Dear Cracker Barrel Shareholders:
At Cracker Barrel’s November 15, 2012 Annual Meeting of Shareholders, you will have an important decision to make regarding the future of your investment. By supporting your Board-designated nominees, you will be able to reaffirm your support for our ongoing commitment to generating value for shareholders.
As you review the large amount of correspondence generated thus far, we encourage you to consider the following key facts: we have successfully executed on the strategic initiatives we announced last year; we had strong financial and operational performance during our 2012 fiscal year; we have added new perspectives, skills and expertise to our Board through seven new directors over the past 18 months; and we have added key senior management hires in areas vital to our organization.
Our accomplishments across multiple operational and financial metrics have translated into not only improvements in sales, operating margins and earnings per share, but also a 68.4% appreciation in the value of the Company’s shares in the year following the announcement of our strategic initiatives. 1 Since launching our strategic priorities in September 2011, we have:• Outperformed the S&P 500 Restaurant Index, S&P 600 Restaurant Index, S&P 1500 Restaurant Index, S&P 500 Index, and the peer set delineated in our 2012 proxy statement; • Doubled our quarterly dividend from $0.25 to $0.50, thereby increasing our dividend yield to 3%; • Increased cash and cash equivalent balances by nearly $100 million, or 190%; • Achieved operating margin expansion of 50 bps for FY 2012; • Accelerated same store sales growth in the last three quarters; and • Outperformed casual dining peers in same store traffic and sales growth for three consecutive quarters, as measured by the Knapp-TrackTM casual dining index. Mr. Biglari has distributed materials that attempt to dispute these facts and distract you from our operational and financial success, recruitment of new Board members and positive ongoing momentum. However, we believe he has failed to contribute any new meaningful or original ideas, and has made assertions about our performance and governance that we believe are, at best, uninformed, and, at worst, intentionally misleading. For example, Mr. Biglari has asserted that we changed the formula used to calculate ROIC for purposes of executive compensation. This is incorrect. As noted by Institutional Shareholder Services (ISS) in its report: “Contrary to assertions by the dissidents, the formula used to calculate ROIC in the executive incentive plans is unchanged from the one the board adopted in fiscal 2011, when it introduced the metric for executive compensation plans.” 2 In its report, Glass Lewis & Co. noted that Mr. Biglari’s most recent solicitation includes “a series of uncompelling and, at times, specious arguments.” We believe that Mr. Biglari has used unnecessarily divisive rhetoric, and has cherry-picked unfavorable data points of questionable relevance in an effort to distract from our successes over the past year. We further believe that his presence on our Board would risk derailing our success and interfere with the Board’s ongoing effectiveness.