45 slides from Cracker Barrel Old Country Store's proxy contest presentation, Oct 26, 2012
Slide 1: Schedule 14A Cracker Barrel Old Country Store, Inc.
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. ) Filed by the Registrant x Filed by a party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy
Slide 2: Presentation delivered to Institutional Shareholder Services
On October 25, 2012, after 5:30 p.m. Eastern Time, representatives of Cracker Barrel Old Country Store, Inc. (the “Company”) delivered the following presentation to Institutional Shareholder Services. This letter was also posted to the “Proxy Contest” section of the Company’s Investor Relations webs
Slide 3: On the Right Track, Generating Exceptional Performance
On the Right Track, Generating Exceptional Performance WHY WE BELIEVE SARDAR BIGLARI IS WRONG FOR THIS BOARD Fall 2012
Slide 4: Important Additional Information
IMPORTANT ADDITIONAL INFORMATION 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
Slide 5: Table of Contents
Table of Contents 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 2
Slide 6: I. Executive Summary
(Old Country Store 1. Executive Summary
Slide 7: What We Have Accomplished in the Past Year
WHAT WE HAVE ACCOMPLISHED IN THE PAST YEAR Delivering on the Company’s Promises Accelerating same store sales Improve same store sales growth in last three quarters with Q4 and traffic trends traffic up 1.4% Cut costs and leverage fixed FY 2012 operating margin growth of costs to enhance profitabili
Slide 8: CBRL Stock Price Has Increased Significantly
CBRL STOCK PRICE HAS INCREASED SIGNIFICANTLY Since Announcement of Our Strategic Priorities We Have Delivered Outstanding Shareholder Returns $70 13-Sep-2011 21-Feb-2012 26-Apr-2012 $67.11 New CEO Sandy CBRL reports 2Q12 EPS of CBRL hosts Analyst and Cochran announces $1.20 excl. proxy costs, 5.3% I
Slide 9: CBRL Has Significantly Outperformed Its Peers
CBRL HAS SIGNIFICANTLY OUTPERFORMED ITS PEERS No Matter What Benchmark You Use, CBRL Has Outperformed Since Announcement of Our Strategic Priorities¹ Since December 2011 Proxy Vote² 170% 68.4% 140% 36.4% 160% 130% 150% 25.8% 140% 21.9% 35.1% 120% 34.8% 16.1% 130% 24.0% 110% 120% 17.8% 15.4% 3.1% 110
Slide 10: Our Shareholders Have Benefited from Performance and Return of Capital Policies
OUR SHAREHOLDERS HAVE BENEFITED FROM OUR PERFORMANCE AND RETURN OF CAPITAL POLICIES ($ in millions) $ 663.5 $22.4 $14.9 $1,616.6 Increase in FY 2012 FY 2012 CBRL Equity Dividends Paid Shares Repurchased Market Cap. Increase in CBRL Equity Market Cap. $915.8 Total Shareholder Value = $700.7 CBRL Equi
Slide 11: Value Creation Results from Successful Execution of Strategic Priorities
WE BELIEVE THIS VALUE CREATION RESULTS FROM SUCCESSFUL EXECUTION OF OUR STRATEGIC PRIORITIES Our Customers Have Responded to Focus on Menu, Marketing, and Execution Announcement of Our Strategic Priorities Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Comparable Restaurant (4.2)% (3.8)% 1.1 % 0.6 % 1.4 %
Slide 12: Why We Are Here...Again
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? – W
Slide 13: II. Delivering on our Six Priorities
II. Delivering on our Six Priorities
Slide 14: What We Told You We'd Do 12 Months Ago
WHAT WE TOLD YOU WE’D DO 12 MONTHS AGO Key Priorities Objectives New marketing messaging Reinforce Authentic Value Refined menu and pricing Increase Variety & Everyday Affordability Enhanced restaurant operating Sustainably Improve the Guest platform Experience Innovative tactics driving retail Deli
Slide 15: New Marketing Message
NEW MARKETING MESSAGE “Hand Crafted by Cracker Barrel” Continued Investment in Billboards First National Television Campaign Comparable Restaurant Traffic 1.4% 1.1% 0.6% Launched national cable advertising for the first time, focusing on brand building during the busiest seasons (Q2 & Q4) Utilized r
Slide 16: Refine Menu and Pricing
2 REFINE MENU AND PRICING Guest Satisfaction Results Show Overall Value Scores at Historic Highs Launched salad refresh as part of the summer seasonal promotion – Feature salad, including dressing and crackers, under 600 calories Better- For-You – Exceeded expectations for mix and guest satisfaction
Slide 17: Enhance Restaurant Operating Platform
3 ENHANCE RESTAURANT OPERATING PLATFORM Past Year’s Focus on Guest Experience Has Driven Significant Improvements to Guest Satisfaction Overall Satisfaction Intent to Recommend Overall Value 70.0% 71.0% 69.7% 70.6% Rank ¹ Chain Score ² 61.1% 59.1% 1 Cracker Barrel Restaurant and Old Country Store 70
Slide 18: Innovative Tactics Driving Retail Sales Growth
4 INNOVATIVE TACTICS DRIVING RETAIL SALES GROWTH Game Plan for Growing Retail Sales… Quarterly Retail Same Store Sales 3.4% Support the restaurant Be a destination retailer 3.1% by reinforcing the for specific occasions emotional connection to + and drive traffic for the the Brand restaurant 0.3% Me
Slide 19: Focused Cost Reduction
5 FOCUSED COST REDUCTION Improving Productivity of the Box 1 Leveraging Our Support Cost Base Adjusted EPS & Operating Inc as % of Sales Eliminating Annual G&A and Labor Expenses $4.34 $1.20 $3.81 7.4% 6.9% $1.01 April-2012: Realigned field leadership July-2011: Restructured home office Labor Manage
Slide 20: Balanced Approach to Capital Allocation
6 BALANCED APPROACH TO CAPITAL ALLOCATION Dividend Yield 3.6 % 3.0 % 2.8 % 2.1 % 2.3 % 2.1 % Peer Median: 1.7% 1.3 % 0.0 % 0.0 % 0.0 % CBRL - One CBRL DRI BOBE EAT TXRH CAKE BH DENN RT Year Ago 1 Dividend Payout Ratio 54.6 % 46.1 % 45.6 % 40.8 % 38.3 % Peer Median: 32.9% 20.5 % 27.6 % 0.0 % 0.0 % 0.
Slide 21: III. Driving Best-in-Class Results
III. Driving Best-in-Class Results
Slide 22: Building on Our Recent Success
BUILDING ON OUR RECENT SUCCESS Focus on Operational Excellence in Existing Units AND Profitable New Restaurant Growth 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 prof
Slide 23: Acceleration of Comparable Restaurant Same Store Sales vs. Knapp-Track
ACCELERATION OF COMPARABLE RESTAURANT SAME STORE SALES VS. KNAPP-TRACK™ Three Consecutive Knapp-Track™ Beats in FY 2012 Cracker Barrel Comparable Restaurant Sales Knapp -Track TM Casual Dining Index Comparable Sales 3.8 % 3.5 % 3.1 % 2.2 % 0.9 % 1.0 % 0.3 % (1.6)% First Quarter Second Quarter Third
Slide 24: A Sector Leader in Total Shareholder Return
A SECTOR LEADER IN TOTAL SHAREHOLDER RETURN 1 TSR Since Announcement of our Strategic Priorities Share Price Appreciation Dividends Paid 78.9% 72.1% 4.1% 3.7% 37.3% 39.6% 39.5% Peer Median: 35.3% 0.5% 33.4% 74.8% 3.9% 68.4% 5.0% 28.3% 2.7% 22.4% 35.7% 36.8% 28.4% 25.6% 22.4% (3.7)% CBRL EAT BOBE DEN
Slide 25: Updated Business Priorities to Continue Driving Performance Through 2013
UPDATED BUSINESS PRIORITIES TO CONTINUE DRIVING PERFORMANCE THROUGH 2013 Key Priorities Objectives Reinforce value proposition for guests with a refresh of Country Dinner Plates 1 Refresh Select Menu Categories Introduce better-for-you programs, including new sides and Wholesome Fixins’ Focus on uni
Slide 26: A Renewed Board Helping to Drive Performance
A RENEWED BOARD HELPING TO DRIVE PERFORMANCE New Within Past 18 Months Independent Sandy Cochran, President and CEO, Cracker Barrel and former CEO, Books-A-Million Tom Barr, Vice President, Global Coffee, at Starbucks Coffee Company James Bradford, Dean of Vanderbilt’s Owen Graduate School of Manage
Slide 27: Analysts Continue to Comment Favorably on the Strategy
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 24
Slide 28: IV. Why We Believe Sardar Biglari is Wrong for This Board
IV. Why We Believe Sardar Biglari is Wrong for This Board
Slide 29: Why We Believe Sardar Biglari Is Still Wrong for This Board
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 confl
Slide 30: Biglari Has Argued He Purchased CBRL Stock for Investment Purposes Only
BIGLARI HAS ARGUED THAT HE PURCHASED CBRL STOCK FOR INVESTMENT PURPOSES ONLY… However, Biglari’s Rhetoric Changes Over Time and We Believe Cannot Be Relied Upon “Our intention was that even if we were to purchase additional Current ownership of 17.4% exceeds his previously announced intentions stock
Slide 31: What Sardar Biglari Recently Confirmed About Biglari Holdings
…WHAT SARDAR BIGLARI RECENTLY CONFIRMED ABOUT BIGLARI HOLDINGS 1 “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 2 that all major c
Slide 32: What Does Biglari Really Think?
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.
Slide 33: Our Views on Biglari Are Shared by Wall Street Analysts
OUR VIEWS ON BIGLARI ARE SHARED BY WALL STREET ANALYSTS Selected Analyst Commentary “ 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 ma
Slide 34: Our Views on Biglari Are Shared by Wall Street Analysts (Cont.)
OUR VIEWS ON BIGLARI ARE SHARED BY WALL STREET ANALYSTS (CONT.) Selected Analyst Commentary “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 evide
Slide 35: Biglari Is a Control Investor; Do Not Allow Creeping Control
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 BIGLARI HOLDINGSINC. 7-Mar-2008 8-Aug-2008 8-Apr-2010 Purchased Biglari wins Proxy Biglari appointed Renamed Biglari Holdings through: Con
Slide 36: Biglari Holdings Has Significantly Underperformed CBRL
EVEN WITH BIGLARI HOLDINGS’ LARGE STAKE, BH HAS SIGNIFICANTLY UNDERPERFORMED CBRL CBRL Represents over 50% of BH’s Market Cap 170% What value has Biglari 160% created for his shareholders in his own restaurant business 150% without CBRL? 140% 130% 120% 110% 100% 90% Sep-2011 Nov-2011 Jan-2012 Mar-20
Slide 37: Biglari Again Turned Down a Good Faith Settlement Offer
BIGLARI AGAIN TURNED DOWN A GOOD FAITH SETTLEMENT OFFER Biglari Rejected The Following Settlement Proposal: Biglari Holdings was offered two board seats subject only to the reasonable requirements that nominees: – Not be affiliated with Biglari Holdings – Not be a current executive officer or direct
Slide 38: One Thing That Has Not Changed at Biglari Holdings
ONE THING THAT HAS NOT CHANGED AT BIGLARI HOLDINGS… ….It’s All About Sardar 35
Slide 39: Other Shareholder Matters: Compensation Policies
OTHER SHAREHOLDER MATTERS Compensation Policies Compensation – Pay for Performance Culture 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 p
Slide 40: Other Shareholder Matters: Shareholder-Friendly Rights Plan
OTHER SHAREHOLDER MATTERS Shareholder-Friendly Rights Plan Shareholder-Friendly Rights Plan is Fully Consistent with ISS Guidelines, Including a 20% Threshold Adopted in April 2012 in response to threat that Biglari could gain creeping control without paying a control premium – In his 2011 “Letter F
Slide 41: Why You Should Vote the WHITE Proxy Card
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
Slide 42: Appendix
(Old Country Store Appendix
Slide 43: Reconciliation of GAAP Basis to Adjusted Non-GAAP Operating Results
RECONCILIATION OF GAAP BASIS OPERATING RESULTS TO ADJUSTED NON-GAAP OPERATING RESULTS (Unaudited and $ in thousands, except per share data) Fourth Quarter Ended August 3, 2012 Fourth Quarter Ended July 29, 2011 As Reported Adjust 53rd Week As Adjusted As Reported Adjust1,2,3,4 As Adjusted Total Reve
Slide 44: A Note Regarding Peer Set Used for Benchmarking
A NOTE REGARDING PEER SET USED FOR BENCHMARKING Peer Set Rationale for Inclusion Ticker Company Name Logo Last year our peer set included: – Biglari Holdings, Brinker International, BH Biglari Holdings Cheesecake Factory, Darden Restaurants, P.F. Chang’s China Bistro, Ruby Tuesday, and BOBE Bob Evan
Slide 45: S&P Restaurant Index Composition
S&P RESTAURANT INDEX COMPOSITION Respective S&P Restaurant Index Constituents S&P S&P S&P S&P S&P S&P Ticker Company Name Logo 500 600 1,500 Ticker Company Name Logo 500 600 1,500 BJRI BJ’s Restaurants MCD McDonald’s BH Biglari Holdings PEET Peet’s Coffee & Tea BOBE Bob Evans Farms PNRA Panera Bread