Cost of goods sold includes the cost of retail merchandise sold at our stores utilizing the retail inventory method (“RIM”). Under RIM, the valuation of our retail inventories is determined by applying a cost-to-retail ratio to the retail value of our inventories. Inherent in the RIM calculation are certain inputs, including initial markons, markups, markdowns and shrinkage, which may significantly impact the gross margin calculation as well as the ending inventory valuation. Inventory valuation provisions are included for retail inventory obsolescence and retail inventory shrinkage. Retail inventory is reviewed on a quarterly basis for obsolescence and adjusted as appropriate based on assumptions made by management and judgment regarding inventory aging and future promotional activities. Retail inventory also includes an estimate of shrinkage that is adjusted upon physical inventory counts. Annual physical inventory counts are conducted based upon a cyclical inventory schedule. An estimate of shrinkage is recorded for the time period between physical inventory counts by using a two-year average of the physical inventories’ results on a store-by-store basis. We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories during the first nine months of 2020 and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions in the future. However, actual obsolescence or shrinkage recorded may produce materially different amounts than we have estimated. Lease Accounting We have ground leases for our leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases. Additionally, we lease our retail distribution center, advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating lea ses. Effective August 3, 2019, we adopted lease accounting guidance which requires the recognition of lease assets and lease liabilities on the balance sheet. Adoption of the accounting guidance for leases resulted in the recognition of right-of-use operating lease assets of $464,394 and total operating lease liabilities of $506,406 as of August 3, 2019. We evaluate our leases at contract inception to determine whether we have the right to control use of the identified asset for a period of time in exchange for consideration. If we determine that we have the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, we recognize a right-of-use asset and lease liability. Also, at contract inception, we evaluate our leases to estimate their expected term which includes renewal options that we are reasonably assured that we will exercise, and the classification of the lease as either an operating lease or a finance lease. Additionally, as our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data. We assess the impairment of the right-of-use asset whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Changes in these assumptions and management judgments may produce materially different amounts in the recognition of the right-of-use assets and lease liabilities. Additionally, any loss resulting from an impairment of the right-of-use assets is recognized by a charge to income, which could be material. Goodwill and Other Intangibles Effective October 10, 2019, the Company acquired 100% ownership of MSBC and recorded estimated amounts for goodwill and other intangibles. Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired. 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. See Notes 2 and 4 to the Condensed Consolidated Financial Statements for further information related to goodwill and other intangibles. 38 Index The qualitative and quantitative assessments related to the valuation and any potential impairment of goodwill and other intangible assets are subject to judgements and assumptions regarding the determination of the fair value of the net assets acquired. Such judgments and assumptions may include projecting future cash flows, determining appropriate discount rates, applying the appropriate valuation techniques and the computation of the implied fair value of goodwill. Future cash flow projections are based on management’s projections and represent best estimates taking into account recent financial performance, market trends, strategic plans and other available information. Changes in these estimates and assumptions could materially affect the determination of fair value or impairment. Future indicators of impairment could result in an asset impairment charge. If actual results are not consistent with our judgements and assumptions or if these judgement and assumptions are revised based on new information, we may be exposed to losses that could be material.