Glass, Lewis & Co. Recommends Electing Sardar Biglari to the Board of Cracker Barrel

SAN ANTONIO, TX, Dec. 12, 2011 /PRNewswire/ -- Sardar Biglari, Chairman and Chief Executive Officer of Biglari Holdings Inc. (NYSE: BH), announced today that Glass, Lewis & Co., a leading proxy advisory firm, has recommended that stockholders of Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) vote the GOLD proxy card. The Glass Lewis report is detailed, comprehensive, appropriately framed the problems, and logically assessed its decision.

Key excerpts from the report:

"To summarize our analysis, in this case we believe shareholder support for [Biglari] is warranted in light of the following concerns at the Company: (i) underperforming total shareholder returns during short and medium terms; (ii) significant and sustained discounted market valuations over long periods; (iii) stagnant or declining operational performance for long periods at both the unit level and company level; (iv) board entrenchment, evidenced by long tenures and delayed reactions to shareholder concerns; (v) poor executive pay policies; (vi) questionable leadership structure until recently; and (vii) somewhat reactionary positive changes for which we give partial credit to [Biglari]."

"Instead, we believe [Biglari] would be a good addition to the board based on the following: (i) properly aligned motivations as a result of a large ownership stake; (ii) relevant industry experience, (iii) successful track record of engineering an operational turnaround and generating shareholder value, (iv) new and external views to contribute to board discussions; and (v) credit for some positive changes recently implemented at the Company."

"In this case, we believe [Biglari] has identified areas of concern, both operationally and governance related, and we find grounds on which to support the notion that the election of the [Biglari] nominee is likely to result in a superior outcome for Cracker Barrel and its shareholders."

"We side with [Biglari] in identifying a number of concerns at Cracker Barrel, including: (i) under-performance and under-valuation compared to peers; (ii) declining store-level operating performance; (iii) stagnant financial performance; (iv) questionable compensation, governance and reporting practices; and (v) reactive responses to shareholder issues and interests."

"We find some validity in [Biglari's] concern that appointing the outgoing CEO as executive chairman to apprentice or season the incoming CEO makes sense only if the performance of the outgoing CEO has been praiseworthy. In Cracker Barrel's case, we believe there's at least some reason for shareholders to be skeptical if this is the most appropriate leadership structure, considering the less than stellar performance highlighted above and that Mr. Woodhouse remains in charge of some business aspects." 

"Despite the Company's [recent] actions, problems remain. Customer traffic is still declining, though trending up from more negative to less negative, sales growth is marginal, long-tenured directors who received over 20% opposition from shareholders at previous meetings remain on the board, financial-reporting transparency isn't where it could be and some questions linger regarding the Company's leadership structure….In short, we view the Company's recent actions as too little, too late."  

"[Biglari] brings ownership representation, relevant experience and constructive ideas to the board. Mr. Biglari has a track record of engineering an operational turnaround at Steak n Shake and enhancing shareholder value."

Glass Lewis not only recommends voting the GOLD proxy card to elect Sardar Biglari but also recommends withholding votes for Jack Lowery.

Glass Lewis also agreed with our recommendation to vote against the poison pill. We do not believe there is a reason to have a poison pill, given the protection awarded by the Tennessee statutes. We believe shareholders should send a very persuasive, strong message that a poison pill is shareholder-unfriendly whether the threshold is at 10%, 15% or at any other arbitrary level. There should not be differential treatment against those shareholders seeking to hold the Cracker Barrel Board accountable. All shareholders should be treated the same whether they file a 13G or a 13D. We must end this counterproductive, limiting of the purchase of shares.

Glass Lewis also agreed with our views on compensation. Commenting on compensation arrangements set by the Cracker Barrel board, Glass Lewis continued, "[W]e are gravely concerned that the entirety of STI and LTI [short-term incentive and long-term incentive] compensation is contingent upon the achievement of simple operating income hurdles….Ultimately, we believe a sizable portion of awards granted under both incentive plans are linked to loose performance criteria that are not sufficiently objective. Given that the performance hurdle under the STI plan is extremely forgiving — the Company has not reported annual operating income under $90 million since 1994 (as noted by [Biglari] in a DEFC14A filing dated November 9, 2011), which is the threshold performance level established under the plan — we find the hurdle-based structure of the plans to be particularly troubling." Glass Lewis also said, "[T]he Company has a history of paying more in executive compensation than peers during years when it performed worse than peers."

Sardar Biglari, in response to the report, stated, "Glass Lewis shares our view that the Company has had lackluster performance, and it correctly concludes that there is compelling necessity for change." Mr. Biglari added, "I have made a commitment to own the stock for the long haul. I am resolved to prevail for we have a large financial stake, and I believe Cracker Barrel has enormous potential for significant gain, one that will be realized only with the right leadership in the boardroom."

Shareholders should note that the threshold required for a shareholder to attain a Glass Lewis recommendation in an election contest is exceedingly high. Glass Lewis states its criteria clearly: "In general, we are reticent to recommend in favor of dissident nominees unless (i) there are serious problems at the company and the dissident has a plan and the ability to solve those problems, or (ii) the current board has undertaken actions to the detriment of shareholders (or failed to implement actions to the benefit of shareholders)." By recommending that Cracker Barrel shareholders vote on the GOLD proxy card, Glass Lewis concluded that Biglari Holdings has made a compelling argument for change, one that is in the best interests of shareholders.

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CERTAIN INFORMATION CONCERNING PARTICIPANTS

Biglari Holdings Inc., an Indiana corporation ("Biglari Holdings"), together with the other participants named below, has filed with the Securities and Exchange Commission ("SEC") a definitive proxy statement and accompanying proxy card to be used to solicit votes for the election of Sardar Biglari to the Board of Directors of Cracker Barrel Old Country Store, Inc., a Tennessee corporation (the "Company"), at the 2011 annual meeting of shareholders of the Company.

BIGLARI HOLDINGS STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN, AND WILL CONTAIN, IMPORTANT INFORMATION.  SUCH PROXY MATERIALS ARE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.  IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST.  REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR, INNISFREE M&A INCORPORATED, TOLL-FREE AT (888) 750-5834, BANKS AND BROKERS CALL COLLECT AT (212) 750-5833.

The participants in this proxy solicitation are Biglari Holdings, Biglari Capital Corp., a Texas corporation ("BCC"), The Lion Fund, L.P., a Delaware limited partnership (the "Lion Fund"), and Sardar Biglari.

As of the date hereof, Biglari Holdings directly owns 2,147,887 shares of Common Stock of the Company.  As of the date hereof, the Lion Fund directly owns 140,100 shares of Common Stock.  Each of BCC, as the general partner of the Lion Fund, and Biglari Holdings, as the parent of BCC, may be deemed to beneficially own the shares of Common Stock directly owned by the Lion Fund.  Mr. Biglari, as the Chairman and Chief Executive Officer of each of BCC and Biglari Holdings, may be deemed to beneficially own the shares of Common Stock directly owned by Biglari Holdings and the Lion Fund.

As members of a "group" for the purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended, each of the participants in this proxy solicitation is deemed to beneficially own the shares of Common Stock of the Company beneficially owned in the aggregate by the other participants. Each of the participants in this proxy solicitation disclaims beneficial ownership of such shares of Common Stock except to the extent of his or its pecuniary interest therein.

SOURCE Biglari Holdings Inc.