Cracker Barrel(US:CBRL)2024-12-04 17:24PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 FY2025 show slight asset growth, decreased operating income, and net cash usage from operations Condensed Consolidated Balance Sheets Total assets increased slightly to $2.19 billion, driven by inventories, while long-term debt rose and equity remained stable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Nov 01, 2024 | Aug 02, 2024 | | :--- | :--- | :--- | | Total Assets | $2,192,996 | $2,161,494 | | Inventories | $201,915 | $180,958 | | Property and equipment – net | $966,557 | $959,821 | | Total Liabilities | $1,752,296 | $1,721,345 | | Long-term debt | $527,023 | $476,581 | | Total Shareholders' Equity | $440,700 | $440,149 | Condensed Consolidated Statements of Income Q1 FY2025 saw revenue increase by 2.6% to $845.1 million, but operating and net income declined due to higher expenses Quarterly Income Statement Summary (in thousands, except per share data) | Metric | Q1 FY2025 (ended Nov 01, 2024) | Q1 FY2024 (ended Oct 27, 2023) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $845,089 | $823,839 | +2.6% | | Operating Income | $7,071 | $11,413 | -38.0% | | Net Income | $4,844 | $5,456 | -11.2% | | Diluted EPS | $0.22 | $0.25 | -12.0% | Condensed Consolidated Statements of Cash Flows Operating cash usage improved to $4.4 million, but increased investing activities led to a net cash decrease of $0.5 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Nov 01, 2024 | Three Months Ended Oct 27, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,395) | $(15,797) | | Net cash used in investing activities | $(38,753) | $(24,598) | | Net cash provided by financing activities | $42,647 | $29,162 | | Net decrease in cash | $(501) | $(11,233) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, debt structure, revenue recognition, and operating lease disclosures for the financial statements - The company operates a single reportable segment, Cracker Barrel Old Country Store, with all operations located within the United States55 Revenue Disaggregation (in thousands) | Revenue Source | Q1 FY2025 (ended Nov 01, 2024) | Q1 FY2024 (ended Oct 27, 2023) | | :--- | :--- | :--- | | Restaurant | $683,271 | $660,793 | | Retail | $161,818 | $163,046 | | Total Revenue | $845,089 | $823,839 | - Gift card breakage revenue recognized in Q1 2025 was $9.2 million, a substantial increase from $3.2 million in the prior-year quarter65 - As of November 1, 2024, the company had $230 million in outstanding borrowings under its $700 million revolving credit facility and $297 million (net carrying amount) of 0.625% convertible senior notes due in 20263648 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 FY2025 financial performance, strategic transformation, and liquidity, noting revenue growth and declining operating income Overview and Strategy The company's long-term strategy focuses on relevancy, food, and profitability, with a five-pillar transformation plan including store remodels - The company's strategic transformation plan is built on five key pillars: - Refining the brand - Enhancing the menu - Evolving the store and guest experience - Winning in digital and off-premise - Elevating the employee experience95 Results of Operations Q1 FY2025 revenue rose 2.6% due to higher prices, but guest traffic declined, leading to a drop in operating income percentage Q1 2025 Key Performance Indicators vs. Q1 2024 | Metric | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Comparable Restaurant Sales | +2.9% | -0.5% | | Comparable Retail Sales | -1.6% | -8.1% | | Comparable Restaurant Guest Traffic | -2.9% | -7.1% | | Average Check Increase | +5.8% | +6.6% | - The decrease in guest traffic is attributed to lower consumer demand from macroeconomic factors like inflation, higher interest rates, and lower savings rates112 - General and administrative expenses increased to 7.1% of revenue from 5.9%, driven by costs related to a wage arbitration settlement ($3.3M), a proxy contest ($3.0M), and the strategic transformation plan (~$3.3M)128 - An impairment charge of $0.7 million was recorded for two underperforming Maple Street Biscuit Company (MSBC) locations129 Liquidity and Capital Resources Liquidity is supported by operations and a $700 million credit facility, with significant capital expenditure increases planned for strategic transformation - The company plans to increase capital expenditures to approximately $600 million to $700 million over the three-year period from 2025 to 2027139 - At the end of the quarter, the company had $230 million outstanding on its revolving credit facility and was in compliance with all financial covenants141142 - The company paid a regular dividend of $0.25 per share during the quarter146 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, with a $2.3 million impact for a 1% rate change - The company is exposed to interest rate risk on its $230 million of outstanding borrowings under its revolving credit facility160 - A one-percentage point increase or decrease in interest rates on the outstanding variable-rate debt would result in an approximate $2.3 million impact on pre-tax annualized earnings161 Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that as of November 1, 2024, the company's disclosure controls and procedures were effective163 - No material changes were made to the internal control over financial reporting during the quarter164 PART II. OTHER INFORMATION Risk Factors No material changes occurred in the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been no material changes in the risk factors from those disclosed in the 2024 Form 10-K165 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter166 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act as exhibits170 Signatures