CRACKER BARREL OLD COUNTRY STORE, INC (CBRL) FY 2026 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. MD&A should be read in conjunction with the Consolidated Financial Statements and notes thereto. Readers should also carefully review the information presented under the section entitled “Risk Factors” and other cautionary statements in this report. All dollar amounts (other than per share amounts) reported or discussed in this MD&A are shown in thousands. References in MD&A to a year or quarter are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.

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This overview summarizes the MD&A, which includes the following sections:

The following MD&A includes a discussion of 2026 and 2025 items and year-to-year comparisons between the years ended July 31, 2026 and August 01, 2025. Discussion of 2024 items and year-to-year comparisons between the years ended August 01, 2025 and August 02, 2024 that are not included in this MD&A can be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended August 01, 2025, filed with the SEC on September 26, 2025.

EXECUTIVE OVERVIEW

Cracker Barrel Old Country Store, Inc. (the “Company,” “our” or “we”) is a publicly traded (Nasdaq: CBRL) company that, through its operations and those of certain subsidiaries, is principally engaged in the operation and development of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept. Each Cracker Barrel store consists of a restaurant with a gift shop. The restaurants serve breakfast, lunch and dinner. The gift shop offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. As of September 11, 2026, the Company operated 655 Cracker Barrel stores located in 43 states. During 2026, the Company completed the divestiture of its Maple Street Biscuit Company (“MSBC”) business, including the MSBC tradename and the assets used in 35 MSBC locations. Simultaneously with the completion of this transaction, the Company closed the remaining 16 MSBC locations.  During 2026 and the first quarter of 2027,  the Company undertook a number of strategic, leadership and financing actions intended to support its long-term business objectives, which are discussed further below in MD&A.

Strategic Priorities

Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy. Our long-term strategy is anchored on the following priorities: food, experience, people, and profitability.

We believe there are significant challenges in the macroeconomic outlook for the coming quarters, including continued inflation volatility, higher consumer debt levels and lower savings rates, as well as the potential uncertainty associated with the geopolitical environment and global trade among other factors. Additionally, during 2026, we faced challenges related to negative publicity from brand initiatives related to our previously-announced strategic plan, including the launch of a new logo and modern test store remodels, to which we responded by returning to our former logo and discontinuing the modern test store remodels during the first quarter of 2026.

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Key Performance Indicators

Management uses a number of key performance indicators to evaluate our operational and financial performance, including the following:

These performance indicators exclude the impact of new store openings and sales related to MSBC.

We use comparable store sales metrics as indicators of sales growth to evaluate how our established stores have performed over time. We use comparable restaurant guest traffic increase/(decrease) to evaluate how established stores have performed over time, excluding growth achieved through menu price and sales mix change. Finally, we use average check per guest to identify trends in guest preferences, as well as the effectiveness of menu changes. We believe these key performance indicators are useful for investors to provide a consistent comparison of sales results and trends across comparable periods within our core, established store base, unaffected by results of store openings, closings, and other transitional changes.

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Restaurant and Retail Industries

Our stores operate in both the restaurant and retail industries in the United States. The restaurant and retail industries are highly competitive with respect to quality, variety and price of food and retail merchandise, service, availability of carryout and home delivery, internet and mobile ordering capabilities, effectiveness of marketing and advertising, and overall guest experience. We compete with a significant number of national and regional restaurant and retail chains, as well as locally owned restaurants and retailers. Competition also comes from family dining, casual dining, full-service, fast casual and quick-service restaurants, as well as supermarkets and other food providers that offer convenient meal alternatives. Cracker Barrel primarily operates in the full-service segment of the restaurant industry. Competition also exists in securing prime real estate locations for new stores, in hiring qualified employees, in advertising, in the attractiveness of facilities and with competitors having similar menu offerings or convenience features. The restaurant and retail industries are often affected by changes in consumer taste and preference; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing restaurants and retailers; and consumers’ discretionary purchasing power.

Additionally, economic, seasonal and weather conditions affect the restaurant and retail industries. Adverse economic conditions, such as elevated and/or volatile rates of inflation and unemployment adversely affect consumer discretionary income and dining and shopping habits. Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby contributing to higher profits in our fourth quarter. Retail sales, which are made substantially to our restaurant guests, are historically strongest in the second quarter, which includes the holiday shopping season.

Severe weather events such as hurricanes, floods, tornadoes, and winter storms may prevent or dissuade guests from visiting our stores, impair our ability to staff our stores or force us to temporarily close affected stores, adversely impacting our restaurant and retail sales. Additionally, severe drought conditions and associated restrictions on water use may impair restaurant operations or increase costs in locations affected by such conditions. Climate change, changing weather patterns or unpredictable weather patterns may increase the incidence of any of these events and otherwise also impact guest visitation patterns on a macro scale. In addition to its impact on store operations, severe weather may also disrupt our supply chain, both in distribution to ports and central warehouses and in distribution to local stores. In general, we believe that the geographic dispersion of our stores and multiple sources of distribution adequately mitigate the potential impact of severe weather and changing weather patterns on our stores, but the Board of Directors and management team continually monitor and reexamine these considerations in light of ongoing trends.

We are currently experiencing, and have in the past experienced, inflationary pressures with respect to a variety of costs, including food, ingredients, retail merchandise, transportation, distribution, labor and utilities. While inflationary trends have fluctuated over time, cost increases in these areas may continue to affect our operating expenses. While we have partially offset the impact of these inflationary pressures with menu price increases and operational improvements, there can be no assurance that such conditions will not adversely affect consumer demand or our cost structure in ways that we may be unable to manage without diminishing our profitability.

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RESULTS OF OPERATIONS

The following table highlights operating results over the past two years:

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The following table sets forth the change in the number of stores in operation for the past two years:

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Total Revenue

The following table highlights the key components of revenue for the past two years:

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Total revenue in 2026 decreased 4.7% as compared to 2025. Our comparable store restaurant sales decrease in 2026 as compared to 2025 resulted primarily from the guest traffic decrease partially offset by the average check increase. The average check increase included an average menu price increase of 4.3%. Off-premise sales represented approximately 20% of restaurant sales volumes in both 2026 and 2025.

Our retail sales are made primarily to our restaurant guests. The decrease in our comparable store retail sales in 2026 as compared to 2025 resulted primarily from the guest traffic decrease.

The decrease in guest traffic in 2026 as compared to 2025 is primarily the result of negative publicity and customer reactions to certain changes in brand initiatives, including the launch of a new logo and modern test store remodels in the first quarter of 2026, and lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher consumer debt levels and lower savings rates as well as the potential uncertainty associated with the geopolitical environment and global trade.

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Cost of Goods Sold (Exclusive of Depreciation and Rent)

The following table highlights the components of cost of goods sold in dollar amounts for the past two years:

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The following table highlights restaurant cost of goods sold as a percentage of restaurant revenue for the past two years:

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The increase in restaurant cost of goods sold as a percentage of restaurant revenue in 2026 as compared to 2025 was primarily driven by higher food waste, commodity inflation, increased discounts and a shift to higher cost menu items partially offset by the menu pricing increase. Commodity inflation was 2.3% in 2026. We presently expect the rate of commodity inflation to be approximately 3.0% in 2027.

The following table highlights retail cost of goods sold as a percentage of retail revenue for the past two years:

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The year-to-year percentage change in 2026 as compared to 2025 resulted primarily from the following:

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The decrease in retail cost of goods sold as a percentage of retail revenue in 2026 as compared to 2025 resulted primarily from tariff refunds of $15,033 partially offset by higher markdowns, higher discounts and lower initial margin.

Additional changes in tariff rates or trade policy could materially affect our operating results and financial condition, and this ongoing uncertainty introduces additional volatility and risk and may affect consumer demand in ways that are difficult to predict.

Labor and Other Related Expenses

Labor and other related expenses include all direct and indirect labor and related costs incurred in store operations. The following table highlights labor and other related expenses as a percentage of total revenue for the past two years:

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The year-to-year percentage change in 2026 as compared to 2025 resulted primarily from the following:

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The increases in store hourly labor and store management compensation as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from lower productivity and the deleverage associated with the decrease in total revenue in 2026 as compared to 2025. We presently expect the rate of wage inflation to be approximately 2.5% to 3.0% in 2027.

The increase in store bonus expense as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from the deleverage associated with the decrease in total revenue in 2026 as compared to 2025.

The increase in employee health care expense as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from unfavorable claim experience.

Other Store Operating Expenses

Other store operating expenses include all store-level operating costs, the major components of which are occupancy costs, operating supplies, advertising, credit card and gift card fees, third-party delivery fees, real and personal property taxes, general insurance and manager conference expenses. Occupancy costs include maintenance, utilities, depreciation and rent.

The following table highlights other store operating expenses as a percentage of total revenue for the past two years:

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The year-to-year percentage change in 2026 as compared to 2025 resulted primarily from the following:

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The increase in store occupancy costs as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from higher maintenance expense and the deleverage associated with the decrease in total revenue.

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The decrease in other store expense, net as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from the receipt of $12,596 in settlement proceeds related to litigation matters involving our poultry and pork suppliers. This favorable impact was partially offset by costs associated with our biennial general manager conference, which was not held in 2025.

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The decrease in supplies expense as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from the Company’s cost savings programs.

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The decrease in general insurance as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from lower expense in 2026 due to unfavorable claims in 2025 that did not recur in 2026.

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General and Administrative Expenses

The following table highlights general and administrative expenses as a percentage of total revenue for the past two years:

The year-to-year percentage change in 2026 as compared to 2025 resulted primarily from the following:

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The increase in payroll and related expense as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from severance costs from a corporate restructuring and Chief Executive Officer (“CEO”) transition costs incurred in 2026 partially offset by lower headcount.

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The increase in professional fees as a percentage of total revenue in 2026 as compared to 2025 primarily resulted from higher legal fees partially offset by lower proxy contest expenses and lower costs associated with the Company’s strategic initiatives. In 2026, we incurred $4,072 in costs related to a proxy contest in connection with the Company’s 2025 annual shareholders meeting held on November 20, 2025. In 2025, we incurred expenses of $8,220 related to a proxy contest in connection with the Company’s 2024 annual shareholders meeting held on November 21, 2024. Costs associated with the Company’s strategic initiatives decreased by approximately $7,300 in 2026 as compared to 2025.

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The decrease in incentive compensation expense as a percentage of total revenue in 2026 as compared to 2025 resulted primarily from lower performance against financial objectives in 2026 as compared to 2025 partially offset by CEO transition costs incurred in 2026.

Gain on Sale and Leaseback Transaction, Net

In the fourth quarter of 2026, we entered into a sale and leaseback transaction involving 26 of our owned Cracker Barrel properties and recorded a net gain of $47,421. This amount is recorded in the gain on sale and leaseback transaction, net line on the Consolidated Statements of Income. See Note 8 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding this sale and leaseback transaction.

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Impairment and Store Closing Costs

During 2026 and 2025, we recorded impairment charges of $21,968 and $19,772, respectively. The increase in impairment and store closing costs in 2026 as compared to 2025 was primarily driven by costs associated with the Company’s divestiture of the MSBC business and the impairment of underperforming locations. The 2026 charges consisted of impairments related to nine Cracker Barrel locations and sixteen MSBC locations, compared with seven Cracker Barrel locations and twenty-five MSBC locations in 2025. In addition, during 2026 and 2025, we incurred store closing costs of $9,266 and $287, respectively. The 2026 store closing costs primarily related to the closure of four Cracker Barrel and thirty-three MSBC locations, compared with two Cracker Barrel and two MSBC locations in 2025. For additional information regarding the divestiture of the MSBC business, see MSBC Divestiture section below and Note 13 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Impairment and store closing costs consisted of the following for the past two years:

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MSBC Divestiture

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On July 20, 2026, the Company completed the sale of certain assets used in its MSBC business to a third party, including the MSBC tradename and other intellectual property and the assets used in thirty-five MSBC restaurant locations. As a result of the transaction, the Company recognized a loss of $27,039 which is recorded in the loss on sale of business assets line on the Consolidated Statements of Income in 2026.

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Simultaneously with the asset sale, the Company closed its remaining sixteen MSBC restaurant locations on July 20, 2026 as part of its focus on its core Cracker Barrel brand and improve profitability. In connection with exiting the MSBC business, the Company recognized an impairment charge of $8,523 and store closing and other exit-related costs of $5,430, consisting primarily of severance, contract termination and other closure-related costs. Impairment, store closing costs and other exit-related charges were recorded in the impairment and store closing costs line on the Consolidated Statements of Income.

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For additional information regarding the exit of the MSBC business, see Note 13 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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Operating Income (Loss)

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Operating income (loss) consisted of the following for the past two years:

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Our operating results declined in 2026 as compared to 2025 primarily due to the decrease in total revenue, the loss on sale of business assets associated with the divestiture of the MSBC business and the impairment and store closing costs discussed above partially offset by the gain recognized on the 2026 sale and leaseback transaction.

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Gain on Extinguishment of Debt

In 2025, contemporaneously with the issuance of $345,000 aggregate principal amount of 1.75% Convertible Senior Notes due 2030 (the “2030 Notes”), we used approximately $145,900 of the net proceeds from the 2030 Notes for the repurchase of $150,000 aggregate principal amount of $300,000 aggregate principal amount of 0.625% Convertible Senior Notes (the “2026 Notes”) in separate and privately negotiated transactions and recorded a gain on extinguishment of debt of $3,186. This amount is recorded in the gain on extinguishment of debt line on the Consolidated Statements of Income. For additional information regarding our debt, see Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Litigation Settlement Income

In the third quarter of 2026, the Company received and recorded $47,422, net of legal fees, pursuant to a settlement agreement resolving interchange fee litigation. This amount is recorded in the litigation settlement income line on the Consolidated Statements of Income.

Interest Expense, Net

The following table highlights interest expense for the past two years:

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The year-to-year decrease in 2026 as compared to 2025 resulted primarily from lower weighted average debt levels under the revolving credit facility partially offset by the interest related to the 2030 Notes. See “Borrowing Capacity, Debt Covenants and Notes” section below for further information related to the 2025 Revolving Credit Facility and the 2030 Notes.

Income Tax Benefit

The following table highlights the income tax benefit as a percentage of income before income taxes (“effective tax rate”) for the past two years:

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Our effective tax rate is lower than statutory rates primarily due to the benefit of tax credits. The decrease in our effective tax rate in 2026 is primarily due to lower income before income taxes as compared to 2025.

We presently expect an income tax benefit of approximately $4,000 to $8,000 for 2027.

H.R.1., also known as the One Big Beautiful Bill Act (OBBBA), was enacted on July 4, 2025, with effective dates in 2025 and through 2027. The legislation includes provisions that impact the timing and magnitude of certain tax deductions. Key provisions include the permanent extension of several business tax benefits originally introduced under the 2017 Tax Cuts and Jobs Act. The Company has evaluated the impacts of OBBBA, and the effects of these provisions have been incorporated into the accompanying financial statements.

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Net Income

Net income consisted of the following for the past two years:

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Our net income in 2026 decreased as compared to 2025 primarily due to our decrease in our operating income (loss) discussed above partially offset by the litigation settlement income related to the credit card interchange fee litigation recognized in 2026 and lower interest expense, net as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The following table presents a summary of our cash flows for the past two years:

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Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our revolving credit facility. Our cash generated from our operations, together with our borrowing capacity under our revolving credit facility, were sufficient to finance all of our capital expenditures, dividend payments, working capital needs, interest payments on long-term debt obligations and other cash payment obligations in 2026.

We believe that cash at July 31, 2026, along with cash expected to be generated from our operating activities and the borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, debt service, dividend payments, capital expenditures and working capital needs for the next twelve months and thereafter for the foreseeable future. Our ability to draw on our $550,000 revolving credit facility (the “2025 Revolving Credit Facility”) is subject to the satisfaction of the provisions of the credit facility, as amended, and we believe we will be able to refinance our credit facility and other debt instruments prior their maturity.

Cash Generated from Operations

The decrease in net cash flow provided by operating activities in 2026 as compared to 2025 was primarily driven by lower earnings as well as the timing of certain payments partially offset by the receipt of income tax refunds.

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Purchase Obligations

We enter into purchase orders for food and retail merchandise; purchase orders for capital expenditures, supplies, other operating needs and other services; and commitments under contracts for maintenance needs and other services in the normal course of business. Our estimate as of July 31, 2026, for these purchase obligations is $151,527, of which $125,681 is short-term. This estimate of our purchase obligations (i) includes long-term agreements and certain retail purchase orders for services and operating needs that can be cancelled (A) with more than 60 days’ notice without penalty only through the term of the notice period and (B) only in the event of an uncured material breach or with a penalty through the entire term of the contract, (ii) excludes contracts that do not contain minimum purchase obligations and long-term agreements for services and operating needs that can be cancelled within 60 days without penalty. Because of the uncertainties of seasonal demands and promotional calendar changes, our estimated usage for food, supplies and other operating needs and services is calculated ratably over either the termination notice period or the remaining life of the contract, as applicable, unless we had better information available at the time related to each contract.

Leases

As of July 31, 2026, the total present value of our lease expenses (including variable lease costs) under operating leases was $698,826, which had a weighted-average remaining lease term of 15.22 years. In addition, as of July 31, 2026, total short-term future minimum lease payments were $86,141. We have not entered into any leases that have not yet commenced as of July 31, 2026. For additional information regarding our operating leases, see Note 8 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Other Long-Term Obligations

At July 31, 2026, other long-term obligations include our Non-Qualified Savings Plan ($25,193, with a corresponding long-term asset to fund the liability; see Note 11 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K) and Deferred Compensation Plan ($1,127).

Taxes

At July 31, 2026, the entire liability of $16,301, for uncertain tax positions (including penalties and interest) is classified as a long-term liability. At this time, we are unable to make a reasonably reliable estimate of the amounts and timing of payments in individual years because of uncertainties in the timing of the effective settlement of tax positions. See Note 14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information on our uncertain tax positions.

Capital Expenditures and Proceeds from Sale of Property and Equipment

The following table presents our capital expenditures (purchase of property and equipment), net of proceeds from insurance recoveries, for the past two years:

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Our capital expenditures consisted primarily of capital investments for existing stores, strategic initiatives and new store locations. The decrease in capital expenditures in 2026 from 2025 resulted primarily from lower capital investments in existing stores, reduced spending on strategic initiatives and fewer store openings.

We currently expect capital expenditures to be approximately $110,000 to $125,000 in 2027. This estimate includes our maintenance and technology initiatives. We intend to fund our capital expenditures with cash generated by operations, cash on hand and borrowings under our 2025 Revolving Credit Facility, as necessary.

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The following table presents our proceeds from sale of property and equipment for the past two years:

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The increase in proceeds from sale of property and equipment in 2026 from 2025 resulted primarily from the sale and leaseback transaction in 2026. See Note 8 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding this sale and leaseback transaction.

Borrowing Capacity, Debt Covenants and Notes

On May 16, 2025, the Company entered into the 2025 Credit Facility, which replaced our previous revolving credit facility that we entered into in 2022 (the “2022 Revolving Credit Facility”). The 2025 Credit Facility consisted of a $550,000 revolving credit facility (the “2025 Revolving Credit Facility”), which includes a $25,000 swingline subfacility and a $75,000 letter of credit subfacility, and a $250,000 delayed draw term loan facility (the “Delayed Draw Term Facility”). The Delayed Draw Term Facility was terminated on June 13, 2025 in connection with the Company’s issuance and sale of the 2030 Notes. The 2025 Credit Facility also contains an option for the Company to increase the 2025 Credit Facility by $200,000. At July 31, 2026 and August 01, 2025, we did not have any borrowings outstanding under the 2025 Revolving Credit Facility.

The following table highlights our borrowing capacity and outstanding borrowings under the 2025 Revolving Credit Facility, our standby letters of credit and our borrowing availability under the 2025 Revolving Credit Facility as of the year ended July 31, 2026:

*Our standby letters of credit relate to securing reserved claims under workers’ compensation insurance. Our standby letters of credit reduce our borrowing availability under the 2025 Revolving Credit Facility.

During 2026, we borrowed $407,000 and repaid $407,000 under the 2025 Revolving Credit Facility. During 2025, we borrowed $548,500 and repaid $728,500 under the 2022 Revolving Credit Facility and 2025 Revolving Credit Facility.

Our 2025 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated senior secured leverage ratio and a minimum consolidated interest coverage ratio. We were in compliance with the 2025 Revolving Credit Facility’s financial covenants at July 31, 2026, and we expect to be in compliance with the 2025 Revolving Credit Facility’s financial covenants for the remaining term of the facility.

On June 13, 2025, we issued the 2030 Notes. The 2030 Notes are senior, unsecured obligations of the Company and bear cash interest at a rate of 1.75% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2026. The 2030 Notes mature on September 15, 2030, unless earlier converted, repurchased or redeemed. Net proceeds from the 2030 Notes were approximately $335,000, after deducting the initial purchasers’ discounts and commissions and the Company’s offering fees and expenses.

Additionally, on June 13, 2025, we used approximately $145,900 of the net proceeds from the 2030 Notes for the repurchase of $150,000 aggregate principal amount of the 2026 Notes. The remaining $150,000 aggregate principal amount of the 2026 Notes was paid on June 15, 2026.

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For additional information regarding our 2025 Revolving Credit Facility, the 2026 Notes and the 2030 Notes, see Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Dividends, Share Repurchases and Share-Based Compensation Awards

Our 2025 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of shares we are permitted to repurchase. Under the 2025 Revolving Credit Facility, provided there is no default existing and the total of our availability under the 2025 Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the “Cash Availability”), we may declare and pay cash dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if at the time the dividend or the repurchase is made our consolidated total leverage ratio is 3.50 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if, at the time such dividend or repurchase is made, our consolidated total leverage ratio is greater than 3.50 to 1.00; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, Cash Availability is at least $100,000, we may declare and pay cash dividends on shares of our common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.

In 2026 and 2025, we paid regular dividends of $1.00 per share. Additionally, during the first quarter of 2027, the Board declared a dividend of $0.25 per share payable on November 12, 2026 to shareholders of record as of October 16, 2026.

The following table highlights the dividends per share we paid for the past two years:

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Our criteria for share repurchases are that they be accretive to expected net income per share and are within the limits imposed by our debt commitments. We did not repurchase any shares of our common stock in 2026 or 2025. In the first quarter of 2026, our Board of Directors approved a share repurchase authorization to repurchase shares of the Company’s outstanding common stock at management’s discretion up to a total value of $100,000 with an expiration date of September 30, 2027.

Working Capital

In the restaurant industry, substantially all payments received are made by credit card, debit card or cash. Like many other restaurant companies, we are able to, and often do, operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories purchased locally are generally financed through trade credit at terms of 30 days or less. Because of our retail gift shop, which has a lower product turnover than the restaurant, we carry larger inventories than many other companies in the restaurant industry. Retail inventories are generally financed through trade credit at terms of 60 days or less. These various trade terms are aided by rapid turnover of the restaurant inventory. Employees generally are paid once every week or every two weeks except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses such as certain taxes and some benefits are deferred for longer periods of time.

The change in working capital at July 31, 2026 compared to August 01, 2025 primarily reflected the payment of 2026 Notes in 2026 and the timing of payments for accounts payable partially offset by a lower income tax receivable due to the receipt of income tax refunds during 2026 and lower inventory levels.

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Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting guidance adopted and not yet adopted. The adoption of accounting for income tax disclosures did not have an impact on our consolidated financial position or results of operations. We are currently evaluating the impact of adopting the accounting guidance not yet adopted.

CRITICAL ACCOUNTING ESTIMATES

We prepare our Consolidated Financial Statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends, outside advice from parties believed to be experts in such matters and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. However, because future events and their effects cannot be determined with certainty, actual results could differ from those assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Critical accounting estimates are those that:

We consider the following accounting estimates to be most critical in understanding the judgments that are involved in preparing our Consolidated Financial Statements:

Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Board of Directors.

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Impairment of Long-Lived Assets

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total expected future cash flows are less than the carrying amount of the asset, the carrying value is written down, for an asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the fair value, net of estimated costs of disposal. Any loss resulting from impairment is recognized by a charge to income. Judgments and estimates that we make related to the expected useful lives of long-lived assets and future cash flows are affected by factors such as changes in economic conditions and changes in operating performance. The accuracy of such provisions can vary materially from original estimates and management regularly monitors the adequacy of the provisions until final disposition occurs.

We have not made any material changes in our methodology for assessing impairments during the past three years and we do not believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used by us to assess impairment of long-lived assets. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and fair values of long-lived assets, we may be exposed to losses that could be material. During 2026, we recorded impairment charges of $16,024 for long-lived assets due to the deterioration in operating performance of six Cracker Barrel locations and thirteen MSBC locations due to the divestiture of the MSBC business. During 2025, we recorded impairment charges of $18,391 for long-lived assets due to the deterioration in operating performance of seven Cracker Barrel locations and twenty-five MSBC locations in 2025. The impairment charges are included in the impairment and store closing costs line item on the Consolidated Statements of Income. See the Lease Accounting section below for information related to impairment charges related to right-of-use assets recorded in 2026 and 2025.

Insurance Reserves

We self-insure a significant portion of our expected workers’ compensation and general liability programs. We purchase insurance for individual workers’ compensation claims that exceed $750 or $1,000 depending on the state in which the claim originated. We purchase insurance for individual general liability claims that exceed $500. We record a reserve for workers’ compensation and general liability for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. These reserves and estimates of IBNR claims are based upon a full scope actuarial study which is performed annually during the fourth quarter and is adjusted by the actuarially determined losses and actual claims payments made subsequent to this full scope actuarial study during the fourth quarter. Additionally, we perform limited scope actuarial studies on a quarterly basis to verify and/or modify our reserves. The reserves and losses in the actuarial study represent a range of possible outcomes within which no given estimate is more likely than any other estimate. As such, we record the losses at the midpoint of that range and discount them to present value using a risk-free interest rate based on projected timing of payments. We also monitor actual claims development, including incurrence or settlement of individual large claims during the interim periods between actuarial studies as another means of estimating the adequacy of our reserves.

Our group health plans combine the use of self-insured and fully-insured programs. Benefits for any individual (employee or dependents) in the self-insured group health program are limited. We record a liability for the self-insured portion of our group health program for all unpaid claims based upon a loss development analysis derived from actual group health claims payment experience. We also record a liability for unpaid prescription drug claims based on historical experience.

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Our accounting policies regarding insurance reserves include certain actuarial assumptions and management judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. We have not made any material changes in the methodology used to establish our insurance reserves during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate the insurance reserves. However, changes in these actuarial assumptions or management judgments in the future may produce materially different amounts of expense that would be reported under these insurance programs.

Retail Inventory Valuation

Cost of goods sold includes the cost of retail merchandise sold at our stores utilizing the retail inventory method (“RIM”). Under RIM, the valuation of our retail inventories is determined by applying a cost-to-retail ratio to the retail value of our inventories. Inherent in the RIM calculation are certain inputs, including initial markons, markups, markdowns and shrinkage, which may significantly impact the gross margin calculation as well as the ending inventory valuation.

Inventory valuation provisions are included for retail inventory obsolescence and retail inventory shrinkage. Retail inventory is reviewed on a quarterly basis for obsolescence and adjusted as appropriate based on assumptions made by management and judgment regarding inventory aging and future promotional activities. Retail inventory also includes an estimate of shrinkage that is adjusted upon physical inventory counts. Annual physical inventory counts are conducted based upon a cyclical inventory schedule. An estimate of shrinkage is recorded for the time period between physical inventory counts by using a two-year average of the physical inventories’ results on a store-by-store basis.

We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions in the future. However, actual obsolescence or shrinkage recorded may produce materially different amounts than we have estimated.

Lease Accounting

We have ground leases for our leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases. Additionally, we lease our retail distribution center, advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases.

We evaluate our leases at contract inception to determine whether we have the right to control use of the identified asset for a period of time in exchange for consideration. If we determine that we have the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, we recognize a right-of-use asset and lease liability. Also, at contract inception, we evaluate our leases to estimate their expected term which includes renewal options that we are reasonably assured that we will exercise, and the classification of the lease as either an operating lease or a finance lease. Additionally, as our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data. We assess the impairment of the right-of-use asset at the asset group level whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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Changes in these assumptions and management judgments may produce materially different amounts in the recognition of the right-of-use assets and lease liabilities. Additionally, any loss resulting from an impairment of the right-of-use assets is recognized by a charge to income, which could be material. In 2026, we recorded impairment charges of $5,944 which primarily related to the right-of-use assets due to the divestiture of the MSBC business. In 2025, we recorded impairment charges of $1,381 related to the right-of-use assets of one Cracker Barrel location. These amounts are included in the impairment and store closing costs line item on the Consolidated Statement of Income.