This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Biglari Holdings Believes Cracker Barrel Old Country Store, Inc.'s Purported Financial Results Distort Economic Reality

Stocks in this article: BH CBRL

SAN ANTONIO, TX, October 31, 2012 /PRNewswire/ -- Biglari Holdings Inc. (NYSE: BH) believes that investor presentation materials filed by Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) with the Securities and Exchange Commission portray a troubling pattern of artificially inflating financial results.  Biglari Holdings urges shareholders to consider the following data and ask themselves whether they can trust what the Board and management are saying about Cracker Barrel's financial performance:

-- In calculating its EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent) margin, Cracker Barrel aggregated its billboard and restaurant operating leases in 2012 (deviating from its past practice of separately reporting these expenses), effectively characterizing nearly half of its advertising budget as rent expense and, thereby, we believe erroneously inflating its 2012 EBITDAR margin.  EBITDAR should not include billboard rentals because they are part of advertising expenses.  We believe that when billboard advertising expenditures are segregated from restaurant rent expenses, Cracker Barrel generated an EBITDAR margin of 11.3% in 2012, as opposed to the 12.8% margin claimed by Cracker Barrel in its investor presentation.  (11.3% is the lowest of the ISS peer group.)  Of course, Cracker Barrel's Board and management have full access to all the information required to accurately determine its EBITDAR margin, and we call upon them to disclose fully to shareholders the relevant data and their method of calculation.

-- Cracker Barrel claims its return on investment in fiscal 2011 for its 116 stores opened between 2004 and 2009 was 16.2%.  However, despite referencing as an authority Dr. Aswath Damodaran's calculation on return analyses, Cracker Barrel failed to follow Dr. Damodaran's definitive calculations by excluding general and administrative, interest and tax expenses as "not material to an investor's understanding of the results for these stores or the Company's decision-making in determining to build new stores…."  Dr. Damodaran was contacted by the Express-News to "get his take on which was the best measure."  In an article appearing on October 25, 2012, Dr. Damodaran, who emphasized that he had no connection with either Cracker Barrel or Biglari Holdings, found Cracker Barrel's logic to be flawed:

"Damodaran, cautioning he had not reviewed the details of Biglari's letter, said in an email:  'If as Mr. Biglari claims, Cracker Barrel has excluded depreciation, G&A and taxes to come up with a return on capital, they are wrong.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs