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Description of the Business
12 Months Ended
Jul. 31, 2020
Description of the Business [Abstract]  
Description of the Business
1. Description of the Business


Cracker Barrel Old Country Store, Inc. and its affiliates (collectively, in the Notes, the “Company”) are principally engaged in the operation and development in the United States (“U.S.”) of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.
 

COVID-19 Impact and Company Response


In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) to be a pandemic.  In an effort to contain and mitigate the spread of COVID-19, federal, state and local governmental authorities have imposed unprecedented restrictions on travel, group gatherings and non-essential activities, such as “social distancing” guidance, shelter-in-place orders and limitations on or full prohibitions of dine-in services.


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


Operating Initiatives


In response to the COVID-19 pandemic and the orders and guidance from U.S. federal and applicable state and local governmental authorities, in March 2020, the Company temporarily closed the dining rooms in all of its restaurants and operated with pick-up and delivery only.  In order to support its off-premise business model, the Company implemented various changes to its Cracker Barrel offerings, including a limited menu and multi-serving takeout family meal baskets, the expansion of third-party delivery services and the implementation of various operating model changes, including contactless curbside delivery.  For a portion of the third quarter of 2020, all of the Company’s restaurant operations were limited to pick-up and delivery orders with no dine-in service.  Thereafter, the Company was able to resume dine-in services at a limited number of restaurants, but with continuing limitations on capacity.  The Company’s dine-in services have been and continue to be limited to occupancy levels well below capacity, and some locations are not currently open at all for dine-in service.  As of September 16, 2020, thirteen of the Company’s restaurants had not opened dine-in services to some extent.  The Company has taken a cautious approach to reopening dining rooms and has instituted operational protocols to comply with applicable regulatory requirements and to monitor developing health authority recommendations in order to protect the health and foster the confidence of employees and guests.  The adverse impacts of the COVID-19 pandemic resulted in the Company testing its restaurant long-lived assets for recoverability.  As a result of this analysis, the Company recorded impairment charges of $22,496 due to the deterioration in operating performance of certain Cracker Barrel and Maple Street Biscuit Company (“MSBC”) locations.


Expense Reductions


The Company made significant reductions in operating expenses to reflect reduced operations and sales levels as well as eliminating non-essential spending where feasible.  The Company furloughed employees and eliminated a significant number of positions at all levels both at the corporate headquarters and in the field.  The Company recorded severance expenses of $3,956 related to the elimination of 469 positions in 2020. The Company also implemented pay reductions for the remainder of the fiscal year for corporate officers, reduced cash retainers payable to the Company’s Board of Directors and temporarily suspended matches to its defined contribution plans through the end of fiscal 2020.  Additionally, the Company adapted its labor model, instituted inventory management measures and negotiated revised terms with landlords and vendors.


Liquidity Initiatives


As a precautionary measure and in order to increase its cash position and provide financial flexibility given the uncertainty in the market caused by the COVID-19 pandemic, in March 2020, the Company borrowed the remaining availability under its revolving credit facility (approximately $471,700, including $6,700 of standby letters of credit) and, in May 2020, the Company exercised the accordion feature under the revolving credit facility in order to borrow an additional amount of $39,395.


To further preserve available cash, the payment of the dividend that was declared on March 3, 2020 was deferred until September 2, 2020.  On that date, the Company paid an aggregate amount of $30,807 in respect of the deferred dividend.  Other than the payment of the deferred dividend, the Company suspended all further dividend payments until further notice.  The Company also temporarily suspended all share repurchases under its previously announced $25,000 share repurchase program.  In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, the Company decided not to invest further resources or otherwise provide additional funding to PBS HoldCo, LLC (see Note 3, “Equity Investment” for further information regarding the Company’s strategic relationship with PBS HoldCo, LLC).


On March 27, 2020, P.L. 116-136, the Coronavirus Aid, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains several provisions offering liquidity to businesses.  The Company has benefited and will continue to benefit from two of these provisions that allowed the Company to recover a portion of qualifying retention pay and health expenses paid to furloughed employees and to defer a portion of employment taxes until calendar 2021 and calendar 2022.


As a result of the actions taken by management, the Company had $436,996 in cash and cash equivalents at July 31, 2020.  In order to maintain and bolster its cash reserves and further strengthen its balance sheet in response to the COVID-19 pandemic, in July 2020, the Company entered into an agreement with the original lessor and a third party financier to obtain ownership of 64 Cracker Barrel properties and simultaneously entered into a sale and leaseback transaction with the financier and, in August 2020, the Company completed a sale and leaseback transaction pursuant to which the Company sold a total of 62 Cracker Barrel owned properties and received net proceeds, after fees and expenses, of $146,357. See Note 11, “Leases” for additional information regarding these sale and leaseback transactions.