What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-12-02 compared with 2022-06-07 · 151 added, 240 removed, 268 unchanged (59% of the section changed)

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Barrel Old Country Store® (“Cracker Barrel”) concept.

At April 29, 2022, we operated 664 Cracker Barrel stores in 45 states and 41 Maple Street Biscuit Company (“MSBC”) company-owned locations in nine states.

At April 29, 2022, MSBC had seven

franchised locations.

At October 28, 2022, we operated 664 Cracker Barrel stores in 45 states and 54 Maple Street Biscuit Company (“MSBC”) company-owned locations in nine states.

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

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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 risks and uncertainties associated with the novel

coronavirus (“COVID-19”) pandemic, including the duration of the COVID-19 pandemic and its ultimate impact on our business, levels of consumer confidence in the safety of dine-in restaurants, restrictions (including occupancy restrictions) imposed

by governmental authorities, the effectiveness of cost saving measures undertaken throughout our operations, disruptions to our operations as a result of the spread of COVID-19 in our workforce, general or regional economic weakness, business and

societal conditions, and the weather impact on sales and customer travel;

pandemic, including the duration of the COVID-19 pandemic and its ultimate impact on our business, levels of consumer confidence in the safety of dine-in restaurants, restrictions (including occupancy restrictions) imposed by governmental

authorities, the effectiveness of cost saving measures undertaken throughout our operations, disruptions to our operations as a result of the spread of COVID-19 in our workforce, general or regional economic weakness, business and societal

conditions, and the weather impact on sales and customer travel;

discretionary income or personal expenditure activity of our customers;

information technology-related incidents, including data privacy and information security breaches,

whether as a result of infrastructure failures, employee or vendor errors, or actions of third parties;

information technology-related incidents, including data privacy and information security breaches, whether as

a result of infrastructure failures, employee or vendor errors, or actions of third parties;

our ability to identify, acquire and sell successful new lines of retail merchandise and new menu items at our restaurants;

our ability to

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

our ability to sustain or the

effects of plans intended to improve operational or marketing execution and performance;

uncertain performance of acquired businesses, strategic investments and other initiatives that we may pursue from time to time;

changes in or

implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, insurance or other undeterminable areas;

the effects of plans intended to promote or protect our

brands and products;

changes in or implementation of

additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, insurance or other undeterminable areas;

the effects of plans intended to promote or protect our brands and

commodity price increases;

the ability of and cost to us to recruit, train, and retain qualified hourly and management employees;

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

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

workers’ compensation, group health and utility price changes;

consumer behavior based on negative publicity or changes in consumer health or dietary trends or safety aspects of our food or products or those of the restaurant industry in

general, including concerns about outbreaks of infectious disease as well as the possible effects of such events on the price or availability of ingredients used in our restaurants;

consumer behavior based on negative publicity or changes in consumer health or dietary trends or safety aspects of our food or products or those of the restaurant industry in general,

including concerns about outbreaks of infectious disease as well as the possible effects of such events on the price or availability of ingredients used in our restaurants;

the effects of our indebtedness and associated restrictions on our

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

Management believes that the Cracker Barrel’s core competitive advantages include our authentic experiential brand, our culture of hospitality, and our homestyle food and retail assortments.

remain focused on these core strengths, and we believe they will continue to drive the long-term success and outperformance of our brand.

We plan to leverage these core strengths in 2022 to drive additional frequency from our core guests, attract

new customers, and strengthen our operating and business model.

During the third quarter, we focused our efforts on operational execution.

We also completed the rollout of our new point of sale system and new food cost management system to all stores.

For the full fiscal year, we currently anticipate adding 15 new MSBC locations, four of which opened in the first nine months of 2022.

This expectation includes the purchase of five franchised

locations in the fourth quarter of 2022.

Management believes that the Cracker Barrel’s brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that

strength as a core competitive component of our business strategy.

Our long-term strategy remains centered on driving sustainable sales growth, continued business model improvements, building profitable Cracker Barrel and MSBC stores, and

ultimately driving shareholder returns.

During the first quarter of 2023, we continued to make progress in key areas of the business such as maintaining a strong value proposition, growing our off-premise business, delivering continued strong

retail sales, marketing, and culinary innovation to grow average check through introduction of add-ons and menu enhancements, thoughtful expansion of MSBC, and store-level operational excellence.

We believe there is significant uncertainty

surrounding the macro backdrop outlook for the coming quarters, but we remain focused on delivering long-term growth and returns for shareholders.

Key Performance Indicators

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To calculate average check per guest, we determine comparable store restaurant sales, as described above, and divide by comparable guest traffic (as described above).

We then subtract average

check per guest for the current year period from average check per guest for the applicable historical period to calculate the absolute dollar change.

The absolute dollar change is divided by the prior year average check number to calculate

average check increase per guest, which we express as a percentage.

We then subtract average check per guest for the current year period from average check per guest for the applicable historical period to calculate the absolute dollar change.

The absolute dollar

change is divided by the prior year average check number to calculate average check increase per guest, which we express as a percentage.

These performance indicators exclude the impact of new store openings and sales related to MSBC.

We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time.

We use comparable restaurant guest traffic increase/(decrease)

to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change.

Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu

We believe these performance indicators are useful for investors by providing a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings,

closings, and other transitional changes.

We use comparable restaurant guest traffic

increase/(decrease) to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change.

Finally, we use average check per guest to identify trends in guest preferences, as well as the

effectiveness of menu changes.

results of store openings, closings, and other transitional changes.

Results of Operations

The following table highlights our operating results by percentage relationships to total revenue for the quarter ended and first nine months ended April 29, 2022 as compared to the same periods

in the prior year:

The following table highlights our operating results by percentage relationships to total revenue for the quarter ended October 28, 2022 as compared to the same period in the prior year:

Quarter Ended

Nine Months Ended

Total revenue

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General and administrative expenses

Gain on sale and leaseback transaction

Operating income

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Provision for income taxes

The following table sets forth the change in the number of Company-owned and franchised units in operation during the quarters and first nine months ended April 29, 2022 and April 30, 2021 as

well as the number of Company-owned and franchised units at the end of the quarters and first nine months ended April 29, 2022 and April 30, 2021:

The following table sets forth the change in the number of Company-owned in operation during the quarters ended October 28, 2022 and October 29, 2021 as well as the number of Company-owned and

franchised units at the end of the quarters ended October 28, 2022 and October 29, 2021:

Quarter Ended

Nine Months Ended

Net change in units:

Company-owned – Cracker Barrel

Company-owned – MSBC

Franchise - MSBC

Units in operation at end of the period:

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Franchise – MSBC

The Company purchased all seven franchise MSBC units in the fourth quarter of 2022.

Total Revenue

Total revenue for the third quarter and first nine months of 2022 increased 10.8% and 19.7%, respectively, as compared to the same periods in the prior year.

The Company continues to recover from

the COVID-19 pandemic, and all dining rooms were open to some extent during the first nine months of 2022.

During the third quarter of 2022, most dining rooms operated with few, if any, restrictions.

However, it is possible that renewed outbreaks,

increases in cases and/or new variants of the disease, either as part of a national trend or on a more localized basis, could result in COVID-19-related restrictions including capacity restrictions or otherwise limit our dine-in services, or

negatively affect consumer demand.

Off-premise sales for the third quarter of 2022 represented approximately 19% of restaurant sales volumes compared to approximately 23% in the third quarter of 2021 when a large number of our restaurants were

operating with limitations on dine-in services.

The following table highlights the key components of revenue for the quarter and nine months ended April 29, 2022 as compared to the same periods in the prior year:

Total revenue for the first quarter of 2023 increased 7.0% as compared to the same period in the prior year.

While all of our dining rooms are currently operating without COVID-19-related

restrictions, it is possible that renewed outbreaks or increases in cases and/or new variants of the disease, either as part of a national trend or on a more localized basis, could result in COVID-19-related restrictions including capacity

restrictions, otherwise limit our dine-in services, or negatively affect consumer demand.

The following table highlights the key components of revenue for the quarter ended October 28, 2022 as compared to the same period in the prior year:

Quarter Ended

Nine Months Ended

Revenue in dollars:

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Total revenue

Comparable store sales increase (decrease) (2) :

Comparable store sales increase (2) :

Restaurant and retail

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(1) Average unit volumes include sales of all stores except for MSBC.

(2) Comparable store sales and traffic consist of sales of stores open at least six full quarters at the beginning

of the period and are measured on comparable calendar weeks.

(2) Comparable store sales and traffic consist of sales of stores open at least six full quarters at the beginning of the period and

are measured on comparable calendar weeks.

Comparable store sales and traffic exclude MSBC.

For the third quarter of 2022, our comparable store restaurant sales increased as a result of a 4.7% guest traffic increase and a 6.2% average check increase (including a 5.9% average menu price

increase) as compared to the prior year period.

For the first nine months of 2022, our comparable store restaurant sales increased as a result of a 11.7% guest traffic increase and a 6.7% average check increase (including a 5.6% average menu price

increase) as compared to the prior year period.

For the first quarter of 2023, our comparable store restaurant sales increased as a result of an 8.9% average check increase (including a 7.8% average menu price increase) partially offset by a

1.8% guest traffic decrease as compared to the prior year period.

Our retail sales are made substantially to our restaurant guests.

For the third quarter of 2022, our comparable store retail sales increase resulted primarily from the guest traffic increase and

strong performance in the toys, food and convenience and décor merchandise categories.

For the first nine months of 2022, our comparable retail sales increase resulted primarily from the guest traffic increase and strong performance in the toys,

food and convenience, décor, apparel and accessories and licensed merchandise categories.

For the first quarter of 2023, our comparable store retail sales increase resulted primarily from strong

performance in the apparel and décor merchandise categories.

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 2022 as compared to the same periods in the prior year:

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 first quarter of 2023 as compared

to the same period in the prior year:

Quarter Ended

Nine Months Ended

Cost of Goods Sold in dollars:

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Cost of Goods Sold by percentage of revenue:

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in the third quarter of 2022 as compared to the same period in the prior year were primarily the result of

commodity inflation partially offset by our menu price increase referenced above.

Commodity inflation was 18.0% for the third quarter of 2022.

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in the first nine months of 2022 as compared to the same period in the prior year was primarily the result of

commodity inflation partially offset by our menu price increase referenced above and a shift to lower cost menu items.

Commodity inflation was 11.4% for the first nine months of 2022.

Lower cost menu items accounted for a decrease of 0.5% as a

percentage of restaurant revenue for the first nine months of 2022 as compared to the same period in the prior year.

We continue to partially offset inflationary pressures through menu price increases and operational improvements, and we presently expect the rate of commodity inflation to be approximately 13.0%

for the full year 2022.

The increase in retail cost of goods sold as a percentage of retail revenue in the third quarter of 2022 as compared to the same period in the prior year resulted from the change in the provision

for obsolete inventory, higher shrinkage and higher freight expense partially offset by lower markdowns and higher initial margin.

Third Quarter

Increase (Decrease) as a

Percentage of Total Revenue

Provision for obsolete inventory

Inventory shrinkage

The increase in restaurant cost of goods sold as a percentage of restaurant revenue in the first quarter of 2023 as compared to the same period in the prior year was primarily the result of

commodity inflation.

Commodity inflation was 16.7% for the first quarter of 2023.

We continue to partially offset inflationary pressures through menu price increases and operational improvements, and we presently expect the rate of commodity inflation to be approximately 8.0% to

9.0% for the full year 2023 with moderation of inflation sequentially with each quarter.

The increase in retail cost of goods sold as a percentage of retail revenue in the first quarter of 2023 as compared to the same period in the prior year resulted primarily from higher markdowns

and higher freight expense.

First Quarter

Increase as a Percentage

of Total Revenue

Freight expense

Higher initial margin

The decrease in retail cost of goods sold as a percentage of retail revenue in the first nine months of 2022 as compared to the same period in the prior year resulted from lower markdowns partially

offset by the change in the provision for obsolete inventory.

First Nine Months

(Decrease) Increase as a

Percentage of Total Revenue

Provision for obsolete inventory

Labor and Related Expenses

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The following table highlights labor and related expenses as a percentage of

total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year:

total revenue for the first quarter of 2023 as compared to the same period in the prior year:

Quarter Ended

Nine Months Ended

Labor and related expenses

This percentage change for the third quarter of 2022 as compared to the prior year third quarter resulted from the following:

Third Quarter

Increase (Decrease) as a

Percentage of Total Revenue

Store hourly labor

Store bonus expense

Labor and related expenses as a percentage of total revenue for the first nine months of 2022 as compared to the same period in the prior year remained flat primarily due to the

First Nine Months

Increase (Decrease) as a

Percentage of Total Revenue

This percentage change for the first quarter of 2023 as compared to the prior year first quarter resulted primarily from the following:

First Quarter

(Decrease) Increase as a Percentage of Total Revenue

Employee health care expense

Workers’ compensation expense

Store hourly labor

Store management compensation

Store bonus expense

The increases in store hourly labor expense as a percentage of total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year resulted primarily

from wage inflation exceeding menu price increases and lower productivity.

In addition to menu price increases, we continue to partially offset inflationary pressures through labor productivity initiatives, and we presently expect the rate of wage

inflation to be approximately 10% in 2022.

The decrease in store management compensation as a percentage of total revenue for the first nine months of 2022 as compared to the same period in the prior year was primarily driven by the

increase in total revenue in 2022 partially offset by wage inflation.

The decreases in store bonus expense as a percentage of total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year resulted from lower

performance against financial objectives for certain components of the incentive plan in 2022 as compared to 2021.

The decrease in employee health care expenses as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from lower claims.

The decrease in workers’ compensation expenses as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from revised

actuarial estimates.

The increase in store hourly labor expense as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from wage inflation

exceeding menu price increases and lower productivity.

In addition to menu price increases, we continue to partially offset inflationary pressures through labor productivity initiatives, and we presently expect the rate of wage inflation to be

approximately 5% to 6% in 2023.

The increase in store management compensation as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted from higher store bonus

expense due to better performance against financial objectives for certain components of the incentive plan in 2023 as compared to 2022.

Other Store Operating Expenses

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advertising, rent, third-party delivery fees, credit and gift card fees, real and personal property taxes and general insurance.

The following table highlights other store operating expenses as a percentage of total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year:

Quarter Ended

Nine Months Ended

Other store operating expenses

This percentage change for the third quarter of 2022 as compared to the prior year third quarter resulted from the following:

Third Quarter

Increase (Decrease) as a

Percentage of Total Revenue

Maintenance expense

Supplies expense

Depreciation expense

This percentage change for the first nine months of 2022 as compared to the prior year resulted from the following:

First Nine Months

(Decrease) Increase as a

Percentage of Total Revenue

Depreciation expense

Other store operating expenses as a percentage of total revenue remained flat at the 23.4% for the first quarter of 2023 as compared to the same period in the prior year primarily as a result of

the following:

First Quarter

(Decrease) Increase as a Percentage of Total Revenue

Advertising expense

Utilities expense

Depreciation expense

Maintenance expense

Other store expenses

The increases in maintenance expenses as a percentage of total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year resulted primarily from

higher expenditures resulting from repair costs due to limited availability of replacement equipment.

The increase in supplies expense as a percentage of total revenue for the third quarter of 2022 as compared to the same period in the prior year resulted primarily from higher costs resulting from

supply chain constraints.

The decrease in depreciation expense as a percentage of total revenue for the third quarter of 2022 as compared to the same period in the prior year was primarily driven by the increase in total

revenue in the third quarter of 2022.

The decreases in depreciation expense, rent expense, advertising expense and utilities expense as a percentage of total revenue in the first nine months of 2022 as compared to the same period in

the prior year were primarily driven by the increase in total revenue in 2022.

The increase in other store expenses as a percentage of total revenue for the first nine months of 2022 as compared to the same period in the prior year resulted primarily from costs associated

with the expansion of our off-premise business.

Utilities expense

The decrease in advertising expense as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from a change in the timing of

holiday television advertising from the first quarter to the second quarter in 2023.

The decrease in depreciation expense as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year was primarily driven by a reduction in capital

expenditures with accelerated depreciation methods.

The increase in maintenance expense as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from higher expenditures for

repair costs due to limited availability of replacement equipment.

The increase in utilities expense as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from higher electricity and

natural gas rates.

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 2022 as compared to the same periods in the prior

The following table highlights general and administrative expenses as a percentage of total revenue for the first quarter of 2023 as compared to the same period in the prior year:

Quarter Ended

Nine Months Ended

General and administrative expenses

This percentage change for the third quarter of 2022 as compared to the prior year third quarter resulted from the following:

Third Quarter

(Decrease) Increase as a

Percentage of Total Revenue

Incentive compensation expense

Payroll and related expense

Travel expense

This percentage change for the first nine months of 2022 as compared to the prior year resulted from the following:

First Nine Months

Decrease as a Percentage

of Total Revenue

Proxy expenses

Incentive compensation expense

The decreases in incentive compensation expense as a percentage of total revenue for the third quarter and first nine months of 2022 as compared to the same periods in the prior year resulted

primarily from lower performance against financial objectives in 2022 as compared to 2021.

The increase in payroll and related expense as a percentage of total revenue for the third quarter of 2022 as compared to the same period in the prior year resulted from an increase in headcount

due to strategic initiatives and an increase in managers-in-training.

Additionally, the Company experienced an increase in travel-related expenses during the third quarter of 2022 as compared to the same period in the prior year.

In the first nine months of 2021, the Company incurred expenses related to a proxy contest initiated by affiliates of Sardar Biglari in connection with the Company’s 2020 annual shareholders

meeting held on November 19, 2020.

Gain on Sale and Leaseback Transaction

On August 4, 2020, the Company completed a sale and leaseback transaction involving 62 of its owned Cracker Barrel stores and recorded a gain of $217,722 which is recorded in the gain on sale and

leaseback transaction line in the Condensed Consolidated Statement of Income in the first quarter of 2021.

See Note 8 to the Condensed Consolidated Financial Statements for additional information regarding this sale and leaseback transaction.

The increase in general and administrative expenses as a percentage of total revenue in the first quarter of 2023 as compared to the same period in the prior year resulted primarily from proxy

contest and settlement expenses in connection with the Company’s calendar year 2022 annual shareholders meeting held on November 17, 2022.

Interest Expense

The following table highlights interest expense, net in dollars for the third quarter and first nine months of 2022 as compared to the same periods in the prior year:

The following table highlights interest expense, net in dollars for the first quarter of 2023 as compared to the same period in the prior year:

Quarter Ended

Nine Months Ended

Interest expense

The decreases in interest expense for the third quarter and first nine months of 2022 as compared to the same periods in the prior year resulted primarily from lower debt levels and lower average

weighted interest rates.

The increase in interest expense for the first quarter of 2023 as compared to the same period in the prior year resulted primarily from higher debt levels and higher average weighted interest

Provision for Income Taxes

The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax rate”) for the third quarter and first nine months of 2022 as compared

to the same periods in the prior year:

The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax rate”) for the first quarter of 2023 as compared to the same period in

the prior year:

Quarter Ended

Nine Months Ended

Effective tax rate

The significant decrease in the effective tax rate from the third quarter of 2021 to the third quarter of 2022 is primarily due to the disproportionate impact of increased tax credits resulting

from lower earnings.

The decrease in the effective tax rate from the first nine months of 2021 to the first nine months of 2022 also resulted primarily from the disproportionate impact of increased tax credits partially offset by the carryback of

2020 federal net operating losses in 2021.

We presently expect our effective tax rate for 2022 to be approximately 12%.

The decrease in the effective tax rate from the first quarter of 2022 to the first quarter of 2023 is primarily due to the disproportionate impact of increased tax credits resulting from lower

We presently expect our effective tax rate for 2023 to be approximately 10% to 15%.

Liquidity and Capital Resources

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Our internally generated cash, along with cash on hand

at July 30, 2021, were sufficient to finance all of our growth, dividend payments, share repurchases, working capital needs, interest payments under our revolving credit facility and other cash payment obligations in the first nine months of 2022.

We believe that cash on hand at April 29, 2022, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, our

continuing expansion plans, share repurchases and working capital needs over the next twelve months.

We believe that cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility will be

sufficient to finance our continuing operations, capital expenditures, interest expense on long-term debt obligations, operating lease obligations, continuing expansion plans, share repurchases and working capital needs beyond the next twelve

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

to their maturity.

Cash Generated From Operations

Our operating activities provided net cash of $106,356 for the first nine months of 2022, representing a decrease from the $212,537 net cash provided during the first nine months of 2021.

decrease primarily reflected higher retail inventory, the timing of payments for accounts payable and certain taxes and higher bonus payments made in 2022 as a result of the prior year’s performance.

at July 29, 2022 and borrowings under our revolving credit facility, were sufficient to finance all of our growth, dividend payments, share repurchases, working capital needs, interest payments under our revolving credit facility and other cash

payment obligations in the first three months of 2023.

We believe that cash on hand at October 28, 2022, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be

sufficient to finance our continuing operations, our continuing expansion plans, share repurchases and working capital needs over the next twelve months.

We believe that cash expected to be generated from our operating activities and the borrowing

capacity under our revolving credit facility will be sufficient to finance our continuing operations, dividend payments, capital expenditures, interest expense on long-term debt obligations, operating lease obligations, continuing expansion plans,

share repurchases and working capital needs beyond the next twelve months.

Our ability to draw on our revolving credit facility is subject to the satisfaction of provisions of the credit facility, as amended, and we believe we will be able to

refinance our revolving credit facility and other debt instruments prior to their maturity.

Cash (Used in) Generated From Operations

Our operating activities used net cash of $600 for the first three months of 2023, representing a decrease from the $23,023 net cash provided during the first three months of 2022.

This decrease

resulted primarily from the timing of payments for accounts payable partially offset by lower bonus payments made in 2023 as a result of the prior year’s performance.

Borrowing Capacity, Debt Covenants and Notes

On September 5, 2018, we entered into the 2019 Revolving Credit Facility, a five-year $950,000 revolving credit facility, which also contains an option to increase the revolving credit facility by

$300,000, of which $260,605 remains.

In the third quarter of 2021, we entered into an amendment to the 2019 Revolving Credit Facility which reduced the commitment amount from $950,000 to $800,000.

At April 29, 2022, we had $80,000 of outstanding borrowings under the 2019 Revolving Credit Facility and $31,896 of standby letters of credit related to securing reserved claims under our workers’

compensation insurance and our July 29, 2020 and August 4, 2020 sale and leaseback transactions, which reduce our borrowing availability under the 2019 Revolving Credit Facility.

At April 29, 2022, we had $688,104 in borrowing availability under

our 2019 Revolving Credit Facility.

During the first nine months of 2022, we borrowed $45,000 and repaid $50,000 of borrowings under the 2019 Revolving Credit Facility.

See Note 4 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

We were in compliance with the 2019 Revolving Credit Facility’s financial covenants at April 29, 2022, and we expect to be in compliance with the 2019 Revolving Credit Facility’s financial covenants for the remaining term.

On June 17, 2022, we entered into a five-year $700,000 revolving credit facility (the “2022 Revolving Credit Facility”) with substantially the same terms and financial covenants as our previous

amended $800,000 revolving credit facility.

The 2022 Revolving Credit Facility also contains an option for the Company to increase the revolving credit facility by $200,000.

At October 28, 2022, we had $190,000 of outstanding borrowings under the 2022 Revolving Credit Facility and $31,896 of standby letters of credit related to securing reserved claims under our

workers’ compensation insurance and our July 29, 2020 and August 4, 2020 sale and leaseback transactions, which reduce our borrowing availability under the 2022 Revolving Credit Facility.

At October 28, 2022, we had $478,104 in borrowing

availability under our 2022 Revolving Credit Facility.

During the first three months of 2023, we borrowed $60,000 under the 2022 Revolving Credit Facility.

See Note 4 to our Condensed Consolidated Financial Statements for further information on

our long-term debt.

Our 2022 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total senior secured leverage ratio and a minimum consolidated

interest coverage ratio.

We were in compliance with the 2022 Revolving Credit Facility’s financial covenants at July 29, 2022, and we expect to be in compliance with the 2022 Revolving Credit Facility’s financial covenants for the remaining term

of the facility.

On June 18, 2021, the Company entered into an issuance and sale of $300,000 aggregate principal amount of 0.625% Convertible Senior Notes due 2026.

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Capital Expenditures and Proceeds from Sale of Property and Equipment

Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $58,807 for the first nine months of 2022 as compared to $44,115 for the same period in the

Capital expenditures (purchase of property and equipment) net of proceeds from insurance recoveries were $21,626 for the first three months of 2023 as compared to $14,053 for the same period in the

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

The increase in capital expenditures from the first nine months of 2021 to

the first nine months of 2022 resulted primarily from capital expenditures for existing stores.

We estimate that our capital expenditures during 2022 will be approximately $90,000.

This estimate includes the acquisition of sites and construction

costs of new MSBC locations that have opened or that we expect to open during 2022, as well as for acquisition and construction costs for new Cracker Barrel and MSBC locations that we plan to be opened in 2023.

We intend to fund our capital

expenditures with cash generated by operations and borrowings under our 2019 Revolving Credit Facility, as necessary.

The proceeds from sale of property and equipment were $44 for the first nine months of 2022 as compared to $149,910 for the same period in the prior year.

This decrease primarily relates to the

sale and leaseback transaction entered into during the first quarter of 2021.

See Note 8 to the Condensed Consolidated Financial Statements for additional information regarding this sale and leaseback transaction.

The increase in capital expenditures from the first three months of 2022

to the first three months of 2023 resulted primarily from capital expenditures for existing stores and an increase in the number of new store locations as compared to the prior year.

We estimate that our capital expenditures during 2023 will be

approximately $125,000.

This estimate includes the acquisition of sites and construction costs of new MSBC locations that have opened or that we expect to open during 2023, as well as for acquisition and construction costs for new Cracker Barrel

and MSBC locations that we plan to be opened in 2024.

We intend to fund our capital expenditures with cash generated by operations and borrowings under our 2022 Revolving Credit Facility, as necessary.

Dividends, Share Repurchases and Share-Based Compensation Awards

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Facility, provided there is no default existing and the total of our availability under the 2022 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 2022, we paid regular dividends of $3.60 per share and declared a dividend of $1.30 per share that was subsequently paid on May 3, 2022, to shareholders of record on

April 18, 2022.

In addition, in the fourth quarter of 2022, our Board of Directors approved a regular dividend payable on August 5, 2022 to shareholders of record on July 15, 2022 of $1.30 per share.

In September 2021, we were authorized by our Board of Directors to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $100,000.

the first nine months of 2022, we repurchased 615,876 shares of our common stock in the open market at an aggregate cost of $73,417 pursuant to this authorization.

In the fourth quarter of 2022, we were authorized by our Board of Directors to

repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $200,000;

this authorization replaced the previous unused portion of the previous $100,000 authorization.

During the first nine months of 2022, we issued 31,030 shares of our common stock resulting from the vesting of share-based compensation awards.

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 senior secured leverage ratio is 2.75 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 2.75 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 three months of 2023, we paid a regular dividend of $1.30 per share and declared a dividend of $1.30 per share that was subsequently paid on November 8, 2022, to shareholders of

record on October 21, 2022.

In the fourth quarter of 2022, we were authorized by our Board of Directors to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of

During the first three months of 2023, we repurchased 120,958 shares of our common stock in the open market at an aggregate cost of $12,448 pursuant to this authorization.

During the first three months of 2023, we issued 34,982 shares of our common stock resulting from the vesting of share-based compensation awards.

Related tax withholding payments on these

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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 negative working capital of $171,509 at April 29, 2022 versus negative working capital of $111,666 at July 30, 2021.

The change in working capital from July 30, 2021 to April 29, 2022

primarily resulted from a decrease in cash partially offset by higher inventory levels.

We had negative working capital of $138,279 at October 28, 2022 versus negative working capital of $185,048 at July 29, 2022.

The change in working capital from July 29, 2022 to October 28, 2022

primarily resulted from the timing of payments for accounts payable and the increase in retail inventory levels.

Higher retail inventories resulted primarily from the build of retail inventory to support our expected holiday sales and earlier

receipt of product to ensure on-time delivery for sale in our stores.

Off-Balance Sheet Arrangements

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the section entitled “Liquidity and Capital Resources” presented in the MD&A of our 2022 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.

The adoption of the accounting guidance on income taxes discussed

in Note 1 did not have a significant impact on our consolidated financial position or results of operations.

See Note 1 regarding the impact of the adoption of the convertible instruments guidance.

Critical Accounting Estimates

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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 2022, and we do not believe that there is a reasonable likelihood that there will

We have not made any material changes in our methodology for assessing impairments during the first three months of 2023, 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.

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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 2022 and do not believe there is a reasonable likelihood that there

We have not made any material changes in the methodology used to establish our insurance reserves during the first three months of 2023 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.

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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 2022 and do not believe there is a

We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories during the first three months of 2023 and do not believe there is a

reasonable likelihood that there will be a material change in the estimates or assumptions in the future.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis