UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Cracker Barrel Old Country Store, Inc.
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The following is a letter sent to shareholders of Cracker Barrel Old Country Store, Inc. (the “Company”) in a mailing commenced on October 13, 2015:
October 13, 2015
Dear Cracker Barrel Shareholders:
At the Cracker Barrel Annual Meeting of Shareholders, to be held on November 12, 2015, you are being asked to vote on the election of the Company’s nine directors and several other proposals, including, importantly, the approval of the Company’s Shareholder Rights Plan. We believe this is a critical choice for you to make in protecting your investment.
By way of background, a Shareholder Rights Plan substantially identical to the version up for approval now has been in place since shareholders overwhelmingly approved it at our 2012 annual meeting. That Plan was adopted as a response to the rapid open-market acquisition program by Biglari Holdings of our outstanding common stock. That Plan expired on April 9, 2015 and the Board of Directors, acting after thoughtful deliberation and in what it believes to be in the best interest of all Cracker Barrel shareholders, approved and implemented a substantially identical Plan for an additional three years, subject to shareholder approval at this year’s Annual Meeting.
As we sit here today, Biglari Holdings remains a threat: with a 19.7% ownership position in Cracker Barrel, we believe that Sardar Biglari desires a controlling stake in our Company. By keeping this Plan in place, our shareholders will continue to be protected from Biglari Holdings, or any other party, who tries to accumulate a potentially controlling position in the Company through any takeover strategies that do not provide ALL Cracker Barrel shareholders an equal opportunity to benefit from a change in control premium.
BIGLARI’S ACTIONS WITHIN HIS OWN COMPANY CONTINUE TO MAKE HIM A THREAT TO CRACKER BARREL SHAREHOLDERS
We believe Mr. Biglari’s questionable governance track record within his own company speaks volumes as to why Cracker Barrel needs the continued protections of a Shareholder Rights Plan. In recent years, Mr. Biglari has pursued numerous tactics that, in our view, seem designed primarily to gain unchallenged control of Biglari Holdings for Mr. Biglari at the expense of his own shareholders. This has included advocating for a dual-class stock structure that would reserve a higher proportion of the voting power to shares controlled by Mr. Biglari, installing a lucrative licensing agreement for the use of his own name that would make any move to replace Mr. Biglari as CEO difficult and costly, altering voting bylaws in his favor and utilizing shareholder money to acquire a controlling stake in a publicly traded company of which he is already the Chairman and CEO.
For more information on Mr. Biglari’s track record of poor governance actions we encourage you to review the presentation available on the Cracker Barrel investor website at investor.crackerbarrel.com.
PROTECTING SHAREHOLDER VALUE THROUGH THE RIGHTS PLAN
The Plan before you for approval is not intended to prevent a takeover or deter fair offers for securities of the Company. To the contrary, it is designed to encourage anyone seeking to acquire the Company to negotiate with the Board of Directors prior to attempting a takeover and contains a “qualifying offer” provision which allows for all-cash, fully financed tender offers to proceed without triggering rights under the Plan. This should enable all shareholders to realize the full value of their investment in our Company. We believe this Plan is shareholder friendly and provides effective protection against creeping acquisitions of control and other abusive takeover tactics.
If shareholders approve the Plan at the Annual Meeting, it will remain effective through April 9, 2018. Therefore, it is important that shareholders vote to maintain this critical protection.
CRACKER BARREL CONTINUES TO DELIVER SUPERIOR RESULTS
Fiscal year 2015 was a year of continued success on many fronts as we demonstrated the strength of the differentiated brand and our ability to execute effectively on our strategic initiatives to generate strong results. During the year, we drove increased traffic which resulted in comparable-store restaurant sales growth of more than 5% and earnings per share growth of more than 20%. We also generated $334 million in cash from operations, which allowed us to increase our quarterly dividend and declare a special dividend.
The success of 2015 builds on our strong existing track record of executing on our growth initiatives and creating value for shareholders. In fact, Cracker Barrel has delivered total shareholder returns of 65%, 172%, and 261%, respectively, during the last one-, three- and five-fiscal year periods, substantially outperforming the S&P MidCap 400® index.
As we continue to execute on our proven strategic priorities, we believe it is vitally important to have a Rights Plan in place that protects against Biglari Holdings or another third party potentially derailing the momentum we have achieved and allows management and the Board to remain focused on delivering superior returns for all of our shareholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE SHAREHOLDER RIGHTS PLAN
Whether or not you expect to be present at the Annual Meeting, please vote and submit your proxy as soon as possible via the Internet, by phone, or if you have requested to receive printed proxy materials, by mailing a proxy card enclosed with those materials.
If you have any questions or require assistance with voting your proxy card, please call MacKenzie Partners, Inc., toll-free, at (800) 322-2885.
Sincerely,
Sandra B. Cochran
President and Chief Executive Officer
Important Additional Information
Cracker Barrel, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from Cracker Barrel shareholders in connection with the matters to be considered at Cracker Barrel’s 2015 annual meeting of shareholders to be held on November 12, 2015. On October 2, 2015, Cracker Barrel filed a definitive proxy statement (as it may be amended, the “Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with any such solicitation of proxies from Cracker Barrel shareholders. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders can obtain the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents filed by Cracker Barrel with the SEC for no charge at the SEC’s website at www.sec.gov. Copies are also available at no charge at the Investor Relations section of our corporate website at www.crackerbarrel.com.
The following materials were first used in a presentation to investors on October 12, 2015 and posted to the Company’s Investor Relations website, investor.crackerbarrel.com.
 Fall 2015
– Investor Presentation
Delivering a Best-in-Class Guest Experience
and Exceptional Shareholder Returns |
 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 that involve risks, uncertainties and other factors that may cause actual results and performance of the Company to differ materially from those expressed or implied in this discussion. All forward-looking information is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995. More detailed information on risks, uncertainties and other factors is provided in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”), press releases and other communications. The Company, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from the Company’s shareholders in connection with the matters to be considered at the Company’s 2015 annual meeting of shareholders to be held
on November 12, 2015. On
October 2, 2015, the Company filed a definitive proxy statement (as it may be amended,
the “Proxy Statement”) with the
SEC in connection with any such solicitation of proxies from the Company’s
shareholders. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ
THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AND OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders can obtain the Proxy Statement, any amendments or supplements to the Proxy Statement and other documents
filed by the Company with the
SEC for no charge at the SEC’s website at www.sec.gov. Copies are also
available at no charge at the Investor Relations section of our
corporate website at www.crackerbarrel.com. |
 I. Cracker Barrel’s Track Record – Delivering Superior Results II. Why We Are Here – Protecting Shareholder Value III. Conclusion – Vote to Approve the Shareholder Rights Plan Table of Contents Appendix – Additional Materials |
 I.
CBRL’s
Track Record – Delivering Superior Results |
 Cracker Barrel’s Heritage – Pleasing People Since 1969 Source: Public filings, Technomic and Company website (1) Percentages represent each day-part’s percentage of restaurant sales in FY2015. (2) Brands include: A: The Cheesecake Factory, B: P.F. Chang's China Bistro, C: Bonefish Grill, D: Buffalo Wild Wings Grill & Bar, E: Olive Garden, F: Texas Roadhouse, G: Famous Dave's, H: Red Lobster, I: California Pizza Kitchen, J: IHOP, K: Outback Steakhouse, L: Carrabba's Italian Grill, M: Romano's Macaroni Grill, N: Mimi's Café, O: Waffle House, P: On The Border Mexican Grill & Cantina, Q: BJ's Restaurant & Brewhouse, R: Logan's Roadhouse, S: LongHorn Steakhouse, T: Bob Evans, U: Ruby Tuesday, V: TGI Friday's, W: Chili's Grill & Bar, X: Friendly's, Y: O'Charley's, Z: Shoney's, A1: Denny's, A2: Perkins Restaurants
& Bakery. Highly differentiated concept providing wholesome
connections to guests
635 old-fashioned country stores welcome ~6,700
guests a week ~$2.84bn in annual revenues; ~20% of annual revenues coming from retail business Welcome break for travelers across 42 states The Cracker Barrel Concept Lunch Breakfast Dinner Diversified Menu and Meal Offerings 1 39% 37% 24% Delivering a Recognized Guest Experience Technomic Brand Metrics Study - Brand Uniqueness Cracker Barrel is Perceived to be More Unique Than Competitors 2 |
 CBRL Has
Delivered Exceptional Shareholder Value Since the Original Six Priorities
Were Announced Source: Public filings, Bloomberg, market data as of
30-Sep-2015 Note: 12-Sep-2011 represents the day
prior to announcement of Strategic Priorities on 13-Sep-2011. (1)
Percentages based on number of shares voted excluding shares controlled by
Biglari. $30
$40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 $160 $170 Sep-2011 Mar-2012 Sep-2012 Mar-2013 Sep-2013 Mar-2014 Sep-2014 Mar-2015 Sep-2015 Daily from 12-Sep-2011 to 30-Sep-2015 $ 147.28 13-Sep-2011 New CEO Sandy Cochran announces Strategic Priorities Proxy Vote I 20-Dec-2011 A majority of votes cast by shareholders (~74% of non-Biglari shares) 1 are for CBRL's slate of directors Proxy Vote II 15-Nov-2012 A majority of votes cast by shareholders (~90% of non - Biglari shares) 1 are for CBRL's slate of directors, an even higher percentage than 2011) Proxy Vote III 13-Nov-2013 A majority of votes cast by shareholders (~92% of non-Biglari shares) 1 are for CBRL's slate of directors. A majority of votes cast by shareholders (~90% of non -Biglari shares) 1 are against a $20 per share special dividend 02-Jun-2015 CBRL announces special dividend of $3.00 per share, in addition to the quarterly dividend of $1.10 per share Proxy Vote IV 23-Apr-2014 A majority of votes cast by shareholders (~92% of non- Biglari shares) 1 are against Biglari's proposals 26-Feb-2013 CBRL announces comparable store traffic up 0.2%, the first quarter in more than 10 years with positive comparable store traffic against a prior-year quarter with positive comparable store traffic 26-Sep-2013 CBRL authorizes new $50mm share repurchase plan 03-Oct-2014 CBRL announces quarterly dividend of $1.00 and authorizes new $25mm share repurchase plan +276.6 % CAGR: 39.3 % 26-Apr-2012 CBRL announces comparable store restaurant sales up 3.1% for the quarter and a 60% increase in its quarterly dividend 24-Feb-2015 CBRL announces comparable store restaurant sales up 7.9% and increases earnings per share guidance for 2015 to $6.40 to $6.50 from $5.95 to $6.10 the previous quarter |
 CBRL Stock
Price has Outperformed Its Benchmarks… Since
Announcement of Strategic Priorities 1 Last Twelve Months Source: Bloomberg, market data as of 30-Sep-2015 Note: S&P 400 Restaurant Index includes Panera, Buffalo Wild Wings, Cheesecake Factory, Brinker, Cracker Barrel, Jack in the Box, Domino’s Pizza, Dunkin’ Brands and Wendy’s. S&P 500 Restaurant Index includes Chipotle, Darden, McDonald’s, Starbucks and YUM! Brands. S&P 600 Restaurant Index includes Papa John’s, Texas Roadhouse, DineEquity, Popeyes Louisiana Kitchen, Sonic, Red Robin Gourmet Burgers, Bob Evans, BJ‘s Restaurants, Biglari Holdings, Ruth's Hospitality and Ruby Tuesday. (1) 12-Sep-2011 is closing price the day prior to announcement of Strategic Priorities on 13-Sep-2011.
Cracker Barrel S&P 400 Restaurant Index S&P 500 Restaurant Index S&P 600 Restaurant Index S&P 400 Mid-Cap Index Russell 2000 Index 60% 100% 140% 180% 220% 260% 300% 340% 380% 420% Sep-2011 Sep-2012 Sep-2013 Sep-2014 Sep-2015 276.6 % 132.9 % 154.1 % 65.4 % 61.9 % 64.2 % 90% 100% 110% 120% 130% 140% 150% 160% Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 45.5 % 26.2 % 21.5 % 19.1 % (0.1)% (0.2)% |
 …Performance Has Been Even More Dramatic When
Layering in Dividends 7 Source: Bloomberg as of 30-Sep-2015 Note: Represents Total Shareholder Return over the period 12-Sep-2011 through 30-Sep-2015. Total Shareholder Return calculated by share price appreciation and dividends paid (assumes dividends paid are re-invested into the stock (purchasing more shares) on the ex-dividend date). 12-Sep-2011 represents the day prior to
announcement of Strategic Priorities on 13-Sep-2011. Share Price
Appreciation Dividend Contribution
277% 342% 289% 225% 161% 106% 95% 77% 78% 382% 364% 236% 175% 194% 169% 137% 50% 42% (18)% 46% 16% 7% 24% 9% 15% 17% 12% 13% 24% 4% 26% 17% 322% 358% 296% 225% 185% 116% 109% 94% 78% 395% 364% 248% 199% 198% 169% 163% 67% 42% 4% (18)% -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 Median TSR = 150% Median TSR = 169% Median TSR = 150% Median TSR = 169% 4% S&P 400 Restaurants S&P 600 Restaurants |
 CBRL is
Keenly Focused on Continuing to Create Value for Shareholders
8 Drive traffic and sales through advertising, menu strategies and targeted marketing programs Continue to use seasonal menu promotions to drive frequency Further expand retail offerings to appeal to a larger segment of the population and reach new markets Increase number of on air weeks, sustain the successful use of pulsing strategy and broaden media mix with greater digital spend Apply technology and process improvements to enhance overall guest experience Integration of new digital technology as a way to add convenience and enhance the guest experience Test online waitlist capabilities through new dining room management system Launch of the Cracker Barrel Games App Implement cost savings initiatives to further drive operating margins Improve operating margins through process enhancements, reductions in food costs, utilities and restaurant and retail labor Several of these important initiatives to be completed during FY16 Invest in long-term growth through new unit expansion and development of the fast casual concept Expand Cracker Barrel footprint, including growth outside the core market Offer a different type of guest experience through fast casual concept restaurants 1 2 3 4 Business Priorities for 2016 |
 II.
Why We Are Here –
Protecting Shareholder Value |
 We Are
Asking You to Approve Our Shareholder-Friendly Rights Plan
10 Source: 2015 ISS United States Summary Proxy Voting Guidelines ISS Guidelines Deter creeping acquisition of control without premium by investor with history of doing so Should be thoroughly explained 3 years from adoption No more than 3 years 20% trigger No lower than a 20% trigger, flip-in or flip-over, but just under 5% for NOL rights plan No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill If the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10% of the shares may call a special meeting or seek a written consent to vote on rescinding the rights plan If the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10% of the shares may call a special meeting or seek a written consent to vote on rescinding the rights plan If existing CBRL Rights Plan not approved by shareholders, will terminate upon certification of shareholder vote Within 12 months of adoption Rationale Rationale Term Term Threshold Threshold Limitations on Future Redemptions Limitations on Future Redemptions Mandatory Redemption Mandatory Redemption Shareholder Ratification Shareholder Ratification In Guidelines? CBRL 20% Rights Plan – Adopted in Apr-2015 The plan before you is not intended to prevent a take-over or to deter fair offers for securities of the Company,
and contains a “qualifying offer” provision for all-cash, fully financed
tender offers ISS Commentary on 2012 Shareholder Rights Plan
(02-Nov-2012) A vote FOR this proposal is warranted because the
rights plan contains features that protect shareholders from entrenchment risk. Specifically, the pill has a three- year term, a 20-percent trigger, and a robust qualifying offer clause and there is no dead-hand or slow-hand provision. In addition,
there are no significant governance concerns at the company.
Identical to the Rights Plan Approved by Shareholders
by a Substantial Margin in 2012 |
 WITH
MANAGEMENT All this… coincides not only with the
dissident's announcement of their
first, failed proxy contest, but with the
new CEO's announcement of her
strategic objectives, which thus far
appear to (be) delivering the goods
and driving meaningful increases in
shareholder value. -ISS, Nov-2012 Our Shareholders Have Overwhelmingly Supported Us in the Past Proxy Advisory Firms’ Recommendations 11 Source: Press releases, Public filings (1) Percentages based on number of shares voted excluding shares controlled by Biglari Holdings and its affiliates.
WITH MANAGEMENT The company's key performance trends, careful executive succession process, and current board renewal efforts strongly suggest that the dissident's arguments are poorly- founded, and that there is not a compelling need for shareholders to effect board change at this time. -ISS, Dec-2011
WITH MANAGEMENT Support for this proposal, therefore, is not warranted given the firm's relatively strong performance and because the board appears to be exercising prudent stewardship of capital. -ISS, Apr-2014 WITH MANAGEMENT Given the strong operating and financial performance under the reconstituted board… the dissidents have not made a compelling case that board change is necessary. -ISS, Oct-2013 2011 Proxy Vote¹ 2012 Proxy Vote¹ 2013 Proxy Vote¹ 2014 Special Meeting Vote¹ WITH DISSIDENT Accordingly, we recommend that shareholders use Biglari’s GOLD proxy card to vote. -Glass Lewis, Dec-2011 WITH MANAGEMENT Further foundering Biglari's most recent solicitation are a series of relatively uncompelling and, at times, specious arguments, which collectively do little to support a forward operating plan that is decidedly light on detail. -Glass Lewis, Nov-2012 WITH MANAGEMENT We find no meaningful footing for the Dissident's current solicitation. In the simplest terms, the submitted resolutions are unnecessarily prescriptive, impractical and counterproductive. -Glass Lewis, Apr-2014
WITH MANAGEMENT We believe investors should reasonably consider the dubious corporate governance principles promulgated by Biglari when considering the prospective appeal of electing either of Messrs. Biglari or Cooley. -Glass Lewis, Nov-2013 |
   Source:
Public filings, company websites, other public sources We Believe
Biglari’s Actions Within His Own Company Demonstrate the Need to
Protect CBRL Shareholders (1/2) Sardar Biglari has a track record of
dubious corporate governance Sardar Biglari
Used His Shareholders’ Money to Usurp Voting Control of Biglari Holdings In 2010, Sardar Biglari used shareholder funds to obtain personal voting control of ~15% of Biglari Holdings
shares — Mr. Biglari used Biglari Holdings cash to invest in his personally-controlled investment vehicle, The Lion Fund,
which The Lion Fund then used to buy Biglari Holdings stock, allowing the shares to
remain outstanding and allowing him to claim personal voting control
(even though he directly owned only ~1%) In 2015, Sardar Biglari increased
his control of Biglari Holdings to 49.5% through a controversial tender offer via The Lion Fund, again using Biglari Holdings shareholder money to do it — This tender offer followed a closely contested proxy fight at Biglari Holdings and now serves to effectively
entrench Mr. Biglari’s
position — The maneuver was facilitated by a change to the corporate by-laws (the day before the tender offer), which
included allowing Mr. Biglari to personally vote all 49.5% of shares and only allowing
for special meetings to be called by the Board or Chairman
— Glass Lewis referred to Mr. Biglari’s structure as: “a circuitous and economically misaligned ownership framework between Biglari Holdings and Mr. Biglari’s shareholder-funded investment vehicle”
— Lucian Bebchuck, Director of the Program on Corporate Governance at Harvard Law School, said of the move:
“the tender offer is an aggressive entrenchment move aimed at enabling the CEO
[Sardar Biglari] to use shareholders’ money to gain control over
the Company” |
   Source:
Public filings, company websites, other public sources (1)
Percentage represents value of ~4.0mm CBRL shares held in The Lion Fund II ($103.18 per
share) divided by BH market capitalization of $711mm as of 30-Sep-2013. (2) FY2014 ending 24-Sep-2014. On 16-Oct-2014, Biglari Holdings changed their fiscal year end from September to December.
(3) Forbes, “The Implosion Of A Warren Buffett Wannabe”, 20-March-2015.
(4) Biglari Holdings Form 10-K/A filed 30-Apr-2015; Figure includes $900k Base Salary, Biglari Holdings Bonus ($10mm in 2013, $0 in 2014),
and Biglari Capital Corp. Incentive Reallocation ($14.7mm in
2013, $34.4mm in 2014); excludes Provision for Shared Services by Biglari Holdings to Biglari Capital Corp. which equaled $1.6mm in 2014. (5) Biglari Holdings Form 8-K, filed 3-Jul-2013; Biglari Holdings Form 10-K, filed 13-Dec-2010.
We Believe Biglari’s Actions Within His Own Company
Demonstrate the Need to Protect CBRL Shareholders (2/2)
Sardar Biglari Has Also Engaged in Several Other Transactions That Served to Further Entrench His Position In 2013, Biglari Holdings transferred ~3.8 million shares of CBRL stock to The Lion Fund (controlled by
Sardar Biglari through his ownership of Biglari Capital Corp., the general partner) with
a 5-year lock-up —
This restructuring transferred control over an asset that constituted ~58% of Biglari Holdings’ market cap 1 from the public company to Mr. Biglari’s personally-controlled private investment entity In 2013, Biglari Holdings entered into a Trademark License Agreement with Sardar Biglari which requires the
Company to pay him 2.5% of revenues per year upon certain events such as his termination
from the Company or a Change of Control
— 2.5% of Biglari Holdings’ FY2014 2 revenues was ~$20 million Other Self- Interested Transactions Biglari Holdings’ restructurings have allowed Sardar Biglari to circumvent his shareholder-approved
$10.9mm compensation cap 3 – Sardar Biglari paid himself more than $25mm in 2013 and more than $35mm in 2014 4 — The 2015 tender offer may allow Mr. Biglari to enhance his personal pay package even further by allowing him to
collect hedge fund-like fees on nearly 50% of Biglari Holdings stock
Sardar Biglari has proposed a dual class, high vote / low vote stock structure at
Biglari Holdings on multiple occasions
As part of the 2013 restructuring, Sardar Biglari acquired 100% of the stock in Biglari
Capital Corp. (the general partner of The Lion Fund) from Biglari Holdings
for ~$1.7mm, an asset that Biglari Holdings had previously
purchased from Sardar Biglari in 2010 for ~$4.1mm 5 Given Sardar Biglari’s corporate governance track record, we believe Cracker Barrel shareholders need the continued protections of a shareholder rights plan |
 Third Party
Views on Biglari’s Governance Practices Source: ISS, Glass Lewis,
Forbes, The New York Times, New York Post The Board Room Strikes
Back Steven Davidoff Solomon, 21-Apr-2015
[Biglari Holdings’] victory is all the more remarkable because the company is a symbol of bad governance. It paid Mr. Biglari $34.4 million last year, prompting recommendations against the management slate from I.S.S. and Glass Lewis. Sardar Biglari in the Press [Biglari Holdings’] numerous questionable governance practices, and particularly decisions by the independent directors regarding corporate investments in the CEO's personal hedge fund, raise significant questions about
the stewardship of the incumbent directors.
-ISS, 26-Mar-2015
Proxy Advisory Firms’ Commentary on Biglari Holdings’ Spring 2015 Proxy
Contest With Groveland Capital In lieu of acting as a check on Mr.
Biglari's predilection for sole investment and management control, the
incumbent board appears, at the very least, content with continuing to
support any program or policy forwarded by Mr. Biglari. These policies
and programs have included, among other things, failed attempts at
creating a dual class share structure at no
discernible benefit to ordinary investors, creation of a circuitous and economically misaligned ownership framework between BHI and Mr.
Biglari's shareholder-funded investment vehicle and execution of an array of licensing and compensation arrangements that
appear to do little more than transfer wealth to Mr. Biglari without much regard to the operating
performance of the Company's primary asset base or the tangible returns
realized by BHI investors. -Glass Lewis,
26-Mar-2015 There is a case to be made that Steak n Shake might
not have survived the financial crisis without some sort of activist
intervention. There is also a case to be made, without contradicting the
first case, that after having helped the company survive, the cure subsequently became as bad as the disease. -ISS, 05-Oct-2015 The Implosion Of A Warren Buffett Wannabe Antoine Gara, 20-March-2015 In the case of Biglari Holdings, the holding company run by Buffett disciple Sardar Biglari, 37, there’s little evidence of the corporate stewardship,
shareholder returns and investing prowess that’s made Berkshire Hathaway a hallmark of American capitalism. Instead, shareholders in Biglari Holdings
are beginning to tire with Biglari’s excessive compensation, self-dealing
and unchecked power, in addition to his company’s murky and sharply
declining financial results.
Biglari’s problems begin with CEO compensation and are illustrative of the
poor judgement and overreach that can ruin a business. Over the past six years, Mr. Biglari has been paid a total of $75.9 million, with his 2014 pay exceeding $34 million as annual operating income tumbled to a five-year low.
How Biglari hoodwinked shareholders into such an arrangement is
indicative of his company’s issues.
Maxim’s Relaunch As Men’s ‘Luxury Magazine’
Falls Flat Keith J. Kelly, 1-September-2015 Biglari fancies himself a Warren Buffett-style conglomerate builder, although his publicly traded company has been underperforming the overall stock market for several years.
He recently cemented his power by compelling Lion Fund — an investment company that he controls — to snap up 29 percent of Biglari Holdings’ stock at $420 a share, giving him control of about
49 percent of the stock. |
 III.
Vote to Approve the Shareholder Rights Plan
|
 CBRL is
Delivering Superior Performance… (1)
Company same store restaurant sales measured against the Knapp-Track TM Casual Dining Index, based upon respective weekly averages. Quarters relate to Cracker Barrel’s fiscal year. Outperformed the Casual Dining Industry 1 15 Out of the Last 16 Quarters |
 …And
Our Success is Reflected in Our Results Cracker Barrel Annual Earnings Per
Share Cracker Barrel Annual Dividend Per Share
Source: Public filings, Press releases and Capital IQ as of
30-Sep-2015 Note:
EPS numbers adjusted for 53 rd week in 2012, and all years adjusted for proxy contest expenses, tax reinstatements, severance and restructuring charges where applicable. Please see Appendix for reconciliation of GAAP basis operating results to adjusted non-GAAP operating results. Years relate to CBRL fiscal years.
(1) Current quarterly dividend of $1.10 annualized by multiplying by four. |
 Three Years
Ago We Presented Our Plan for FY 2013 to FY 2015
Adjusted Operating Income
8-10% annual growth
Adjusted EPS 12-15% annual growth Adjusted Total Shareholder Return 15-18% per year Metric Plan How did we do? |
 We Achieved
These Results Through the Successful Execution of Our Business Priorities
19 Extending the reach of the Cracker Barrel brand to drive traffic and sales in both our restaurant and retail businesses Grew comparable store restaurant sales by 5.1% Grew comparable store retail sales by 3.6% Increased comparable store traffic by 2.1% Optimizing average guest check through the implementation of geographic pricing tiers Developed geographic pricing model and implemented pricing tiers Laid the foundation for further optimization of average guest check Applying technology and process enhancements to drive store operating margins Realized notable labor savings through our plateware reduction initiative and a systemwide update to our retail labor scheduling Completed the rollout of the Dining Room Management system Invest in long-term growth through new unit expansion and development of the fast casual concept Since implementing new site selection tools, new stores have outperformed expectations Opened first of our new store (Fusion) prototype, designed to save $200K/year in operating costs Maintaining our balanced approach to capital allocation Declared a $3 special dividend Increased our regular quarterly dividend by 10%, bringing the total increase of our dividend to 400+% since 2011 1 2 3 4 Business Priorities for 2015 5 |
   Approve the
Shareholder Rights Plan We are continuing to execute on our proven
strategic priorities We believe it is vitally important to protect our
shareholders from Biglari Holdings or any other party who attempts to
accumulate a potentially controlling position without paying a change of
control premium This is a critical choice for you to make in protecting
your investment Our Board unanimously recommends a vote for the approval of
the Shareholder Rights Plan |
 Appendix
– Additional Materials |
 Reconciliation of GAAP Basis Operating Results to
Adjusted Non-GAAP Operating Results
Twelve Months Ended August 3, 2012
Twelve Months Ended July 29, 2011
As Reported Adjustments 1,4 53rd Week As Adjusted As Reported Adjustments 1,2,3,4 As Adjusted Total Revenue $ 2,580,195 $ (51,059) $ 2,529,136 $ 2,434,435 $ 2,434,435 Store Operating Income 337,146 – (11,093) 326,053 305,778 – 305,778 General and Administrative Expenses $146,171 (6,863) (1,370) 137,938 139,222 (2,172) 137,050 Impairment and Store Dispositions, Net – – – – (625) 830 205 Operating Income 190,975 6,863 (9,723) 188,115 167,181 1,342 168,523 Interest Expense 44,687 – (811) 43,876 51,490 (5,136) 46,354 Pretax Income 146,288 6,863 (8,912) 144,239 115,691 6,478 122,169 Provision for Income Tax 43,207 2,027 (2,632) 42,602 30,483 1,707 32,190 Net Income $ 103,081 $ 4,836 $ (6,280) $ 101,637 $ 85,208 $4,771 $ 89,979 Earnings Per Share – Basic $ 4.47 $ 0.21 (0.27) $ 4.41 $ 3.70 $ 0.21 $ 3.91 Earnings Per Share – Diluted $ 4.40 $ 0.21 (0.27) $ 4.34 $ 3.61 $ 0.20 $ 3.81 Source: Public filings (1) Severance, other charges and tax effects related to organizational changes. (2) (Charges) Gain and tax effects of impairment net of gain on sale of property. (3) Refinancing costs and tax effects related to the Company's $750 million credit facility.
(4) Charges and tax effects of the proxy contest concluded at the Company's annual meeting of shareholders.
(5) Provision for taxes adjusted to exclude the $2.1 million prior year favorable effect of the retroactive reinstatement of the work opportunity tax
credit. (6)
Accrued liability and tax effects related to the settlement of the Fair Labor Standards Act litigation. Full year adjustments includes the amount accrued in the first quarter of 2015, which was not previously included in the reconciliation schedule. (7) Provision for taxes adjusted to exclude the $2.3 million prior year favorable effect of the retroactive reinstatement of the Work opportunity Tax
Credit. (8)
Charges and tax effects of the special meeting of shareholders or proxy contest at the
annual shareholders meeting. (Unaudited and $ in thousands, except per
share data) Twelve Months Ended July 31, 2015
Twelve Months Ended August 1, 2014
Twelve Months Ended August 2, 2013
As Reported Adjustments 6,7 As Adjusted As Reported Adjustments 8 As Adjusted As Reported Adjustments 1,4,5 As Adjusted Total Revenue $ 2,842,284 – $ 2,842,284 $ 2,683,677 – $ 2,683,677 $ 2,644,630 – $ 2,644,630 Store Operating Income 402,424 – 402,424 337,793 – 337,793 344,786 – 344,786 General and Administrative Expenses 147,544 (3,519) 144,025 129,387 (4,313) 125,074 143,262 (5,634) 137,628 Impairment and Store Dispositions, Net – – – – – – – – – Operating Income 254,880 3,519 258,399 208,406 4,313 212,719 201,524 5,634 207,158 Interest Expense 16,679 – 16,679 17,557 – 17,557 35,742 – 35,742 Pretax Income 238,201 3,519 241,720 190,849 4,313 195,162 165,782 5,634 171,416 Provision for Income Tax 74,298 3,417 77,715 58,721 1,327 60,048 48,517 3,847 52,364 Net Income $ 163,903 $ 102 $ 164,005 $ 132,128 $ 2,986 $ 135,114 $ 117,265 $ 1,787 $ 119,052 Earning Per Share – Basic $ 6.85 $ 0.01 $ 6.86 $ 5.55 $ 0.13 $ 5.68 $ 4.95 $ 0.08 $ 5.02 Earning Per Share – Diluted $ 6.82 $ – $ 6.82 $ 5.51 $ 0.12 $ 5.63 $ 4.90 $ 0.07 $ 4.97 |
 S&P
Restaurant Index Composition Respective S&P Restaurant Index
Constituents Ticker
Company Name Logo S&P 400 S&P 500 S&P 600 BH Biglari Holdings BJRI BJ’s Restaurants BOBE Bob Evans Farms BWLD Buffalo Wild Wings CAKE The Cheesecake Factory CBRL Cracker Barrel Old Country Store CMG Chipotle Mexican Grill DIN DineEquity DNKN Dunkin Brands Group DPZ Domino’s Pizza DRI Darden Restaurants EAT Brinker International JACK Jack in the Box Source: Standard & Poor‘s Ticker Company Name Logo S&P 400 S&P 500 S&P 600 MCD McDonald’s PLKI Popeyes Louisiana Kitchen PNRA Panera Bread Company PZZA Papa John’s International RRGB Red Robin Gourmet Burgers RT Ruby Tuesday RUTH Ruth’s Hospitality Group SBUX Starbucks SONC Sonic TXRH Texas Roadhouse WEN The Wendy’s Company YUM Yum! Brands |