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Contributors: Douglas McIntyre Jon C. Ogg

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Friday, July 14, 2006

Cracker Barrel, Ex-Logan's

Stock Tickers: CBRL, LGNS

How does one ugly company try to make itself pretty? For starters they may try a spin-off of the good part(s) of the business. That is what is happening at CBRL Group (CBRL) today. CBRL has filed to sell its Logan's Roadhouse unit in an IPO, although this has been telegraphed that it would occur on prior occasions. Its proposed ticker will be "LGNS."

CBRL is the parent of Cracker Barrel and operates over 500 Cracker Barrel Old Country Store restaurants and gift shops. Yes, that the one you see on the highways when you do road trips.

They also own 134 Logan's Roadhouse restaurants and have an additional 25 franchised Logan's locations. That is up from 84 total restaurants in early 2003. Logan's is viewed by many as the more upscale piece of the business. It is smaller but has more growth opportunities as they are in more city environments where the market penetration is deemed low. This is also one of the Americana joints that has a Route 66 feel with jukeboxes and a nostalgic feel to it.

CBRL shares gapped from the mid-$30's to almost $45, and then above $45.00 for a brief period. That was then, this is now. The stock has slid steadily down to current prices of $32.63. It is essentially right under the lows of last year and you have toi go back almost 2-years to have seen these prices. They just shook up management with the "retirement" of CEO Cyril Taylor, who had been with the company since 1978. The company has suffered from lagging sales, and this seperation may be the only thing that can help.

After this IPO, CBRL will not hold an interest in Logan's. Logan's is profitable and it looks like the IPO proceeds will be used to pay down debt and to terminate its credit facility within CBRL.

Jon C. Ogg
July 14, 2006

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