Cracker Barrel Old Country Store, Inc. · NASDAQ:CBRL
Cracker Barrel Old Country Store — Proxy Contest (October 2012)
29 slides from Cracker Barrel Old Country Store's proxy contest presentation, Oct 25, 2012
Slide 1: Cracker Barrel Performance Analysis
CRACKER BARREL PERFORMANCE ANALYSIS ‘Qcober25,2012 BIGLARI HOLDINGS Inc.
Slide 2: Seeking 2 Board Seats Out of 10
SEEKING 2 BOARD SEATS OUT OF 10 Owner of 17.6% of Cracker Barrel Long-term holder with a long-term perspective Restaurant specialists — significant experience analyzing, investing, owning, and running businesses Added value from the outside — improved financial transparency, detected misstatements,
Slide 3: Change Warranted on Board
CHANGE WARRANTED ON BOARD WHY? HUNDREDS OF MILLIONS OF DOLLARS SPENT BASED ON FLAWED ANALYSIS OF RETURN ON NEW STORE INVESTMENT BOARD PLANS TO SPEND ADDITIONAL ~$155 MILLION OPENING NEW STORES BASED ON CLAIMED RETURN OF 16.2% OUR REALITY-BASED ANALYSIS CALCULATES A RETURN OF 3.7%!" WE BELIEVE THE BO
Slide 4: Claimed vs. Actual New Store Investment Return
CLAIMED VS. ACTUAL NEW STORE INVESTMENT RETURN BOARD: 16.2% i DAMODARAN: 3.7%'" EXCLUDES: INCLUDES: » General & Administrative » General & Administrative expenses expenses » Depreciation » Depreciation » Taxes D Taxes Damodaran analysis based on academic text’? cited by Cracker Barrel Peewee HOLDING
Slide 5: Reality on Capital Allocation: Stores Opened 2004-2009
REALITY ON CAPITAL ALLOCATION 116 STORES OPENED BETWEEN 2004 AND 2009 2011 RESULTS” CLAIMED $ IN THOUSANDS RETURN REALITY ‘STORE EBITDA’ $ 61,800 61,800 DEPRECIATION 14,700 GENERAL & ADMINISTRATIVE 27,300 OPERATING INCOME 19,800 TAXES 5,800 NET OPERATING PROFIT AFTER TAX 14,000 INVESTED CAPITAL $ 38
Slide 6: Competing Plans
COMPETING PLANS BOARD PLAN vs. OUR PLAN » ~$155 million » Halt store expansion on new stores . > Return capital to shareholders SHAREHOLDERS DEMAND BETTER THAN A 3.7% RETURN
Slide 7: Our Plan for Significant Growth
OUR PLAN FOR SIGNIFICANT GROWTH >») BENCHMARK AGAINST HISTORICAL PERFORMANCE >») BENCHMARK AGAINST PEERS’ EBITDAR MARGIN $1 BILLION MARKET VALUE UPSIDE POTENTI. Bictarr Renee
Slide 8: Cracker Barrel vs. Cracker Barrel
CRACKER BARREL VS. CRACKER BARREL CRACKER BARREL OPERATING INCOME PER STORE $168k = $294k a 1998 2012 $168k GAP IN OPERATING INCOME PER STORE X 616 STORES = $103.5 MILLION OPPORTUNITY
Slide 9: Benchmarking the Productivity Gap
BENCHMARKING THE PRODUCTIVITY GAP BIGLARI Benchmarking Cracker Barrel against restaurant peers using Earnings before Interest, Taxes, Depreciation, Amortization and Rent (EBITDAR) EBITDAR IS THE RIGHT OPERATING METRIC » Cracker Barrel owns 2/3 of its real estate - many restaurant chains lease EBITDA
Slide 10: EBITDAR Margin Below ISS Peer Group
EBITDAR MARGIN BELOW ISS PEER GROUP EBITDAR MARGIN DINEEQUITY, INC. 'SS PEER GROUP PANERA BREAD BUFFALO WILD WINGS BYS RESTAURANTS BRINKER INTERNAT DENNYS CORP. DARDEN RESTAURANTS Cracker Barrel ranked JENS KOLO 22 OUT OF 24 RED ROBIN GOURMET BURGER of S&P 1500 BOB EVANS FARMS Restaurant Index ‘CRAC
Slide 11: Cracker Barrel EBITDAR Margin Gap
CRACKER BARREL EBITDAR MARGIN GAP EBITDAR MARGIN OPPORTUNITY GAP 12.5% CRACKER BARREL ISS PEER GROUP MEDIAN ~$90 MILLION OPERATING INCOME OPPORTUNITY Brcrarr §
Slide 12: Cracker Barrel's Significant Upside Potential
CRACKER BARRELS SIGNIFICANT UPSIDE POTENTIAL BENCHMARKING VS. Cracker Barrel VS. PEERS PRODUCTIVITY GAP $103 million $90 million ~$100 MILLION IN appiTioNat OPERATING INCOME OVER $1 BILLION IN market VALUE CREATION” ic
Slide 13: Valuation Changed
VALUATION CHANGED PRE BI: 1 BIGLARI DISCLOSES STAKE ‘SHARE PRICE PERFORMANCE SHARE PRICE PERFORMANCE (BASE = JUNE 14, 2010) (BASE = JUNE 13, 2011) —CBRL_—S&P 1500 Rest. Index —CBRL_ —S&P 1500 Rest. Index 130 SEP DEC MAR __JUN JUN SEP DEC MAR JUN SEP PMesweSM FOLDINGS INC
Slide 14: Biglari Impact Recognized
BIGLARI IMPACT RECOGNIZED by Date planned to step down ~ NASHVILLE POST The company ha lity and lower r we think his been pushing Cracker which have helped the ~ RESTAURANT FINANCE MONITOR Bictar: ERaane
Slide 15: Business vs. Stock Performance
BUSINESS VS. STOCK PERFORMANCE >40.0% 9.5% OPERATING INCOME STOCK PRICE PER DILUTED SHARE APPRECIATION » We believe one-year stock performance driven by correction of undervalvation » Future stock performance must be predicated on business performance Bictarr Renee
Slide 16: Relative Shareholder Returns
RELATIVE SHAREHOLDER RETURNS TOTAL SHAREHOLDER RETURN 1-YEAR _3-YEAR__5-YEAR__7-YEAR CRACKER BARREL 63.8% 93.8% 90.1% 126.9% S&P 1500 Restaurant Index 14.4% 93.2% 90.5% 177.9% Bictarr Renee
Slide 17: Biglari Believes in Cracker Barrel
BIGLARI BELIEVES IN CRACKER BARREL INVESTMENTS IN CRACKER BARREL STOCK 2011 - 2012") » INVESTED $ 206,227,000 BOARD MEMBERS Ptes@eSa FOLDINGS INc.
Slide 18: Cracker Barrel Adopted Our Ideas
RACKER BARREL ADOPTED OUR IDEAS BIGLARI » Licensing into grocery stores » Raising bonus eligibility target D Returning cash to shareholders » Amending credit agreement for greater share repurchases » Improving financial transparency — separation of retail/restaurant data
Slide 19: Board Rhetoric Conflicts with Board Actions
BOARD RHETORIC CONFLICTS WITH BOARD ACTIONS BIGLARI IDEA BOARD REJECTED IDEA BOARD ACCEPTED IDEA 11/14/2011 Amending share repurcl 11/14/2011 Sepo 08/23/2011 11/29/2011 8/24/2011 Lic being "ne m benefit” 4/26/2012 Credit agreement amende¢ 4/24/2012 disclosed 11/22/2011 Bictarr Renee
Slide 20: Biglari Plan
BIGLARI PLAN PUT MORATORIUM ON NEW STORE OPENINGS » Redirect FY 2013 — FY 2015 projected spending of $155 million CLOSE PRODUCTIVITY GAP » Improve restaurant operating level performance EXPAND THROUGH INTERNATIONAL FRANCHISING/LICENSING BETTER CAPITAL MANAGEMENT P Rigorous return analysis of capital
Slide 21: Cracker Barrel's Central Argument: Business and Legal Conflict
CRACKER BARREL’S CENTRAL ARGUMENT: “BUSINESS AND LEGAL CONFLICT” WE POINTEDLY ASKED MR. WOODHOUSE: STEAK N SHAKE AND CRACKER BARREL DIRECT COMPETITORS? WE CLEARLY RECALL MR. WOODHOUSE AGREED THEY WERE NOT Biglari Holdings has an equity investment in Cracker Barrel that is comparable to its ‘equity i
Slide 22: Cracker Barrel's Central Argument: Creeping Control
RACKER BARREL’S CENTRAL ARGUMEN “CREEPING CONTROL’ » With only two Board seats we cannot control the Board » We would represent a minority of the members of the Board D Tennessee law prohibits us from acquiring control for five years D Because of Tennessee statutes, we would have to purchase over 80
Slide 23: Fiction vs. Fact
FICTION VS. FACT FICTION STEAK ‘N SHAKE IS A fering nks/shakes make up nearly “FAMILY DINING ts RESTAURANT CHAIN’ Cat m e restaurant by QSR gozine, Crest/NPD, Restaurant Trends, and Technomics BIGLARI HOLDINGS IS A “RESTAURANT ly stated 's letter: “It would be a ACQUISITION AND HOLDING COMPANY” BOAR
Slide 24: Board Qualifications
BOARD QUALIFICATIONS LEADERSHIP FINANCIAL INDUSTRY EXPERIENCE EXPERIENCE EXPERIENCE v v BIGLARI 7] NOMINEES CRACKER BARREL BOARD ONLY ONE INDEPENDENT DIRECTOR HAS EXPERIENCES THAT MEET ALL THREE CRITERIA v v v v v v v v v v PMesweSM FOLDINGS INC
Slide 25: Board Change Is Necessary
BOARD CHANGE IS NECESSARY “Mike Woodhouse, our Executive Chairman,...will be succeeded by Jim Bradford, a former NYSE company CEC — Sandra B. Cochran, CEO DID MR. BRADFORD READ THE 6 PROXY STATEMENTS FILED WITH SEC OVER THE LAST YEAR? DID MR. BRADFORD READ MS. COCHRAN’S LETTER TO SHAREHOLDERS? » If
Slide 26: Bradford Misstatement Is More Than a Misunderstanding
BRADFORD MISSTATEMENT IS MORE THAN A ‘MISUNDERSTANDING’ ‘Résumé-gate at Cracker Barrel?” [NASHVILLEPOST] ate ee eae “ Cracker Barrel Old Country Store Inc. agreed that it misrepresented incoming chairman REUTERS James Bradford's experience” . = REUTERS Ap “Cracker Barrel confirmed Tuesday that Bradf
Slide 27: Director James W. Bradford Must Be Replaced
DIRECTOR JAMES W. BRADFORD MUST BE REPLACED Mr. Bradford serves on four public company boards; he is designated as Chairman of Cracker Barrel; and his full-time job is professor and Dean of Vanderbilt University’s Owen Graduate School of Management. FACT Board had to amend its Corporate Governance G
Slide 28: Director Richard J. Dobkin Must Be Replaced
DIRECTOR RICHARD J. DOBKIN MUST BE REPLACED DOBKIN IS LEGACY MEMBER OF COMPENSATION COMMITTEE n exceedingly bon in FY 2011 Ja in FY 2012, resulting nus payments ncial performance J gross profit margin information, but continue Bictarr Renee
Slide 29: Restaurant Company Executives and Directors
BJ’s Restaurants, Inc. (BJRI) Peter A. Bassi Potbelly Sandwich Works Bob Evans Farms, Inc. (BOBE) E. William Ingram CEO - White Castle System, Inc. Bravo Brio Restaurant Group, Inc. (BBRG) Fortunato Valenti David Pittaway Thomas J. Baldwin CEO - Patina Restaurant Group, LLC The Cheesecake Factory In
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