'In fact, they are then using a ... (calculation) that actually does not measure how well you are doing as a business,' Damodaran said."
Under the Board's erroneous methodology, a 16.2% return is calculated, whereas the more appropriate measure that factors in, not ignores material and relevant expenses, produces a paltry return of 3.7%, clearly below Cracker Barrel's cost of capital.
-- Cracker Barrel's calculations of its return on invested capital (ROIC) are also fraught with error. Cracker Barrel's ROIC numbers appear better than actuality because Cracker Barrel does not follow Dr. Damodaran's formula when it excludes many expenses, modifying both net operating profit after tax (to boost the numerator) as well as adjusting invested capital (to lower the denominator). We challenge Cracker Barrel to disclose its computation of ROIC for the last seven years to track exactly how Cracker Barrel has improved its numbers in spite of its poor investments. The data, we are certain, would show a lack of consistency as well as artificial enlargement of its results.
Biglari Holdings believes that when the full facts are presented, the truth about Cracker Barrel's financial performance stands in stark contrast to the Board's and management's incomplete and inaccurate presentations to shareholders. We urge Cracker Barrel shareholders to hold the Board accountable for what we clearly believe to be misleading financial results. Cracker Barrel shareholders should demand full and transparent disclosure, critical to their ability to make an informed decision.SOURCE Biglari Holdings Inc.
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