Cracker Barrel Old Country Store reports fiscal Q2 earnings of US$25.6M, down 11% from year-ago period amid increased food costs, higher expenses; revenue up 5% to US$673.2M

LEBANAON, Tennessee , February 21, 2012 (press release) – Cracker Barrel Old Country Store, Inc. (“Cracker Barrel” or the “Company”) (Nasdaq: CBRL) today reported financial results for the second quarter of fiscal 2012 ended January 27, 2012, and increased its full-year earnings guidance.

Second-Quarter Fiscal 2012 Highlights

* Adjusted earnings per diluted share, which excludes proxy contest expenses, of $1.20 were equal to the prior year quarter (see non-GAAP reconciliation below). On a GAAP basis, earnings per diluted share were $1.10.
* Comparable store restaurant and retail sales increased by 3.5% and 3.4%, respectively. Total revenue was $673.2 million, an increase of 5.1% compared to the prior year quarter.
* Adjusted operating income margin was 7.5% of total revenue compared with 8.2% in the prior year quarter. On a GAAP basis, operating income margin was 7.0% of total revenue.

Second Quarter Fiscal 2012 Results

Revenue

The Company reported total revenue of $673.2 million for the second quarter of fiscal 2012 representing an increase of 5.1% over the second quarter of fiscal 2011. Comparable store restaurant sales increased 3.5%, including a 2.4% increase in average check. The average menu price increase for the quarter was approximately 2.2%. Comparable store retail sales were up 3.4% for the quarter. During the quarter, the Company opened two new Cracker Barrel stores, and has opened three additional stores since the end of the quarter, for a total of eight new store openings year-to-date.

Operating Income

In the second quarter of fiscal 2012, adjusted operating income was $50.6 million, or 7.5% of total revenue, compared with operating income of $52.5 million, or 8.2% of total revenue, in the second quarter of fiscal 2011. On a GAAP basis, which includes proxy contest expenses, operating income was $47.3 million, or 7.0% of total revenue. The decrease in adjusted operating income was primarily the result of higher food commodity costs and the timing of advertising expenses, partially offset by lower hourly wages, maintenance and utilities expenses. Adjusted general and administrative expenses were 4.9% of total revenue in the second quarter of fiscal 2012 compared with 5.2% in the prior year quarter. On a GAAP basis, general and administrative expenses were 5.4% of total revenue in the second quarter of fiscal 2012.

“Driven by our strong sales and traffic performance, particularly in January, our financial results for the second quarter exceeded our expectations,” said Sandra B. Cochran, President and Chief Executive Officer of Cracker Barrel Old Country Store, Inc. “Comparable store traffic and sales outperformed the Knapp-Track™ Index for the quarter, and we are pleased to report positive traffic for the first time in the past five quarters. We continued to control our expenses, and we are seeing the expected benefits from our cost reduction initiatives. Our diluted earnings per share, adjusted for proxy contest expenses, were in line with the prior year quarter, despite the change in our marketing strategy and resulting change in the timing of our advertising spend, and the expected timing of increases in commodity costs.”

Year-to-date Fiscal 2012 Results

Year-to-date through the end of the second quarter, total revenue was $1.3 billion, an increase of 2.6% compared to the prior year period. Comparable store restaurant sales increased 1.0%, including a 2.3% higher check, and comparable store retail sales increased 1.4%.

Year-to-date, the Company reported adjusted net income of $53.1 million or $2.29 per diluted share, compared with net income of $52.5 million, or $2.21 per diluted share in the prior year period. On a GAAP basis, year-to-date net income was $49.4 million or $2.13 per diluted share. Year-to-date net cash flow provided by operating activities was $114.0 million, compared with $57.3 million in the prior year period, due to timing differences in accounts payable payments, estimated income taxes and changes in other assets and liabilities. The Company did not repurchase any shares during the second quarter of fiscal 2012.

A reconciliation of the Company’s financial results determined in accordance with GAAP to certain non-GAAP financial measures used in this release has been provided in the financial statement tables included in this release to supplement its unaudited financial statements presented on a GAAP basis.

Fiscal 2012 Outlook Update

The Company commented that its outlook for fiscal 2012 reflects many assumptions, the accuracy of which is not yet known. Based upon year-to-date financial performance, recent trends and current estimates, the Company has raised its full-year earnings guidance for fiscal 2012. The Company expects total revenue for fiscal 2012 of between $2.55 billion and $2.6 billion, reflecting anticipated increases in comparable store restaurant and retail sales in a range of 1.0% and 2.0%. Due to delayed construction starts on two stores previously scheduled to open late this year, the Company expects to open 13 new Cracker Barrel stores in the current fiscal year rather than the 15 originally planned. The Company now expects to report adjusted earnings per diluted share for the fiscal year of between $4.20 and $4.35, excluding proxy contest expenses of $0.16 per diluted share. On a GAAP basis, the Company expects to report earnings per diluted share for the fiscal year between $4.04 and $4.19. Food commodity costs are expected to increase 5.5% to 6.5% from the prior year, and adjusted operating income margins are expected to range between 7.2% and 7.4% of total revenues.

The Company expects depreciation expense of between $64 million and $66 million; net interest expense of approximately $45 million; an effective tax rate of between 29% and 30%; and capital expenditures of between $85 million and $95 million. The Company reminds investors that its 2012 fiscal year is a 53-week year and that the impact of the 53rd week, which is included in its guidance, is expected to be additional revenue of approximately $50 million and approximately $0.25 of additional earnings per diluted share.

In order to provide additional visibility into its expectations for future performance, the Company provided quarterly earnings guidance for the current quarter. For the third quarter of fiscal 2012, the Company expects to report earnings per diluted share of between $0.70 and $0.75.

Commenting on the outlook, Ms. Cochran said, “While we continue to remain cautious about the outlook for consumer spending, gasoline prices and commodity costs, we are encouraged by our improving sales trends. We believe that the six strategic initiatives to drive restaurant traffic, grow retail sales and control costs continue to gain traction. We expect to build on this success in the second half of the year.”

Fiscal 2012 Second-Quarter Conference Call

As previously announced, the live broadcast of today’s quarterly conference call will be available to the public on-line at investor.crackerbarrel.com today beginning at 11:00 a.m. (ET). The on-line replay will be available at 2:00 p.m. (ET) and continue through March 7, 2012.

The Company plans to announce its fiscal 2012 third-quarter earnings and comparable restaurant and retail sales on Tuesday, May 22, 2012.

About Cracker Barrel

Cracker Barrel Old Country Store® restaurants provide a friendly home-away-from-home in its 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 restaurants serve up delicious, home-style country food such as meatloaf and homemade chicken n’ dumplins as well as the Company’s signature biscuits using an old family recipe. The authentic old country retail store is fun to shop and offers unique gifts and self-indulgences.

Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 in Lebanon, Tenn. and operates 611 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.

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