UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Cracker Barrel Old Country Store, Inc. (the “Company”) used the following investor presentation in meetings beginning on November 5, 2012, after 4:30 p.m. Central Time. This investor presentation was also posted to the “Proxy Contest” section of the Company’s Investor Relations website, investor.crackerbarrel.com.
 On the
Right Track, Generating Exceptional Performance
Fall 2012
WHY
WE
BELIEVE
SARDAR
BIGLARI
IS
WRONG
FOR
THIS
BOARD |
 IMPORTANT
ADDITIONAL INFORMATION 1
Cracker Barrel Old Country Store, Inc. (“the Company”) urges caution in
considering current trends and earnings guidance disclosed in this
presentation. Except for specific historical information, matters discussed in this presentation are forward looking statements
that involve risks, uncertainties and other factors that may cause actual results and
performance of the Company to differ materially from those expressed or
implied in this discussion. All forward-looking information is provided pursuant to the safe harbor
established under the Private Securities Litigation Reform Act of 1995.
More detailed information on risks, uncertainties, and other factors is provided in
the Company’s filings with the Securities and Exchange Commission, press
releases and other communications. Cracker Barrel, its directors and certain of
its executive officers may be deemed to be participants in the solicitation of proxies
from Cracker Barrel shareholders in connection with the matters to be considered at
Cracker Barrel’s 2012 Annual Meeting. On October 4, 2012, Cracker Barrel
filed a definitive proxy statement (as it may be amended, the “Proxy Statement”) with the U.S.
Securities and Exchange Commission (the “SEC”) in connection with any such
solicitation of proxies from Cracker Barrel shareholders.
INVESTORS
AND
SHAREHOLDERS
ARE
STRONGLY
ENCOURAGED
TO
READ
THE
PROXY
STATEMENT
AND
ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION. Detailed information regarding the identity
of
potential
participants,
and
their
direct
or
indirect
interests,
by
security
holdings
or
otherwise,
is
set
forth
in
the
Proxy Statement, including Annex A thereto. Shareholders can obtain the Proxy
Statement, any amendments or supplements to the Proxy Statement and other
documents filed by Cracker Barrel with the SEC for no charge at the SEC’s website at
www.sec.gov. Copies will also be available at no charge at the Investor Relations
section of our corporate website at www.crackerbarrel.com.
|
 2
I.
Executive Summary
II.
Delivering on our Six Priorities
III.
Driving Best-in-Class Results
IV.
Why We Believe Sardar Biglari is Wrong for This Board
Appendix
Table of Contents |
 I.
Executive Summary |
 4
Improve same store sales
and traffic trends
Accelerating same store sales
growth in last three quarters with Q4
traffic up 1.4%
Cut costs and leverage fixed
costs to enhance profitability
FY 2012 operating margin growth of
50 bps
Reconfigure the Board with
new members bringing a
fresh perspective
7
new
board
members
1
,
including
a
new
independent
Chairman
2
Fill in key management
positions to enhance
functional capabilities
Revitalized
leadership
–
five
senior
executives new to Cracker Barrel or
serving in new positions since
January 2011
Develop a long-term plan to
maintain operating
momentum
Same store sales outperforming
casual dining peers in Knapp-
Track™
for three consecutive
quarters
WHAT WE HAVE ACCOMPLISHED IN THE PAST YEAR
Delivering on the Company’s Promises
(1)
Changes to board since 20-Jun-2011.
(2)
As announced on 6-Aug-2012, to be effective following Michael A.
Woodhouse’s retirement in early November 2012. |
 5
CBRL STOCK PRICE HAS INCREASED SIGNIFICANTLY
Since Announcement of Our Strategic Priorities We Have Delivered
Outstanding Shareholder Returns
Source: Bloomberg, public filings, Company press releases, and IBES
Note: 12-Sep-2011; is closing price the day prior to announcement of
Strategic Priorities on 13-Sep-2011. Please see Appendix for reconciliation of
GAAP basis operating results to adjusted non-GAAP operating results.
(1) Figure used for comparability to IBES estimates is GAAP basis, earnings
per diluted share of $1.47. When adjusted for the impact of the extra week
in FY’
12 and certain charges in the current and prior year, adjusted earnings per
diluted share were $1.20. $30
$40
$50
$60
$70
Sep-2011
Nov-2011
Jan-2012
Mar-2012
May-2012
Jul-2012
Sep-2012
Daily from 12-Sep-2011 to 28
-Sep-2012
22-Nov-2011
CBRL reports 1Q12 EPS
of $1.09 excl. proxy costs,
4.8% higher than analyst
expectations
20-Dec-2011
A majority of
shareholders vote for
CBRL's slate of directors
22-May-2012
CBRL reports 3Q12 EPS of
$0.86 excl. proxy costs, 16.2%
higher than analyst
expectations
$39.86
$67.11
19-Sep-2012
CBRL reports 4Q12 EPS
1
of $1.47, 13.1% higher
than analyst expectations
26-Apr-2012
CBRL hosts Analyst and
Investor Day reviewing
strategic initiatives
21-Feb-2012
CBRL reports 2Q12 EPS of
$1.20 excl. proxy costs, 5.3%
higher than analyst expectations
13-Sep-2011
New CEO Sandy
Cochran announces
strategic priorities
68.4% INCREASE |
 6
Since December 2011 Proxy Vote
2
Since Announcement of Our Strategic Priorities
1
CBRL HAS SIGNIFICANTLY OUTPERFORMED ITS PEERS
No Matter What Benchmark You Use, CBRL Has Outperformed
Source: Bloomberg
Cracker Barrel
Peer Set
S&P 500 Restaurant Index
S&P 600 Restaurant Index
S&P 1500 Restaurant Index
S&P 500 Index
Note:
Peer
set
includes
BH,
BOBE,
EAT,
CAKE,
DRI,
DENN,
RT,
TXRH.
S&P
Restaurant
Index
includes
the
restaurant
companies
in
the
S&P
500
Index:
CMG,
DRI,
MCD,
SBUX, YUM. S&P 600 Restaurant Index includes the restaurant companies in
the S&P 600 Index: BJRI, BH, BWLD, CEC, CBRL, DIN, JACK, PZZA, PEET, RRGB, RT,
RUTH, SONC, TXRH. S&P 1,500 Restaurant Index includes the restaurant
companies in the S&P 1,500 Index: BJRI, BH, BOBE, EAT, BWLD, CEC, CAKE, CMG, CBRL, DRI,
DIN, JACK, MCD, PNRA, PZZA, PEET, RRGB, RT, RUTH, SONC, SBUX, TXRH, WEN, YUM.
(1)
12-Sep-2011; is closing price the day prior to announcement of Strategic
Priorities on 13-Sep-2011. (2)
20-Dec-2011; date of CBRL’s 2011 Annual General Meeting, proxies
voted. |
 7
OUR SHAREHOLDERS HAVE BENEFITED FROM OUR
PERFORMANCE AND RETURN OF CAPITAL POLICIES
($ in millions)
Source: Public filings and Bloomberg
Note: 12-Sep-2011; is closing price the day prior to announcement of
Strategic Priorities on 13-Sep-2011. $ 663.5
$22.4
$915.8
$14.9
$1,616.6
CBRL Equity
Market Cap.
Total
Shareholder
Value
12-Sep-2011
Increase in
CBRL Equity
Market Cap.
28-Sep-2012
Increase in
CBRL Equity
Market Cap.
= $700.7
FY 2012
Dividends Paid
FY 2012
Shares Repurchased
28-Sep-2012 |
 8
WE BELIEVE THIS VALUE CREATION RESULTS FROM
SUCCESSFUL EXECUTION OF OUR STRATEGIC PRIORITIES
Source: Public filings
Note: Announcement of Strategic Priorities on 13-Sep-2011.
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Comparable Restaurant
Traffic
(4.2)%
(3.8)%
1.1 %
0.6 %
1.4 %
Average Check
2.8 %
2.2 %
2.4 %
2.5 %
2.4 %
Comparable Restaurant
Sales
(1.4)%
(1.6)%
3.5 %
3.1 %
3.8 %
Comparable Retail Sales
(0.7) %
(1.3)%
3.4 %
0.3 %
3.1%
Our Customers Have Responded to Focus on Menu, Marketing, and Execution
Announcement
of Our Strategic
Priorities |
 9
WHY WE ARE HERE…AGAIN
Despite losing by a significant margin in last year's proxy fight, Sardar Biglari
remains inexplicably insistent in his campaign against Cracker
Barrel. Why do we say “inexplicably?”
Because of all we accomplished over the past year
What would Biglari have done differently?
–
We don’t know –
he hasn’t raised specific new ideas or suggestions to
management
or
the
Board,
despite
having
many
opportunities
to
do
so
We
believe
Sardar
Biglari
has
a
conflict
of
interest,
a
history
of
“creeping
control”
that
is not in the best interest of shareholders, and a questionable track record on
corporate governance
Despite being offered two independent seats (for the second year), he turned the
offer down
–
Biglari refuses to consider any settlement offer unless he is personally appointed
to the Board
–
Our shareholders determined he was not right for the Board last year
•
We agreed and believe he is not right for the Board this year either
This discussion should be about the business and who’s got it on the right
path |
 II.
Delivering on our Six Priorities |
 11
New marketing messaging
Reinforce Authentic Value
Refined menu and pricing
Increase Variety & Everyday Affordability
Enhanced restaurant operating
platform
Sustainably Improve the Guest
Experience
Innovative tactics driving retail
sales growth
Deliver Value & Connection With the
Brand
Focused cost reduction
Offset Commodity Pressures and Other
Costs
Balanced approach to capital
allocation
Enhance Shareholder Value
WHAT WE TOLD YOU WE’D DO 12 MONTHS AGO
1
2
3
4
5
6
Key Priorities
Objectives |
 12
(4.2%)
(3.8%)
1.1%
0.6%
1.4%
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
NEW MARKETING MESSAGE
“Hand Crafted by Cracker Barrel”
Source: Public filings
1
Launched
national
cable
advertising
for
the
first
time,
focusing
on
brand building during the busiest seasons (Q2 & Q4)
Utilized radio advertising to promote products and value
Leveraged billboards to support travel business
Hired new advertising agency Havas Worldwide (formerly known as
Euro RSCG Worldwide)
Continued Investment in Billboards
First National Television Campaign
Comparable Restaurant Traffic |
 REFINE
MENU AND PRICING Guest
Satisfaction
Results
Show
Overall
Value
Scores
at
Historic
Highs
2
Better-
For-You
Daily
Lunch
Specials
Highlighted an attractive $5.99 price point
Drove week-day lunch traffic
Reinforced value perception across all day-parts
13
Launched salad refresh as part of the
summer seasonal promotion
–
Feature salad, including dressing
and crackers, under 600 calories
–
Exceeded expectations for mix and
guest satisfaction |
 14
3
During the year, received all-time company high scores in nine categories on
the guest feedback program
For the second year in a row we have received top honors in the family dining
segment of the Consumer Picks
survey
conducted
for
Nation’s
Restaurant
News
magazine
Past Year’s Focus on Guest Experience Has Driven Significant Improvements to
Guest Satisfaction Overall Satisfaction
Intent to Recommend
Overall Value
ENHANCE RESTAURANT OPERATING PLATFORM
July-2011
July-2012
69.7%
70.6%
July-2011
July-2012
70.0%
71.0%
July-2011
July-2012
59.1%
61.1%
Rank¹
Chain
Score²
1
Cracker Barrel Restaurant and Old Country Store
70.3%
2
Marie Callender's
3
62.1
3
Bob Evans Restaurants
61.2
4
The Original Pancake House
3
59.7
5
IHOP
53.5
6
Steak ‘N Shake
52.1
7
Village Inn
51.9
8
Perkins Restaurant & Bakery
51.5
9
Big Boy
50.2
10
Friendly’s Ice Cream
47.5
11
Shoney’s
45.5
12
Huddle House
44.8
13
Denny’s
43.9
14
Waffle House
41.4
(1) Source: Nation's Restaurant News and WD Partners, 2012 Consumer Picks
family dining segment survey.
(2) Weighted by attribute importance. (3) 100-149
responses.
3 |
 15
INNOVATIVE TACTICS DRIVING RETAIL SALES GROWTH
Game Plan for Growing Retail Sales…
Source: Public filings
Quarterly Retail Same Store Sales
4
Merchandising
Strategy
Support the restaurant
by reinforcing the
emotional connection to
the Brand
Be a destination retailer
for specific occasions
and drive traffic for the
restaurant
Unique
Nostalgic
Seasonal
Everyday Needs
(0.7)%
(1.3)%
3.4%
0.3%
3.1%
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
April-2012: Appointed new SVP of
Retail, Laura Daily |
 16
FOCUSED COST REDUCTION
5
Improving Productivity of the Box
Eliminating Annual G&A and Labor Expenses
April-2012: Realigned field leadership
July-2011: Restructured home office
Labor Management System
Improves direction of weekly training, productivity,
and execution
Hourly wage expense down 50bps in Q4 2012
Transportation Management System
Improves efficiency in the distribution of retail
merchandise
Improved
Technology
Streamlined
Supply
Chain and
Purchasing
Increasing
Labor
Productivity
Enhanced
Operating
Systems
Leveraging Our Support Cost Base
Source: Public filings
(1)
Adjusted
for
53
week
in
FY’12,
proxy
contest
expenses,
severance
and
restructuring
charges.
Please
see
Appendix
for
reconciliation
of
GAAP basis
operating
results
to
adjusted
non-GAAP
operating
results.
rd
Margin and Process Improvement
Adjusted EPS
&
Operating Inc as % of Sales
1 |
 17
BALANCED APPROACH TO CAPITAL ALLOCATION
Source: Bloomberg and public filings
Note: Market data as of 28-Sep-2012.
(1) Calculated as latest annualized latest dividend per
share divided by last twelve months reported diluted earnings per share. Adjusted diluted
earnings per share and / or diluted earnings per share from continuing operations
used as disclosed. (2) Adjusted
for
53
rd
week
in
FY’12,
proxy
contest
expenses,
severance
and
restructuring
charges.
Please
see
Appendix
for
reconciliation
of
GAAP basis operating results to adjusted non-GAAP operating
results. (3) CAKE
not
adjusted
for
impact
of
53
rd
week
in
FY’11
due
to
lack
of
disclosure.
6
Dividend Yield
Dividend Payout Ratio
1
2.1 %
3.0 %
3.6 %
2.8 %
2.3 %
2.1 %
1.3 %
0.0 %
0.0 %
0.0 %
CBRL -
One
CBRL
DRI
BOBE
EAT
TXRH
CAKE
BH
DENN
RT
Peer Median: 1.7%
20.5 %
46.1 %
54.6 %
45.6 %
40.8 %
38.3 %
27.6 %
0.0 %
0.0 %
0.0 %
CBRL -
One
CBRL
DRI
BOBE
EAT
TXRH
CAKE
BH
DENN
RT
Peer Median: 32.9%
2
3
Year Ago
Year Ago |
 III.
Driving Best-in-Class Results |
 19
Sales Growth
~5%
Operating Income Growth
~8-10%
Earnings Per Share Growth
~12-15%
Total Shareholder Return
~15-18%
Decisive Action Driving
Total Shareholder
Return
BUILDING ON OUR RECENT SUCCESS
Continued focus on six business priorities
Focus on increasing average unit volume in existing stores
Increase retail sales with unique and nostalgic merchandise
Drive increased profitability in existing locations
Continued commitment to profitable new unit growth
Allocate capital in a way to maximize value
–
New store growth: 2-3% / per year; focus on most profitable growth, best
locations, and flawless execution
Extend the power of the brand beyond the physical store
Long term value creation through e-commerce & development of branded
products platform Focus on Operational Excellence in Existing Units AND
Profitable New Restaurant Growth
2012 –
2015 Strategic Plan |
 20
ACCELERATION OF COMPARABLE RESTAURANT SAME STORE
SALES VS. KNAPP-TRACK™
Three
Consecutive
Knapp-Track™
Beats
in
FY
2012
Source:
Public
filings
and
Knapp-Track™
Note:
Knapp-Track™
Casual
Dining
Index
Comparable
Sales
figure
is
an
approximation
based
on
respective
weekly
averages.
Cracker Barrel vs.
Knapp-Track™
(2.5)%
1.3%
2.1%
3.5%
(1.6)%
3.5 %
3.1 %
3.8 %
0.9 %
2.2 %
1.0 %
0.3 %
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Cracker Barrel Comparable Restaurant Sales
Knapp-Track
TM
Casual
Dining
Index
Comparable
Sales |
 21
A SECTOR LEADER IN TOTAL SHAREHOLDER RETURN
TSR Since Announcement of our Strategic Priorities
1
Source: Bloomberg and public filings
Note: Total Shareholder Return calculated by share price appreciation and
dividends paid (assumes dividends paid are re-invested into the stock
(purchasing more shares) on the ex-date of the dividend) over the past
year. (1) 12-Sep-2011; is closing price the day prior to
announcement of Strategic Priorities on 13-Sep-2011. |
 22
Refresh Select Menu Categories
Reinforce value proposition for guests with a
refresh of Country Dinner Plates
Introduce better-for-you programs, including new
sides and Wholesome Fixins’
Grow Retail Sales with Unique
Merchandise
Focus on unique, exclusive, authentic
merchandise
Improve productivity with visual merchandising
and space planning
Build on Successful Handcrafted
Marketing Campaign
Continue national media strategy
Introduce new “Hand-crafted”
creative
advertisements for TV, radio, and billboards
Invest in and Leverage Technology to
Support Operations and Reduce Costs
Implement technology to improve efficiencies and
food quality
Streamline processes to increase labor
productivity
Focus on Maximizing
Shareholder Returns
Target 2
-3% annual new unit growth over the
next three years
Pay competitive dividends and repurchase shares
Improve E-commerce Business
and Develop Branded Products
Platform
Grow e-commerce awareness and revenues
Lay groundwork to sell Cracker Barrel branded
products in grocery stores
UPDATED BUSINESS PRIORITIES TO CONTINUE DRIVING
PERFORMANCE THROUGH 2013
Key Priorities
Objectives
1
2
3
4
5
6 |
 23
A RENEWED BOARD HELPING TO DRIVE PERFORMANCE
Note: Represents board changes as implemented or announced. Represents
Board members standing for election at Cracker Barrel 2012 Annual
Shareholder Meeting.
(1) As announced on 6-Aug-2012, to be effective following Michael A.
Woodhouse’s retirement in early November 2012. Independent
New Within Past 18 Months
Tom Barr, Vice President, Global Coffee, at Starbucks Coffee Company
Sandy
Cochran,
President
and
CEO,
Cracker
Barrel
and
former
CEO,
Books-A-Million
James Bradford, Dean of Vanderbilt’s Owen Graduate School of Management and
former President and CEO
of
AFG
Industries,
Inc.;
Designated
Independent
Chairman
of
the
Board
of
Cracker
Barrel
¹
Glenn Davenport, Retired Chairman and CEO, Morrison Management Specialists
Norman Johnson, Executive Chairman and Former CEO, CLARCOR Inc.
William
McCarten,
Chairman
of
the
Board,
DiamondRock
Hospitality
Company
and
former
President
and
CEO, HMS Host Corporation
Coleman
Peterson,
President
and
CEO,
Hollis
Enterprises,
LLC
and
former
EVP
and
Chief
People
Officer,
Wal-Mart Stores, Inc.
Richard
Dobkin,
retired
Managing
Partner
of
the
Tampa,
FL
office
of
Ernst
&
Young
Martha Mitchell, retired Senior Partner and SVP, Fleishman-Hillard,
International Communications Andrea Weiss, President and CEO, Retail
Consulting and former Chairman, Cortefiel Group |
 24
ANALYSTS CONTINUE TO COMMENT FAVORABLY ON THE STRATEGY
PUT FORTH BY THE INCUMBENT BOARD AND NEW MANAGEMENT…
Selected Analyst Commentary
Source: Publicly available equity research reports, permission to use
quotations neither sought nor obtained “In
our
view,
CBRL
is
generating
positive
growth
in
traffic–not
just
comps–thanks
to
its
effective
communication
of
its
revamped
value
strategy
and
we
expect
sales
momentum
to
continue.
At
the
same
time,
management
continues
to
hone
the
efficiency
of
operations
which
we
argue
is
a
key
ingredient
of
CBRL’s
earnings
power
and
we
anticipate
this,
in
conjunction
with
positive
sales
and
traffic
growth,
will
offset
the
effect
of
higher
food
costs
in
the
next
12
months.”
-
Stephen Anderson, Miller Tabak; 19-Sep-2012
“We
credit
management’s
outreach
to
local
customers
–
which
account
for
about
60%
of
CBRL’s
customer
base–with
sustained
same-restaurant
sales
gains.
Specifically,
we
think
management’s
barbell
strategy
of
appealing
to
value
customers
(e.g.,
$5.99
lunch
entrées)
and
customers
seeking
non-traditional
menu
options
(e.g.,
seasonal
and
“better
for
you”
menu
items)
with
helping
CBRL
boost
both
sales
and
traffic.”
-
Stephen Anderson, Miller Tabak; 19-Sep-2012
“Since
taking
the
CEO
reigns
(sic)
in
2011,
Sandy
Cochran
identified
several
enhancements
that
have
improved
CBRL
same-
restaurant
sales
(SRS)
and
traffic
trend
we
believe
the
impact
of
these
changes
will
continue
benefiting
SRS
and
traffic.
In
addition,
the
Company
has
identified
$30
million-$45
million
in
cumulative
cost
savings
that
should
be
realized
by
year-end
FY15,
contributing
roughly
100
bps
to
EBIT
margin
improvement
during
the
next
three
years
Lastly,
management
appears
receptive
to
returning
more
capital
to
shareholders
in
terms
of
dividends
and
share
repurchases.”
-
Christopher O'Cull, KeyBanc Capital Markets; 12-Jul-2012
“Under
the
leadership
of
CEO
Sandy
Cochran
management
has
taken
increasingly
proactive
steps
to
enhance
its
core
and
iconic
Old
Country
Store
brand;
refine
and
increase
the
relevancy
of
its
food,
service
and
retail
products;
and
improve
the
marketing
of
its
concept
to
a
broadened
consumer
marketplace.”
-
Bob Derrington, Northcoast Research; 28-Jun-2012
;
.
,
,
,
, |
 IV. Why We Believe Sardar Biglari is Wrong for This
Board |
 26
WHY WE BELIEVE SARDAR BIGLARI IS STILL WRONG FOR THIS
BOARD
New Cracker Barrel CEO and reconfigured Board laid out a new plan and are
successfully executing that plan –
we believe Biglari would be disruptive to current business momentum
We believe
Biglari’s
presence
on
our
Board
would
create
a
conflict
of
interest
–
he
is
the
CEO
of
a
family
restaurant chain and CEO of a restaurant acquisition vehicle
We believe Biglari would want to be operationally involved but has failed to
disclose his specific plans or agenda for the business, either to management
or directly to the Board His repeated public pronouncements highlight his
combative approach – was offered two independent
board seats for representation (twice) but turned BOTH offers down
Biglari has a history of “creeping control”
that we believe is not in the best interest of shareholders:
took control of Steak ‘n Shake over time without paying a premium
We believe Biglari has a questionable track record on corporate governance:
still proposing dual class of high vote / low vote stock at Biglari Holdings
and proposed excessive compensation for himself at Biglari Holdings which
received negative shareholder and ISS responses Biglari Holdings just agreed
to pay a $850,000 civil penalty to resolve a Federal Trade Commission
complaint for failing to comply with the Hart-Scott-Rodino Act in amassing
its initial position in Cracker Barrel –
a violation the FTC’s Chairman characterized as trying to abuse the law’s
“passive investor” exemption |
 27
Nominee
ISS Recommendation
Glass Lewis Recommendation
Sardar Biglari
Philip Cooley
PROXY ADVISORY FIRMS AGREE –
VOTE THE WHITE
PROXY CARD
Source: ISS Proxy Advisory Services report (Institutional Shareholder
Services) and Proxy Paper report (Glass, Lewis & Co.); both respectively dated 2-
Nov-2012
Note: Permission to use information neither sought nor obtained.
Our Board Was Fully Recommended on 2-Nov By ISS and Glass Lewis
Biglari Holdings Nominees
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
FOR
Tom Barr
James Bradford
Sandy Cochran
Glenn Davenport
Richard Dobkin
Norman Johnson
William McCarten
Martha Mitchell
Coleman Peterson
Andrea Weiss
Glass Lewis Recommendation
ISS Recommendation
Nominee
Management Nominees
DO NOT VOTE
DO NOT VOTE
DO NOT VOTE
DO NOT VOTE |
 28
PROXY ADVISORY FIRMS AGREE –
VOTE THE WHITE
PROXY CARD
Selected Commentary from ISS
Source: ISS Proxy Advisory Services report (Institutional Shareholder Services)
dated 2-Nov-2012 Note: Permission to use quotations neither
sought nor obtained. Emphasis added.
“As
the
most
compelling
explanation
of
the
company’s
resurgence
is
the
leadership
change
and
execution
on
the
new
strategic
plan
by
the
existing
board
and
management
team
the dissident nominees in last year’s or this year’s proxy contest,
however meritorious—it is clear the dissidents have not made a
compelling case that change at the board level is warranted ISS therefore
recommends shareholders
vote
on
the
WHITE
proxy
card
FOR
the
management
nominees.” “To
the
extent
share
price
appreciation
has
outstripped
growth
in
margins
and
net
income,
one
might
reasonably
conclude
this
is
evidence
the
market
has
bought
into
the
company’s
turnaround
strategy
and
its
operating
leadership.” “The
income
statement
for
fiscal
2012
strongly
supports
the
company’s
view
that
a
real
turnaround
has
taken
root.” “It
is
worth
pointing
out
that
this
is
a
profoundly
silly
reason
to
run
a
proxy
contest,
and
the
amount
of
attention
the
dissidents
have
lavished
on
it
may
raise
more
questions
about
their
sense
of
perspective
than
the
incoming
Chairman’s
integrity.
…
The
critical
point,
in
all
the
company’s
communications
which
deployed
the
phrase,
is
that
Bradford
has
significant
and
substantial
executive
experience
as
a
leader—
an
unchallenged bona fide which might shareholders assessing his ability to lead this
company as Chairman might
appreciate.” —
and not suggestions of |
 29
PROXY ADVISORY FIRMS AGREE –
VOTE THE WHITE
PROXY CARD
Selected Commentary from Glass Lewis
Source: Proxy Paper report (Glass, Lewis & Co.) dated
2-Nov-2012 Note: Permission to use quotations neither sought
nor obtained. Emphasis added.
“With the foregoing factors in mind, we see little reason for shareholders to
now support the candidacy of Messrs. Biglari or Cooley, whose own
high-level stewardship has failed to generate attractive returns for shareholders of Biglari, despite its
relatively
substantial
interest
in
a
rebounding
Cracker
Barrel.
Accordingly,
we
recommend
shareholders
vote
FOR
all
nominees
on
management's
WHITE
proxy
card.”
“…
we
now
find
a
materially
improved
Company
operating
under
the
stewardship
of
a
substantially
reconstituted
board
and
management
team
that
has
executed
on
a
well-codified
and
publicly-disclosed
business
plan.
Further
foundering Biglari's most recent solicitation are a series of relatively
uncompelling and, at times, specious arguments, which collectively do
little to support a forward operating plan that is decidedly light on detail, despite the Dissident's industry
experience.”
“Cracker
Barrel
appears
to
have
dramatically
improved
its
financial
performance,
while
also
taking
concrete
steps
to
remediate
or
eliminate
several
outstanding
governance
concerns.
In
response,
we
find
the
Dissident
has
resorted
to
decidedly
less
compelling
quantitative
arguments
and
abrasive
commentary
to
support
a
vaguely-framed
plan
that,
all
other
things
equal,
seems
to
work
against
a
strategy
that
has
objectively
improved
returns
and
transparency
for
Cracker
Barrel
shareholders.”
“…
we note the board has already been substantially reconstituted through the
appointment of six new independent directors in the last 18 months, and,
moreover, several board members with whom we have previously taken issue will not
be
standing
for
reelection
at
the
2012
annual
meeting.
When
taken
together
with
what
we
view
as
a
well-disclosed
business
plan,
we
see
little
reason
to
disrupt
the
current
board
dynamic.” |
 30
BIGLARI HAS ARGUED THAT HE PURCHASED CBRL STOCK FOR
INVESTMENT PURPOSES ONLY…
(1) Biglari Holdings, press release dated 23-Sep-2011.
However, Biglari’s Rhetoric Changes Over Time and We Believe Cannot Be Relied
Upon “…we told Chairman Michael
Woodhouse that we have
purchased stock for
investment purposes only”
–
Sardar Biglari
1
“Our intention was that even if
we were to purchase additional
stock, we would keep
ownership well under 20%.”
–
Sardar Biglari
1
Current ownership of 17.4% exceeds his previously
announced intentions
Biglari has twice attempted to gain board seats to
influence the Company –
not “investment purposes
only”
In September 2012, Biglari Holdings agreed to pay
$850,000 to settle charges that it violated anti-trust
rules when it purchased Cracker Barrel shares |
 31
…WHAT SARDAR BIGLARI RECENTLY CONFIRMED ABOUT
BIGLARI HOLDINGS
“We,
however,
are
control
investors”
“Biglari Holdings is an unconventional public company because it is in the
business of owning other businesses without regard to any particular
industry along with the stipulation that
all
major
capital
allocation
decisions
are
made
by
Sardar
Biglari,
Chairman
and
CEO.”
“The logic underlying the dual class structure indicates that we could gain
increased flexibility in structuring acquisitions and financing
transactions to augment our growth. As a holding company, we believe that
the greater flexibility resulting from our proposal would transform into an
advantage in our pursuit of other businesses. …We may also use such
stock
to
acquire
other
businesses
or
combinations
thereof.”
Source: Public filings
Note: Emphasis added.
(1)
Biglari Holdings, 2011 Letter from the Chairman, dated 10-Dec-2011.
(2)
Biglari Holdings, Schedule 14A, filed 12-Sep-2012.
1
2
2 |
 32
WHAT DOES BIGLARI REALLY THINK?
“Biglari Holdings is a jockey stock.
You are choosing the jockey; I am choosing the horses.
It
would
be
asinine
to
bet
on
the
jockey
and
then
deny
him
the
saddle
or
whip.”
1
Source: Public filings
(1)
Biglari Holdings, 2011 Letter from the Chairman, dated 10-Dec-2011.
|
 33
OUR VIEWS ON BIGLARI ARE SHARED BY WALL STREET
ANALYSTS
Selected Analyst Commentary
Source: Public news sources and publicly available equity research reports,
permission to use quotations neither sought nor obtained “Mr.
Biglari’s argument seems to be less focused on corporate governance and shareholder performance, which was
the basis of last year’s proxy fight, and more focused on demanding that as the
largest shareholder he deserves two
seats
on
Cracker
Barrel’s
board.
We
are
skeptical
that
the
other
82%
of
Cracker
Barrel’s
shareholders
would
vote
for
two
executives
of
a
direct
competitor,
Steak
‘n
Shake,
to
join
Cracker
Barrel’s
board.
We
find
it
interesting
that
if
you
exclude
the
investment
in
Cracker
Barrel,
Biglari
Holdings
has
not
made
many
shareholder
enhancing
decisions
the
past
two
years.
Assuming the market is reflecting the CBRL investment gain in BH’s market
valuation, we estimate BH’s market value would be down about 10% since
it became an active investor in Cracker Barrel on June 13, 2011 (vs. KBCM Restaurant Index
+30%).
We
estimate
the
CBRL
investment
represents
roughly
55%
of
BH’s
enterprise
value.
We
expect
Biglari
Holdings
will lose the proxy fight in November.”
-
Chris O’Cull, KeyBanc Capital Markets; 20-Sep-2012
“Mr.
Biglari
has
not
issued
an
alternative
strategic
plan
for
CBRL
but
has
suggested
aggressive
goals
to
drive
sales
and
traffic
without
supporting
details
as
to
how
such
results
would
be
realized.
Under
Sandy
Cochran,
who
became
CEO
in
September 2011, the company has performed strongly.
Numerous changes have been implemented ranging from board
composition (much higher quality board in our opinion) to marketing, cost
management, and willingness to return cash to shareholders.
…It
is
not
clear
what
Mr.
Biglari’s
plans
might
involve
or
if
they
could
be
as
effective
as
management’s
recent performance.”
-
Joseph T. Buckley, Bank of America Merrill Lynch; 19-Sep-2012
“At this
point
in
time
[Biglari]
hasn't
revealed
any
plan,
of
which
I'm
aware,
to
the
company.
I
think
the
company
wants
to
make
sure
if
he
has
designs
on
taking
over
this
company
and
its
business,
they'd
like
to
make
sure
the
shareholders,
other
than just him, are well taken care of.”
-
Bob Derrington, Northcoast Research, as quoted in the San Antonio Express;
18-Oct-2012 |
 34
OUR VIEWS ON BIGLARI ARE SHARED BY WALL STREET
ANALYSTS (CONT.)
Selected Analyst Commentary
Source: Publicly available equity research reports, permission to use quotations
neither sought nor obtained “Whatever
Biglari’s
intentions
for
CBRL
still
may
be,
however,
we
continue
to
side
with
management
in
this fight,
as the company already has enacted several measures to boost operational
performance (as evidenced by CBRL’s industry-leading comps in
family dining), enhance shareholder value (e.g., increased dividend 14% for
FY12, removed operating and corporate-level costs), and improve managerial
oversight (e.g., splitting the roles of CEO
and
Chairman
of
the
Board).
…We
surmise
there
will
be
even
less
incentive
for
shareholders
to
side
with a potential Biglari-sponsored slate of Board nominees this November.
Although the potential for a second proxy fight remains, we now think a
repeat of last year’s contentious fight appears less
likely.”
-
Stephen
Anderson,
Miller
Tabak;
6-Aug-2012
“Mr.
Biglari
has
a
record
of
“creeping”
takeovers.
…
Biglari
Holdings
is
essentially
sending
excess
cash
from
Steak
n
Shake
to
the
Lion
Fund.
These
investments
in
the
Lion
Fund
do
not
appear
in
Biglari
Holdings’
balance
sheet due to the requirement to fully consolidate the Lion Fund in BH’s
financial statements. In addition, the Lion Fund’s portfolio has
purchased significant interests in BH common stock, which is classified on BH’s balance sheet
as treasury stock, yet the shares remain outstanding. BH’s pro-rata
ownership of its common stock through Lion Fund as of June 13, 2012 was
roughly 100,000 shares, but the Lion Fund, in total, owns roughly 200,000 shares.
Essentially, Mr. Biglari has voting control of roughly 15% of
BH’s common stock, but he personally owns roughly
10,000 shares (0.7%). We wonder how BH decides between allocating excess cash
to the Lion Fund and investing more in Steak n’
Shake (since Mr. Biglari argues it is doing so well) or just returning it to BH
shareholders.” -
Christopher
O'Cull,
KeyBanc
Capital
Markets;
12-Jul-2012 |
 35
BIGLARI OFTEN STATES HE IS A "CONTROL INVESTOR’’
BUT WE BELIEVE
YOU SHOULD NOT ALLOW HIM TO TAKE CREEPING CONTROL OF
CRACKER BARREL AS HE DID WITH STEAK 'N SHAKE
Source: Public filings and Bloomberg
(1) Stock price adjusted for reverse split to be comparable to
current market price. (2) As per Biglari's Schedule 13D/A
filing on 3-Feb-2010. (3) As per Biglari's
preliminary proxy filing on 12-Sep-2012. 17-Aug-2007
Share Price:
$309.00
1
Biglari discloses
5.8% ownership in
Steak ‘n Shake
Nominates himself
and Cooley to the
Board
7-Mar-2008
Biglari wins Proxy
Contest
19-Jun-2008
Biglari appointed Chairman
of the Board
Jul-2008
Two executive team
members resign
8-Aug-2008
Biglari appointed
CEO
Took control
Became Chairman and CEO
Merged with Western Sizzlin
Renamed Biglari Holdings
22-Oct-2009
Announces Merger with
Western Sizzlin
5.8%
Ownership
Today:
Control of 15.5%
3
and CEO
Share Price
(28-Sep-2012)
$365.06
8-Apr-2010
Renamed Biglari Holdings
Biglari only controlled 6.8%
2
Purchased
through:
-
Lion Fund
-
Western Sizzlin
-
P. Cooley
Call Options:
-
20,000 shares
through Lion
Fund
-
561,000 shares
through Western
Sizzlin
BIGLARI
HOLDINGS
Biglari originally claimed that
he had acquired shares
“for investment purposes”
Instead he:
INC. |
 36
EVEN
WITH
BIGLARI
HOLDINGS’
LARGE
STAKE,
BH
HAS
SIGNIFICANTLY UNDERPERFORMED CBRL
CBRL Represents over 50% of BH’s Market Cap
Source: Bloomberg and public filings
Note: 12-Sep-2011; is closing price the day prior to announcement of
Strategic Priorities on 13-Sep-2011. What value has Biglari
created for his
shareholders in his own
restaurant business
without CBRL? |
 37
BIGLARI AGAIN TURNED DOWN A GOOD FAITH SETTLEMENT
OFFER
Biglari Rejected The Following Settlement Proposal:
–
Not be affiliated with Biglari Holdings
–
Not be a current executive officer or director of a competing restaurant company
–
Comply with CBRL’s long-standing publicly disclosed qualification
criteria This offer was subject to the minimal conditions that, Biglari
Holdings: –
Support the Board-recommended slate of nominees at the 2012 annual meeting
that would include the two nominees of Biglari Holdings
–
Not nominate other candidates or present shareholder proposals at the 2012 annual
meeting –
Not seek to call or support any special meeting prior to the Company’s 2013
annual meeting Many proxy fights are settled with the appointment of one or
more directors that are not affiliated with the dissident, yet Biglari
refuses even to consider nominating an independent director, insisting that is has to be him
and Cooley
Does
Mr.
Biglari
really
want
representation
or
simply
a
platform
for
himself?
–
In voting Biglari down last year, shareholders determined last year he wasn’t
right for the Board Biglari Holdings was offered two board seats subject only to the reasonable
requirements that nominees: |
 38
ONE THING THAT HAS NOT CHANGED AT BIGLARI HOLDINGS…
….It’s All About Sardar |
 39
OUR SHAREHOLDER RIGHTS PLAN IS DESIGNED TO PROTECT
SHAREHOLDERS AND HAS BEEN RECOMMENDED BY ISS
Source: ISS Proxy Advisory Services report (Institutional Shareholder
Services) dated 2-Nov-2012 Our Shareholder-Friendly Rights Plan
Protects Shareholders From Biglari’s Tactics Adopted in April 2012 in
response to threat that Biglari could gain creeping control without paying a
control premium
–
In his 2011 “Letter From the Chairman,”
Biglari said “We…are control investors when we own a sizeable block
of stock engendering influence”
–
Tennessee law preventing shareholders from voting shares above 20% without
shareholder approval is not sufficient. By acquiring shares above
20%, Biglari could still prevent other shareholders from voting those
shares and gain greater influence by virtue of economic ownership
Shareholder-friendly provisions include:
–
Rights expire if shareholders do not approve rights plan at November 2012 annual
meeting –
If shareholders approve, rights would expire on April 9, 2015
ISS Recommends A Vote “FOR”
Our Shareholder Rights Plan
“A vote FOR
this proposal is warranted because the rights plan contains features that
protect shareholders from entrenchment risk.
Specifically, the pill has a three-year term, a 20-percent trigger, and a
robust qualifying offer clause and there is no dead-hand or
slow-hand provision. In addition, there are no significant governance
concerns at the company.”
Note: Permission
to
use
quotations
neither
sought
nor
obtained.
Emphasis
added.
–
Rights plan is focused on creeping acquisitions above 20% and would not be
triggered by “qualifying offers” (all-cash,
fully
financed
tender
offers
that
remain
open
for
at
least
60
business
days) |
 40
OTHER SHAREHOLDER MATTERS
Compensation –
Pay for Performance Culture
Compensation Committee Review and Revisions of Compensation Practices in 2012
80% of CEO’s target total direct 2012 compensation, and 69% of other named
executive officers, is contingent upon measurable performance
Incentive programs have one, two and three year performance periods to promote
both short and long term appreciation of shareholder value
2012
Total
Shareholder
Return
significantly
outperformed
the
S&P
500,
600,
and
1,500
Restaurant
indices
Revenue growth, improved margins, and strong Return On Invested Capital
performance resulted in incentive plan performance in excess of
targets Initiated full review of compensation practices based on
say-on-pay vote results and feedback from shareholders and proxy
advisory services in connection with 2011 annual meeting Instituted a number
of revisions to compensation practices as a result of this analysis:
Compensation Policies
—
Revised overall compensation philosophy to target total compensation paid to our
executive officers at median of peer group
—
Revised
stock
ownership
guidelines
to
multiple
of
base
salary
for
executive
officers
and
total
cash
retainer
for
non-employee
directors:
–
5x base salary for CEO
–
3x base salary for CFO and Executive Vice Presidents; 2x base salary for all other
executive officers –
For non-employee directors, greater of 5,000 shares or 5x the annual cash
retainer –
No covered persons may sell any shares until threshold is reached
—
Worked
to
clarify
disclosure
in
CD&A
of
compensation
performance
targets
and
performance
relative
to
them
—
Adopted anti-hedging policy for officers and directors
|
 41
WHY YOU SHOULD VOTE THE WHITE PROXY CARD
We have accomplished a great deal over the last year –
with more to come
Our reconfigured Board is highly engaged and continuously seeks to create
value We believe Biglari’s and Cooley’s presence would create a
conflict of interest and would be detrimental to the functioning of our
Board We again made a good faith offer this year to permit Biglari to appoint
two independent directors to the Board and again he rejected. Is his
fight about having representation or just about him?
We believe Biglari’s historic playbook of creeping control and poor corporate
governance could harm Cracker Barrel and its shareholders
|
 Appendix |
 43
RECONCILIATION OF GAAP BASIS OPERATING RESULTS
TO ADJUSTED NON-GAAP OPERATING RESULTS
(Unaudited and $ in thousands, except per share data)
(1) Severance, other charges and tax effects related to operational
restructuring. (2) (Charges) Gain and tax effects of impairment net of gain
on sale of property. (3) Refinancing costs and tax effects related to the
Company's $750 million credit facility. (4) Charges and tax effects of the
proxy contest concluded at the Company's annual meeting of shareholders.
Fourth Quarter Ended August 3, 2012
Fourth Quarter Ended July 29, 2011
As Reported
Adjust
53rd Week
As Adjusted
As Reported
Adjust
1,2,3,4
As Adjusted
Total Revenue
$ 700,010
(51,059)
$ 648,951
$ 612,942
$ 612,942
Store Operating Income
97,577
–
(11,093)
86,484
74,660
–
74,660
General and Administrative Expenses
37,671
–
(1,370)
36,301
35,323
(2,172)
33,151
Impairment and Store Dispositions, Net
–
–
–
–
1,249
(1,044)
205
Operating Income
59,906
–
(9,723)
50,183
38,088
3,216
41,304
Interest Expense
11,354
–
(811)
10,543
16,327
(5,136)
11,191
Pretax Income
48,552
–
(8,912)
39,640
21,761
8,352
30,113
Provision for Income Tax
13,856
–
(2,632)
11,224
4,218
2,201
6,419
Net Income
$ 34,696
–
$ (6,280)
$ 28,416
$ 17,543
$ 6,151
$ 23,694
Earning Per Share –
Basic
$ 1.49
–
(0.27)
$ 1.22
$ 0.77
$ 0.27
$ 1.04
Earning Per Share –
Diluted
$ 1.47
–
(0.27)
$ 1.20
$ 0.75
$ 0.26
$ 1.01
Twelve Months Ended August 3, 2012
Twelve Months Ended July 29, 2011
As Reported
Adjust
1,4
53rd Week
As Adjusted
As Reported
Adjust
1,2,3,4
As Adjusted
Total Revenue
$ 2,580,195
(51,059)
$ 2,529,136
$ 2,434,435
$ 2,434,435
Store Operating Income
337,146
–
(11,093)
326,053
305,778
–
305,778
General and Administrative Expenses
146,171
(6,863)
(1,370)
137,938
139,222
(2,172)
137,050
Impairment and Store Dispositions, Net
–
–
–
–
(625)
830
205
Operating Income
190,975
6,863
(9,723)
188,115
167,181
1,342
168,523
Interest Expense
44,687
–
(811)
43,876
51,490
(5,136)
46,354
Pretax Income
146,288
6,863
(8,912)
144,239
115,691
6,478
122,169
Provision for Income Tax
43,207
2,027
(2,632)
42,602
30,483
1,707
32,190
Net Income
$ 103,081
$ 4,836
$ (6,280)
$ 101,637
$ 85,208
$4,771
$ 89,979
Earning Per Share –
Basic
$ 4.47
$ 0.21
(0.27)
$ 4.41
$ 3.70
$ 0.21
$ 3.91
Earning Per Share –
Diluted
$ 4.40
$ 0.21
(0.27)
$ 4.34
$ 3.61
$ 0.20
$ 3.81 |
 44
A NOTE REGARDING PEER SET USED FOR BENCHMARKING
Last year our peer set included:
–
Biglari Holdings, Brinker International,
Cheesecake Factory, Darden Restaurants, P.F.
Chang’s China Bistro, Ruby Tuesday, and
Texas Roadhouse
–
During the past year P.F. Chang’s China Bistro
was acquired by Centerbridge Partners and is
no longer publicly traded
–
Based on feedback received we have added
Bob Evans Farms and Denny’s Corporation both
full-service restaurants chains
We believe this subset of casual and family dining
restaurants represents the most comparable set of
companies to benchmark CBRL performance
–
Leading casual / family dining concepts
–
Operational comparability
–
Similar scale
–
Geographical proximity
Rationale for Inclusion
Peer Set
Ticker
Company Name
Logo
BH
Biglari Holdings
BOBE
Bob Evans Farms
EAT
Brinker International
CAKE
The Cheesecake Factory
DRI
Darden Restaurants
DENN
Denny‘s Corporation
RT
Ruby Tuesday
TXRH
Texas Roadhouse |
 45
S&P RESTAURANT INDEX COMPOSITION
Respective S&P Restaurant Index Constituents
Ticker
Company Name
Logo
S&P
500
S&P
600
S&P
1,500
BJRI
BJ’s Restaurants
BH
Biglari Holdings
BOBE
Bob Evans Farms
BWLD
Buffalo Wild Wings
CAKE
The Cheesecake Factory
CBRL
Cracker Barrel Old Country Store
CEC
CEC Entertainment
CMG
Chipotle Mexican Grill
DIN
DineEquity
DRI
Darden Restaurants
EAT
Brinker International
JACK
Jack in the Box
Ticker
Company Name
Logo
S&P
500
S&P
600
S&P
1,500
MCD
McDonald’s
PEET
Peet’s Coffee & Tea
PNRA
Panera Bread Company
PZZA
Papa John’s International
RRGB
Red Robin Gourmet Burgers
RT
Ruby Tuesday
RUTH
Ruth’s Hospitality Group
SBUX
Starbucks
SONC
Sonic
TXRH
Texas Roadhouse
WEN
The Wendy’s Company
YUM
Yum! Brands |
|
|
POST OFFICE BOX 787 LEBANON, TENNESSEE 37088-0787 |
| Investor Contact: | Lawrence E. Hyatt, Senior Vice President and Chief Financial Officer | |
| (615) 235-4432 | ||
| Mark Harnett, MacKenzie Partners, Inc. (212) 929-5877 | ||
| Media Contact: | Julie K. Davis, Senior Director, Corporate Communications (615) 443-9266 Ruth Pachman, Kekst and Company | |
| (212) 521-4891 | ||
CRACKER BARREL URGES SHAREHOLDERS TO PROTECT THE FUTURE OF THEIR
INVESTMENT BY SUPPORTING ONGOING BUSINESS SUCCESS
| • | Asks For YES Votes on All Board Nominees at Annual Meeting Next Week, as Recommended by ISS and Glass Lewis |
| • | Urges Approval of Shareholder-Friendly Rights Plan Endorsed by ISS |
LEBANON, Tenn. November 6, 2012 – Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq: CBRL) today sent a letter to shareholders from Sandra B. Cochran, President and Chief Executive Officer, urging them to protect the future of their investment by supporting the Company’s ongoing business success and preventing Sardar Biglari from taking “creeping control” without paying shareholders a premium.
Ms. Cochran asked shareholders to approve all Board nominees at the Company’s annual meeting on November 15, 2012, in line with recommendations of leading independent proxy advisory services Institutional Shareholder Services (ISS) and Glass Lewis & Co. She also urged approval of the Company’s shareholder-friendly rights plan, which was also endorsed by ISS.
“We believe that Mr. Biglari has used unnecessarily divisive rhetoric, and has cherry-picked unfavorable data points of questionable relevance in an effort to distract from our successes over the past year,” Ms. Cochran stated. “We further believe that his presence on our Board would risk derailing our success and interfere with the Board’s ongoing effectiveness.”
She emphasized the importance of shareholders voting for the Shareholder Rights Plan, which was designed to prevent Mr. Biglari or anyone else from gaining creeping control of Cracker Barrel without paying shareholders a premium, while retaining several shareholder-friendly provisions.
- MORE -
Page 2
She concluded: “We believe that change at the Board level is not warranted at this time, and we are pleased that ISS and Glass Lewis recognize our successful business execution over the past year, as well as the lack of foundation for Mr. Biglari’s arguments. We urge you to protect your investment and support all ten of your Board’s nominees.”
Text of Letter from Ms. Cochran to Cracker Barrel Shareholders:
PROTECT THE FUTURE OF YOUR INVESTMENT AND SUPPORT YOUR
COMPANY’S ONGOING BUSINESS SUCCESS
Leading Proxy Advisory Firms Agree: Reject Biglari and Cooley for Board Seats;
Vote FOR Cracker Barrel’s Highly Qualified Board Slate
ISS Recommends Voting FOR Shareholder Rights Plan;
Prevent Biglari from Taking Creeping Control of Your Company
VOTE THE ENCLOSED WHITE PROXY CARD TODAY
November 6, 2012
Dear Cracker Barrel Shareholders:
At Cracker Barrel’s November 15, 2012 Annual Meeting of Shareholders, you will have an important decision to make regarding the future of your investment. By supporting your Board-designated nominees, you will be able to reaffirm your support for our ongoing commitment to generating value for shareholders.
As you review the large amount of correspondence generated thus far, we encourage you to consider the following key facts: we have successfully executed on the strategic initiatives we announced last year; we had strong financial and operational performance during our 2012 fiscal year; we have added new perspectives, skills and expertise to our Board through seven new directors over the past 18 months; and we have added key senior management hires in areas vital to our organization.
Our accomplishments across multiple operational and financial metrics have translated into not only improvements in sales, operating margins and earnings per share, but also a 68.4% appreciation in the value of the Company’s shares in the year following the announcement of our strategic initiatives.1 Since launching our strategic priorities in September 2011, we have:
| • | Outperformed the S&P 500 Restaurant Index, S&P 600 Restaurant Index, S&P 1500 Restaurant Index, S&P 500 Index, and the peer set delineated in our 2012 proxy statement; |
| • | Doubled our quarterly dividend from $0.25 to $0.50, thereby increasing our dividend yield to 3%; |
| 1 | From September 12, 2011, the day prior to announcement of our six strategic priorities, through September 28, 2012. |
- MORE -
Page 3
| • | Increased cash and cash equivalent balances by nearly $100 million, or 190%; |
| • | Achieved operating margin expansion of 50 bps for FY 2012; |
| • | Accelerated same store sales growth in the last three quarters; and |
| • | Outperformed casual dining peers in same store traffic and sales growth for three consecutive quarters, as measured by the Knapp-TrackTM casual dining index. |
Mr. Biglari has distributed materials that attempt to dispute these facts and distract you from our operational and financial success, recruitment of new Board members and positive ongoing momentum. However, we believe he has failed to contribute any new meaningful or original ideas, and has made assertions about our performance and governance that we believe are, at best, uninformed, and, at worst, intentionally misleading. For example, Mr. Biglari has asserted that we changed the formula used to calculate ROIC for purposes of executive compensation. This is incorrect. As noted by Institutional Shareholder Services (ISS) in its report: “Contrary to assertions by the dissidents, the formula used to calculate ROIC in the executive incentive plans is unchanged from the one the board adopted in fiscal 2011, when it introduced the metric for executive compensation plans.”2 In its report, Glass Lewis & Co. noted that Mr. Biglari’s most recent solicitation includes “a series of uncompelling and, at times, specious arguments.”
We believe that Mr. Biglari has used unnecessarily divisive rhetoric, and has cherry-picked unfavorable data points of questionable relevance in an effort to distract from our successes over the past year. We further believe that his presence on our Board would risk derailing our success and interfere with the Board’s ongoing effectiveness.
We firmly stand behind the qualifications of our Board, and remain confident that we have the right members in place to drive continued execution of our strategic plan. In addition, our nominees have received the unequivocal endorsement of two leading proxy advisory firms, ISS and Glass Lewis, both of which recommend that you reject the nominations of Mr. Biglari and Mr. Cooley to our Board.
In its recommendation to support Cracker Barrel’s slate of nominees, ISS states: “As the most compelling explanation of the company’s resurgence is the leadership change and execution on the new strategic plan by the existing board and management team-and not suggestions of the dissident nominees in last year’s or this year’s proxy contest, however meritorious—it is clear the dissidents have not made a compelling case that change at the board level is warranted. ISS therefore recommends shareholders vote on the WHITE proxy card FOR the management nominees.”
In its report, Glass Lewis states that: “We see limited reason for shareholders to further alter the current board and prospectively hinder Cracker Barrel’s recent progress.”
| 2 | Permission to use quotes from the ISS report or the Glass Lewis report neither sought nor obtained. |
- MORE -
Page 4
ISS also recommends that shareholders vote FOR the Company’s Shareholder Rights Plan, which was designed to prevent investors like Mr. Biglari, or anyone else, from gaining creeping control of Cracker Barrel without paying our shareholders a premium while retaining several shareholder-friendly provisions. In recommending that you vote in favor of the Shareholder Rights Plan, ISS states: “A vote FOR this proposal is warranted because the rights plan contains features that protect shareholders from entrenchment risk. Specifically, the pill has a three-year term, a 20-percent trigger, and a robust qualifying offer clause and there is no dead-hand or slow-hand provision. In addition, there are no significant governance concerns at the company.”
In sum, we believe that change at the Board level is not warranted at this time, and we are pleased that ISS and Glass Lewis recognize our successful business execution over the past year, as well as the lack of foundation for Mr. Biglari’s arguments. We urge you to protect your investment and support all ten of your Board’s nominees.
To support your Board, vote the enclosed WHITE card and vote “FOR ALL” of the Company’s nominees to the Board and “FOR” the Company’s Shareholder Rights Plan. To ensure that your vote is received in time, vote by telephone or Internet by following the instructions on the Company’s WHITE card. We urge you NOT to sign any gold proxy card sent to you by Mr. Biglari. Even a withhold vote for Mr. Biglari and Mr. Cooley on his gold proxy card will cancel any previous proxy that you previously submitted to vote “FOR ALL” the Company’s nominees as it is only the latest dated proxy card that will be counted at the shareholder meeting.
If you have any questions or require assistance with voting your WHITE proxy card, please call MacKenzie Partners, Inc., toll-free, at (800) 322-2885.
Sincerely,
Sandra B. Cochran
President and Chief Executive Officer
About Cracker Barrel
Cracker Barrel Old Country Store restaurants provide a friendly home-away-from-home in their old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that’s surprisingly unique, genuinely fun and reminiscent of America’s country heritage…all at a fair price. The restaurant serves up delicious, home-style country food such as meatloaf and homemade chicken n’ dumplins as well as its signature biscuits using an old family recipe. The authentic old country retail store is fun to shop and offers unique gifts and self-indulgences.
Headquartered in Lebanon, Tennessee, Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 and operates 621 company-owned locations in 42 states. Every Cracker Barrel unit is open seven days a week with hours Sunday through Thursday, 6 a.m. — 10 p.m., and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com.
- MORE -
Page 5
IMPORTANT ADDITIONAL INFORMATION
Cracker Barrel, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from Cracker Barrel shareholders in connection with the matters to be considered at Cracker Barrel’s 2012 Annual Meeting. On October 4, 2012, Cracker Barrel filed a definitive proxy statement (as it may be amended, the “Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with any such solicitation of proxies from Cracker Barrel shareholders. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the Proxy Statement, including Annex A thereto. Shareholders can obtain the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents filed by Cracker Barrel with the SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Investor Relations section of our corporate website at www.crackerbarrel.com.
CBRL-F
- END -
Cracker Barrel Old Country Store, Inc. (the “Company”) sent the following letter to shareholders of the Company in a mailing commenced on November 6, 2012. This letter was also posted to the “Proxy Contest” section of the Company’s Investor Relations website, investor.crackerbarrel.com.
PROTECT THE FUTURE OF YOUR INVESTMENT AND SUPPORT YOUR
COMPANY’S ONGOING BUSINESS SUCCESS
Leading Proxy Advisory Firms Agree: Reject Biglari and Cooley for Board Seats;
Vote FOR Cracker Barrel’s Highly Qualified Board Slate
ISS Recommends Voting FOR Shareholder Rights Plan;
Prevent Biglari from Taking Creeping Control of Your Company
VOTE THE ENCLOSED WHITE PROXY CARD TODAY
November 6, 2012
Dear Cracker Barrel Shareholders:
At Cracker Barrel’s November 15, 2012 Annual Meeting of Shareholders, you will have an important decision to make regarding the future of your investment. By supporting your Board-designated nominees, you will be able to reaffirm your support for our ongoing commitment to generating value for shareholders.
As you review the large amount of correspondence generated thus far, we encourage you to consider the following key facts: we have successfully executed on the strategic initiatives we announced last year; we had strong financial and operational performance during our 2012 fiscal year; we have added new perspectives, skills and expertise to our Board through seven new directors over the past 18 months; and we have added key senior management hires in areas vital to our organization.
Our accomplishments across multiple operational and financial metrics have translated into not only improvements in sales, operating margins and earnings per share, but also a 68.4% appreciation in the value of the Company’s shares in the year following the announcement of our strategic initiatives.1 Since launching our strategic priorities in September 2011, we have:
| • | Outperformed the S&P 500 Restaurant Index, S&P 600 Restaurant Index, S&P 1500 Restaurant Index, S&P 500 Index, and the peer set delineated in our 2012 proxy statement; |
| • | Doubled our quarterly dividend from $0.25 to $0.50, thereby increasing our dividend yield to 3%; |
| • | Increased cash and cash equivalent balances by nearly $100 million, or 190%; |
| • | Achieved operating margin expansion of 50 bps for FY 2012; |
| • | Accelerated same store sales growth in the last three quarters; and |
| • | Outperformed casual dining peers in same store traffic and sales growth for three consecutive quarters, as measured by the Knapp-TrackTM casual dining index. |
| 1 | From September 12, 2011, the day prior to announcement of our six strategic priorities, through September 28, 2012. |
Mr. Biglari has distributed materials that attempt to dispute these facts and distract you from our operational and financial success, recruitment of new Board members and positive ongoing momentum. However, we believe he has failed to contribute any new meaningful or original ideas, and has made assertions about our performance and governance that we believe are, at best, uninformed, and, at worst, intentionally misleading. For example, Mr. Biglari has asserted that we changed the formula used to calculate ROIC for purposes of executive compensation. This is incorrect. As noted by Institutional Shareholder Services (ISS) in its report: “Contrary to assertions by the dissidents, the formula used to calculate ROIC in the executive incentive plans is unchanged from the one the board adopted in fiscal 2011, when it introduced the metric for executive compensation plans.”2 In its report, Glass Lewis & Co. noted that Mr. Biglari’s most recent solicitation includes “a series of uncompelling and, at times, specious arguments.”
We believe that Mr. Biglari has used unnecessarily divisive rhetoric, and has cherry-picked unfavorable data points of questionable relevance in an effort to distract from our successes over the past year. We further believe that his presence on our Board would risk derailing our success and interfere with the Board’s ongoing effectiveness.
We firmly stand behind the qualifications of our Board, and remain confident that we have the right members in place to drive continued execution of our strategic plan. In addition, our nominees have received the unequivocal endorsement of two leading proxy advisory firms, ISS and Glass Lewis, both of which recommend that you reject the nominations of Mr. Biglari and Mr. Cooley to our Board.
In its recommendation to support Cracker Barrel’s slate of nominees, ISS states: “As the most compelling explanation of the company’s resurgence is the leadership change and execution on the new strategic plan by the existing board and management team-and not suggestions of the dissident nominees in last year’s or this year’s proxy contest, however meritorious—it is clear the dissidents have not made a compelling case that change at the board level is warranted. ISS therefore recommends shareholders vote on the WHITE proxy card FOR the management nominees.”
In its report, Glass Lewis states that: “We see limited reason for shareholders to further alter the current board and prospectively hinder Cracker Barrel’s recent progress.”
ISS also recommends that shareholders vote FOR the Company’s Shareholder Rights Plan, which was designed to prevent investors like Mr. Biglari, or anyone else, from gaining creeping control of Cracker Barrel without paying our shareholders a premium while retaining several shareholder-friendly provisions. In recommending that you vote in favor of the Shareholder Rights Plan, ISS states: “A vote FOR this proposal is warranted because the rights plan contains features that protect shareholders from entrenchment risk. Specifically, the pill has a three-year term, a 20-percent trigger, and a robust qualifying offer clause and there is no dead-hand or slow-hand provision. In addition, there are no significant governance concerns at the company.”
In sum, we believe that change at the Board level is not warranted at this time, and we are pleased that ISS and Glass Lewis recognize our successful business execution over the past year, as well as the lack of foundation for Mr. Biglari’s arguments. We urge you to protect your investment and support all ten of your Board’s nominees.
| 2 | Permission to use quotes from the ISS report or the Glass Lewis report neither sought nor obtained. |
To support your Board, vote the enclosed WHITE card and vote “FOR ALL” of the Company’s nominees to the Board and “FOR” the Company’s Shareholder Rights Plan. To ensure that your vote is received in time, vote by telephone or Internet by following the instructions on the Company’s WHITE card. We urge you NOT to sign any gold proxy card sent to you by Mr. Biglari. Even a withhold vote for Mr. Biglari and Mr. Cooley on his gold proxy card will cancel any previous proxy that you previously submitted to vote “FOR ALL” the Company’s nominees as it is only the latest dated proxy card that will be counted at the shareholder meeting.
If you have any questions or require assistance with voting your WHITE proxy card, please call MacKenzie Partners, Inc., toll-free, at (800) 322-2885.
Sincerely,
Sandra B. Cochran
President and Chief Executive Officer
IMPORTANT ADDITIONAL INFORMATION
Cracker Barrel, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from Cracker Barrel shareholders in connection with the matters to be considered at Cracker Barrel’s 2012 Annual Meeting. On October 4, 2012, Cracker Barrel filed a definitive proxy statement (as it may be amended, the “Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with any such solicitation of proxies from Cracker Barrel shareholders. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, is set forth in the Proxy Statement, including Annex A thereto. Shareholders can obtain the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents filed by Cracker Barrel with the SEC for no charge at the SEC’s website at www.sec.gov. Copies will also be available at no charge at the Investor Relations section of our corporate website at www.crackerbarrel.com.
|
If you have any questions, require assistance with voting your WHITE proxy card, or need additional copies of the proxy materials, please contact: |
|
|
| 105 Madison Avenue |
| New York, NY 10016
cbrlproxy@mackenziepartners.com
|
| (212) 929-5500 (Call Collect) |
| Or |
| TOLL-FREE (800) 322-2885 |
