Schedule 14A


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Compensation of Directors

During 2016, each outside director was paid an annual cash retainer of $50,000. Each outside director also was paid a director’s fee of $1,500 for each committee meeting attended, other than the Audit Committee and the Compensation Committee members, who were paid $2,000 for each committee meeting attended. The Chairman of each committee, other than the Audit Committee and the Compensation Committee, was paid an additional annual retainer of $13,000, while the Chairman of the Audit Committee was paid an additional retainer of $21,000 and the Chairman of the Compensation Committee was paid an additional annual retainer of $18,000. Directors also receive $2,000 for each meeting of our Board of Directors attended, in addition to the annual retainer described above. We reimburse all non-employee directors for reasonable out-of-pocket expenses incurred in connection with attendance at meetings.

Non-employee directors are also offered the option to participate in our deferred compensation plan. The deferred compensation plan allows a participant to defer a percentage or sum of his or her compensation and earn interest on that deferred compensation at a rate equal to the 10-year Treasury bill rate (as in effect at the beginning of each calendar month) plus 1.5%.

Each non-employee director who is elected at an annual meeting also receives a grant of shares of restricted stock having a value equal to approximately $100,000, with the number of shares of restricted stock included in such grant to be determined based on the closing price of our common stock on the date of the applicable annual meeting, as reported by NASDAQ, and to be rounded down to the nearest whole share. These awards vest at the earlier of one year from the date of grant or at the next annual meeting of shareholders. The Company has no knowledge of any agreement or arrangement between any director or director nominee and any person or entity other than the Company relating to compensation or other payment in connection with such person’s candidacy or service as a director.

In addition to the compensation set forth above with respect to each outside director, our independent Chairman James W. Bradford was paid an additional annual cash retainer of $35,000 and received an additional grant of shares of restricted stock having a value equal to approximately $65,000, based on the closing price of our common stock on the date of the grant, as reported by NASDAQ, and rounded to the nearest whole share. These shares of restricted stock vest one year from the date of grant.

The compensation of our directors during 2016 is detailed in the Director Compensation Table, which can be found on page 37 of this proxy statement.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSIONAND ANALYSIS

This portion of the proxy statement, called Compensation Discussion and Analysis or “CD&A,” provides a description of the objectives and principles of Cracker Barrel’s executive compensation programs. It explains how compensation decisions are linked to Cracker Barrel’s performance relative to our strategic goals and efforts to drive shareholder value. It is also meant to give our shareholders insight into the deliberative process and the underlying compensation philosophy that are the foundation of the design of the pay packages of our executive officers. Generally, Cracker Barrel’s executive compensation programs apply to all executive officers, but this CD&A focuses on the compensation decisions relating to our executive officers who qualified as “named executive officers” under applicable SEC rules (the “Named Executive Officers”) during fiscal 2016.

Executive Summary

Company Performance in 2016 and Impact on Executive Compensation

Fiscal 2016 was a year of continued success and growth for the Cracker Barrel Old Country Store 

 



 

Shareholder Returns: For the three-year period ended July 29, 2016, we delivered “total shareholder return” or TSR, which we believe is an appropriate measure of value returned on the shareholders’ investment, of approximately 78%, compared to 52% for the S&P 400 Restaurant Index over the same period. Also during fiscal 2016, the Board increased the quarterly dividend paid to our shareholders to $1.15 per share, marking a five-fold increase since May 2011, and declared a special dividend of $3.25 per share.

 

 



 

Revenue Growth: In fiscal 2016, we grew revenues by 2.5% to $2.91 billion, with comparable store restaurant sales increasing 2.2% and comparable store retail sales increasing 2.7% over the prior year. With this top-line growth, we outperformed our casual dining peers consistently throughout the year, as measured by Black Box Intelligence, a TDn2K TM company and Knapp Track TM sales indices.

 

 



 

Improved Margin: We improved our GAAP operating margin, achieving 9.6% of revenue in fiscal 2016, compared to 9.0% in fiscal 2015. This represented a year-over-year increase of 60 basis points, or 50 basis points when adjusted for the impact of a litigation accrual in the prior year.

 

 



 

Guest Experience: In addition to our financial achievements, the success of our efforts is clear in what our guests and employees say about us. This year, we took top honors as part of the Nation’s Restaurant News’ 2016 Consumer Picks report, chosen as the Best Family-Dining Restaurant. This marked our fourth year to receive top honors in the Nation’s Restaurant News’ Consumer Picks’ six-year history. Cracker Barrel ® was also named America’s Favorite Casual Dining Restaurant in a study by Market Force Information, a leading research firm providing insights from customer experience in the restaurant industry. This recognition was based on the satisfaction ratings of consumers regarding their most recent dining experience and their likelihood to refer. Cracker Barrel also ranked the highest in the general menu category, as well as led in the attributes of Value, Friendly Service, and Fast Service. Furthermore, Cracker Barrel was recognized as the winner among full service restaurants in the Value Through Service category of the Chain Restaurant Consumers’ Choice Award by

 

(1) 

The GAAP amount for 2016 includes the reversal of certain provisions for uncertain tax positions and the retroactive reinstatement of the Work Opportunity Tax Credit in fiscal 2016, and the GAAP amount for 2015 includes expenses associated with the litigation under the Fair Labor Standards Act and the retroactive restatement of the Work Opportunity Tax Credit in fiscal 2015. A reconciliation of the Company’s financial results determined in accordance with GAAP to certain non-GAAP financial measures used herein has been provided on page 57 of this proxy statement.

 

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Technomic, Inc., a leading consulting and research firm serving the food industry. This award from Technomic, Inc. marked our third Chain Restaurant Consumers’ Choice Award win.

The strength of our performance was driven by our strategic plan to Enhance the Core business, Expand the Cracker Barrel Footprint, and Extend the Brand outside of the Cracker Barrel Store. As a result of our disciplined focus and execution on our strategic plan, we exceeded many of our three-year financial targets in 2016.

Our first strategic priority, to Enhance the Core business, encompasses our key sales and traffic drivers, including menu innovation, retail merchandising, and marketing programs, as well as our many cost-saving initiatives. In fiscal 2016, as part of our seasonal menu featured products, we offered several new limited-time menu items, as well as highlighting our core menu guest favorites. We believe these seasonal menu offerings, such as our Campfire Chicken and Campfire Beef entrees, drove incremental improvements to our sales mix. Our fiscal 2016 marketing programs included increased use of national cable advertising, an expansion of our music artist partnerships, and growth in our digital and social media channels. We also continue to grow our core guest base through Spanish-language television and radio advertising. We believe the marketing plan execution supported our outperformance of the casual dining industry. Further driving positive sales growth, and important to the authentic Cracker Barrel experience, we merchandised our stores with distinctive and nostalgic retail products, like our refreshing nostalgic sodas curated from all parts of the country. We sourced collections with broad multi-generational appeal and unique product assortments, such as our “Summer Fun” theme merchandise, which included a variety of clothing, accessories, and home décor items that we believe appealed to guests of all ages. We remained focused on implementing several cost-saving initiatives, and as a result grew operating margin to 9.6% of total revenue. Despite continued wage pressure, we reduced our labor and other related expenses as a percentage of total revenue when compared with the prior fiscal year. Contributing to this, and to savings in multiple other operating expense lines, were our LED Lighting, Targeted Food Management System, and new Food Processor initiatives.

Our second strategic priority is to Expand the Cracker Barrel Footprint with new store openings outside of our core markets. Through the use of our refined site selection tools, the implementation of market-based pricing tiers, and operating cost reductions realized through our Fusion prototype, we have begun to deliver on these plans. We opened our first Nevada store in fiscal 2016 and have additional sites in Nevada and Oregon in our new store pipeline.

Our third strategic priority is to Extend the Brand outside of the Cracker Barrel store. During fiscal 2016, that included a focus on developing and bringing to market a new concept, Holler & Dash Biscuit HouseWe believe that the disciplined and successful execution of our strategic plan has resulted in our sustained financial growth and ability to drive positive shareholder returns. As we begin our new fiscal year, we remain focused on our chief goals of delivering continued positive results and providing value to our shareholders and guests.

Operating income and earnings per diluted share (EPS) determined in accordance with GAAP were $280.5 million and $7.86 per share for 2016 and $254.9 million and $6.82 per share for 2015, respectively, representing increases of 9.8% and 15.2% (respectively) over fiscal 2015 comparable measures. Adjusted operating income and adjusted EPS were $280.5 million and $7.55, respectively, representing increases of 8.5% and 10.7% over adjusted fiscal 2015 comparable measures.

 

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       GAAP/Adjusted Operating Income ($MM)

  

GAAP/Adjusted EPS

 

 

Summary of 2016 Compensation Actions

Pay actions for our Named Executive Officers in 2016 reflected the overall corporate performance discussed above, driven in large part by successful execution and focus on our three strategic business priorities:

 

 



 

Short term awards (annual bonus plan) for Named Executive Officers were 103.21% of target, driven by the increase in our operating income;

 

 



 

Long term awards (2015 LTPP Awards) for Named Executive Officers were 188.65% of target and reflected our achievement of “return on invested capital” (ROIC) of 21.69% during the past two fiscal years; and

 

 



 

Long term awards (2014 MSU Grants) for Named Executive Officers were 150% of target and reflected our achievement of a positive change in cumulative TSR of 78.31% during the past three fiscal years.

Advisory Vote on Executive Compensation 

Last year, we held our annual advisory vote to approve Named Executive Officer compensation, commonly known as “Say on Pay.” Approximately 72% of the votes cast were in favor of our executive compensation as disclosed in our 2015 Proxy Statement. MacKenzie Partners, Inc. (“MacKenzie”), the Company’s proxy solicitor in proxy contests at recent shareholder meetings, informed the Company that Biglari Capital Corp. and its affiliates (“Biglari Capital”) cast 4,735,794 votes against our executive compensation as disclosed in our 2015 Proxy Statement. Excluding these votes cast by Biglari Capital, a historically dissident shareholder, approximately 98% of the remaining votes cast were in favor of our executive compensation. The Compensation Committee considered these results, as well as other feedback the Company has received from shareholders as part of its ongoing review of our executive compensation programs, and determined not to make material changes to our executive compensation programs because the Compensation Committee believes this advisory vote, particularly that of our disinterested shareholders, indicates considerable shareholder support for continuing the Company’s strong pay-for-performance philosophy.

Elements of Compensation Program

Compensation Philosophy

Our central compensation objective is to develop a program that will ultimately drive long-term total return to our shareholders and build a better company by implementing compensation programs that reward both company-wide and individual performance, align our executives’ interests with those of our shareholders and allow us to attract and retain talented executives.

 

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We have a strong “pay for performance” philosophy designed to reward executive officers for maximizing our success, as determined by our performance relative to our financial and operational goals. One hundred percent of the at-risk compensation payable to our executives is tied to the Company’s achievement of measurable performance goals (TSR, operating income and ROIC) that we believe directly relate to our ability to return value to our shareholders and thereby translate into higher TSR over time. In furtherance of our overall philosophy, we seek to reward our executives for both near-term and sustained longer-term financial and operating performance as well as leadership excellence. Compensation opportunities are intended to align the economic interests of executives with those of our shareholders and encourage them to remain with the Company for long and productive careers.

The Company’s compensation philosophy is to target total direct compensation paid to our executive officers at the median of our peer group and other market comparisons. While the Compensation Committee strives to deliver a target total compensation package approximating the market median, judgment is applied to recognize individual performance, experience, and value to the organization when establishing compensation opportunities. The Compensation Committee believes it utilizes elements of compensation that create appropriate flexibility and help focus and reward executives for both near-term and long-term performance while aligning the interests of executive officers with the interests of our shareholders.

Role of the Compensation Committee

The Compensation Committee’s primary responsibility is the establishment and approval of compensation and compensation programs for our executive officers that further the overall objectives of our executive compensation program. In fulfilling this responsibility, the Compensation Committee:

 

 



 

Reviews and approves corporate performance goals for our executive officers, sets cash- and equity-based compensation and administers our equity incentive arrangements;

 

 



 

Assesses (together with management) potential risks to the Company associated with our compensation programs and reviews and approves employment and change in control agreements of our executive officers; and

 

 



 

Periodically conducts or authorizes studies of matters within its scope of responsibilities and may retain, at the Company’s expense, independent counsel or other consultants necessary to assist the Compensation Committee in connection with any such studies.

The Compensation Committee makes compensation decisions after reviewing the performance of the Company and carefully evaluating both quantitative and qualitative factors such as an executive’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, long-term potential to enhance shareholder value, current compensation status as shown on tally sheets reflecting current and historical compensation for each executive, and tenure with the Company.

In addition, for any Named Executive Officers who are subject to employment agreements, the Compensation Committee, with the assistance of Frederic W. Cook & Co., the Compensation Committee’s outside compensation consultant (“Cook & Co.”), and the Company’s outside counsel, is responsible for negotiating and reviewing the terms of such employment agreements. Currently, only Ms. Cochran, our President and Chief Executive Officer, is subject to an employment agreement.

Role of Management

Management plays the following roles in the compensation process:

 

 



 

Management recommends to our Board of Directors business performance targets and objectives for the annual plan and provides background information about the underlying strategic objectives;

 

 



 

Management evaluates employee performance;

 

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Management recommends cash compensation levels and equity awards;

 

 



 

Management works with the Compensation Committee Chairman to establish the agenda for Compensation Committee meetings;

 

 



 

The Chief Executive Officer generally makes recommendations to the Compensation Committee regarding salary increases for other executive officers during the regular merit increase process;

 

 



 

The Chief Executive Officer provides her perspective on recommendations provided by the consulting firm hired by the Compensation Committee regarding compensation program design issues;

 

 



 

The Chief Executive Officer does not play a role in setting her own compensation; and

 

 



 

Other members of management, at the request of the Compensation Committee, work with the outside consultants hired by the Compensation Committee to provide data about past practices, awards, costs and participation in various plans, and information about our annual and longer-term goals. When requested by the Compensation Committee, selected members of management may also review consultant recommendations on plan design and structure and provide a perspective to the Compensation Committee on how these recommendations may affect recruitment, retention and motivation of our employees as well as how they may affect us from an administrative, accounting, tax or similar perspective.

Role of Independent Compensation Consultant

To assist the Compensation Committee with establishing executive compensation, the Compensation Committee retains Cook & Co., a nationally recognized executive compensation consulting firm, to provide competitive market data, assist in establishing a peer group of companies and provide guidance on compensation structure as well as levels of compensation for our senior executives and the Board. The Compensation Committee consulted with Cook & Co. in determining the compensation to be awarded to all of the Named Executive Officers, including Ms. Cochran, in 2016. Cook & Co. reports directly to the Compensation Committee. The Compensation Committee has assessed the independence of Cook & Co. pursuant to applicable SEC and NASDAQ rules and concluded that no conflict of interest exists that would prevent Cook & Co. from serving as an independent consultant to the Compensation Committee.

Analysis of Peer Group

The Compensation Committee evaluates a variety of factors in establishing an overall compensation program that best fits our overarching goals of maximizing shareholder return and building a stronger company. As one element of this evaluative process, the Compensation Committee, with the assistance of Cook & Co., considers competitive market compensation paid by other similarly situated companies and attempts to maintain compensation levels and programs that are comparable to and competitive with those of a peer group of similarly situated companies. Although we do not benchmark our compensation relative to peers, we do use the peer group data as an additional reference point to ensure relative consistency at the median level of our peers. The peer group is reviewed annually by the Compensation Committee, working with Cook & Co., and is comprised of the following:

 

 



 

Organizations of similar business characteristics (i.e., publicly traded organizations in the restaurant and retail industries);

 

 



 

Organizations against which we compete for executive talent;

 

 



 

Organizations of comparable size to Cracker Barrel (measured by sales); and

 

 



 

Organizations with similar geographic dispersion and workforce demographics.

 

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After detailed analysis, the peer group approved and used by the Compensation Committee during 2016 was comprised of the following 15 publicly-traded companies:

 

 

 

 

 

 

 

 



  

ANN, Inc.

 



  

Darden Restaurants, Inc.

 

 

 

 



  

Big Lots, Inc.

 



  

DineEquity, Inc.

 

 

 

 



  

Bloomin’ Brands, Inc.

 



  

Jack-in-the-Box, Inc.

 

 

 

 



  

Bob Evans Farms, Inc.

 



  

Panera Bread Co.

 

 

 

 



  

Brinker International, Inc.

 



  

Ruby Tuesday, Inc.

 

 

 

 



  

Buffalo Wild Wings, Inc.

 



  

Tractor Supply, Inc.

 

 

 

 



  

Cheesecake Factory, Inc.

 



  

The Wendy’s Company

 

 

 

 



  

Chipotle Mexican Grill, Inc.

 

 

  

 
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