Chili's 2002 Annual Report Download

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Table of contents

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    ... at the very heart of every decision we make. Our logo also depicts the eight flames that ignite our mission - Customers, Shareholders, Food, Team, Concepts, Culture, Partners, and Community. The passion and dedication with which we manage our business are based on these driving forces. And on the...

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    ... Highlights (Amounts in thousands, except per share amounts) 2002 Systemwide Sales Revenues Operating costs and expenses: Cost of sales Restaurant expenses Depreciation and amortization General and administrative Total operating costs and expenses Operating Income Interest expense Other, net Income...

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    ... long-term drivers of our business - consumer lifestyles, demographics, dual-income households, the inconvenience of cooking at home, and the ever present time crunch - remain relevant and hold true for the foreseeable future. Brinker's vibrant concept portfolio is exceptionally well positioned for...

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    Douglas H. Brooks President and Chief Operating Officer Ronald A. McDougall Chairman of the Board and Chief Executive Officer 6

  • Page 8
    ... occurred, fiscal 2002 was an exceptional year in terms of strong results along with several noteworthy milestones. • Added 129 new restaurants, bringing our systemwide total to 1,268 units. • Systemwide sales surpassed $3.4 billion. • Honored as one of "America's Most Admired Companies" by...

  • Page 9
    ... award for the fourth straight year. • Opened a new Chili's in Anchorage, Alaska, expanding our national presence to 49 states. • Received a Platinum Award from Forbes magazine as one of "America's Best Big Companies." • Stock price hit an all-time high. These milestones have been accomplished...

  • Page 10
    ... last fall. Each year, Brinker International sponsors and operates The Pavilion at the Byron Nelson Golf Classic, donating the proceeds to a number of charities including the Salesmanship Club, Texas Scottish Rite Hospital for Children, and Limbs for Life. And our team members systemwide contribute...

  • Page 11
    ... more restaurant openings than ever before and over five consecutive years of same-store sales increases. We entered our 49th state, with record-breaking sales, in Anchorage, Alaska, while Chili's international representation increased to 22 countries with the addition of venues in Qatar, Oman, and...

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    ... fresh white gladiolas, string lights, and open kitchens. The Chefs Make It. You Take It.® curbside delivery campaign has introduced a tremendously successful way for our guests to experience authentic Italian meals with family and friends at home. Our distinctive chef-driven menu is developed...

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    ... our menu, and we've concentrated on improving favorite selections by expanding our fajita offerings and create-your-own combos. Popular choices such as Quesadillas, Enchiladas, Fajitas, and our famous Border Sampler have been augmented by new items like Salmon Mexicano, Blackened Chicken Salad, and...

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    ... of wines and delectable desserts like our scrumptious Vera's Lemon Cookies and an award-winning Tiramisu. The popularity of the Maggiano's concept continues to grow with 5 new restaurants opening in the year ahead. Most of our 20 locations offer carry-out meals for an authentic Italian-American...

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    ... like Pesto Cavatappi Pasta, Chicken Santa Fe Salad, and the Uptown Turkey Sandwich joining our signature Panini and favorites like the Corner Combo and Trio Salad. And, of course, convenience and ease are also central to Corner Bakery's mission as carry-out and catering continue to flourish. While...

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    ... design of our new prototype planned to open in Austin in the coming year. At Cozymel's, we want our guests to savor the atmosphere. They can sit back, relax, and enjoy the spirited, friendly welcome, the lively island music, and the best dishes from some of the most desirable locations in the world...

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    ..., puts our stir-fry kitchen center stage, and sets up our island bar as a distinct destination within the restaurant. Our popular To Go entrances will continue to be featured in the new design, providing convenient and tasty take-home options for our customers. Annual family events like Noodlefest...

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    ... we have to offer so we give them lots of choices - from how their selection is prepared to a range of blackboard specials created daily by our Chef Partners for each of their respective restaurants. Kids are encouraged to try new things with our playful View-Master children's menu. And our concept...

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    ..., Jr. Chairman of the Board & Chief Executive Officer Michael J. Mayell President & Chief Operating Officer James T. Bond General Manager of H. L. Hawkins Jr. Oil and Gas E. L. Henry Partner, Adams & Reese Joe E. Kares Partner, Kares & Chilar Gary A. Messersmith Partner, Fouts & Moore, L.L.P. Jack...

  • Page 28
    ...A. Marcus Private Investor James E. Oesterreicher Retired Chairman of the Board, J.C. Penney Company, Inc. Cece Smith Managing General Partner, Phillips-Smith-Machens Venture Partners Roger T. Staubach Chairman of the Board and Chief Executive Officer, The Staubach Company Principal Officers Ronald...

  • Page 29
    ...of Food and Beverage James D. Vinz Vice President of Operations Mark F. Tormey President and Chief Operating Officer Jonathan A. Fox Senior Vice President of Beverage and Culinary Development Yorgo Koutsogiorgas Senior Vice President of Human Resources Kenny Dennis 1953-2002 On August 5, 2002, our...

  • Page 30
    ... Executive Offices Brinker International, Inc. 6820 LBJ Freeway Dallas, TX 75240 Annual Meeting Thursday, November 14, 2002 at 10:00 a.m. At the Westin Park Central Hotel (Grand Ballroom, Salons A, B, and C) 12720 Merit Drive Dallas, TX 75251 Stock Transfer Agent and Registrar Mellon Investor...

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    hijkl FINANCIAL INFORMATION

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    ...June 28, 2000 ...Consolidated Statements of Cash Flows-Fiscal Years Ended June 26, 2002, June 27, 2001, and June 28, 2000 ...Notes to Consolidated Financial Statements ...Independent Auditors' Report ...Management's Responsibility for Consolidated Financial Statements ... F-1 F-2 F-10 F-11 F-12 F-13...

  • Page 33
    ... weighted average shares outstanding ...Balance Sheet Data(End of Period): Working capital deficit ...Total assets ...Long-term obligations ...Shareholders' equity ...Number of Restaurants Open (End of Period): Company-operated ...Franchised/Joint Venture ... $ $ 1.56 - 1.56 $ $ 1.46 - 1.46...

  • Page 34
    ... to menu items with higher percentage food costs. These unfavorable variances were partially offset by menu price increases and favorable commodity price variances for other commodities. Restaurant expenses increased in fiscal 2002 due primarily to an approximate $11.0 million expense related to...

  • Page 35
    ... corporate expenditures relative to increasing revenues and increased sales leverage resulting from new unit openings and acquisitions. Interest expense increased for fiscal 2002 as compared to fiscal 2001 as a result of amortization of debt issuance costs and debt discounts on the Company...

  • Page 36
    ... expenses increase, the Company, to the extent permitted by competition, recovers increased costs through a combination of menu price increases and reviewing, then implementing, alternative products or processes. LIQUIDITY AND CAPITAL RESOURCES The working capital deficit increased from $110...

  • Page 37
    ... such as beef, chicken, flour, and cooking oil. These commodities are generally purchased based upon market prices established with vendors. These purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. The Company does not use...

  • Page 38
    ... of future cash flows. This process requires the use of estimates and assumptions which are subject to a high degree of judgment. In addition, at least annually the Company assesses the recoverability of goodwill and other intangible assets related to its restaurant concepts. These impairment tests...

  • Page 39
    ... operating histories than the Company. There is active competition for management personnel and for attractive commercial real estate sites suitable for restaurants. In addition, factors such as inflation, increased food, labor and benefits costs, and difficulty in attracting hourly employees may...

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    ... economically viable locations for new restaurants, obtain all required governmental permits (including zoning approvals and liquor licenses) on a timely basis, hire all necessary contractors and subcontractors, and meet construction schedules. The costs related to restaurant and concept development...

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    ... forward-looking statements include, without limitation, changes in economic conditions, consumer perceptions of food safety, changes in consumer tastes, governmental monetary policies, changes in demographic trends, availability of employees, terrorist acts, and weather and other acts of God. F-9

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    ... OF INCOME (In thousands, except per share amounts) 2002 Fiscal Years 2001 2000 Revenues ...Operating Costs and Expenses: Cost of sales ...Restaurant expenses ...Depreciation and amortization ...General and administrative ...Total operating costs and expenses ... $2,887,111 796,714 1,591,367...

  • Page 43
    ... outstanding at June 27, 2001 ...Additional paid-in capital ...Retained earnings ...Less: Treasury stock, at cost (20,059,663 shares at June 26, 2002 2001) ...Accumulated other comprehensive loss ...Unearned compensation ...Total shareholders' equity ...Total liabilities and shareholders' equity...

  • Page 44
    ... tax ...Comprehensive income ...Purchases of treasury stock ...Issuances of common stock ...Tax benefit from stock options exercised ...Amortization of unearned compensation ...Issuance of restricted stock, net of forfeitures ... (2,089) 900,287 Balances at June 26, 2002 ... 97,440 $11,750 $330,191...

  • Page 45
    ...Net proceeds from issuance of long-term debt Proceeds from issuances of treasury stock ...Purchases of treasury stock ... Net cash provided by (used in) financing activities ...Net change in cash and cash equivalents ...Cash and cash equivalents at beginning of year ...Cash and cash equivalents at...

  • Page 46
    ... on the present value of expected future cash flows discounted at the interest rate currently offered by the Company which approximates rates currently being offered by local lending institutions for loans of similar terms to companies with comparable credit risk; and long-term debt is based on the...

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    ... discounted future operating cash flows of the asset and the expected proceeds upon sale of the asset. Assets held for sale are reported at the lower of carrying amount or fair value less costs to sell. (f) Capitalized Interest Interest costs capitalized during the construction period of restaurants...

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    ... pay for the stock. The Company's policy is to grant stock options at the market value of the underlying stock at the date of grant. Proceeds from the exercise of common stock options issued to officers, directors, and key employees under the Company's stock option plans are credited to common stock...

  • Page 49
    ... 2001, the Company acquired from its franchise partner, Sydran Group, LLC and Sydran Food Services III, L.P. (collectively, ''Sydran''), thirty-nine Chili's restaurants for approximately $53.9 million. As part of the acquisition, the Company assumed $35.5 million in capital lease obligations ($19...

  • Page 50
    ...taxes): 2002 2001 2000 Net income, as reported ...Intangible ...the following (in thousands): 2002 2001 Payroll ...Gift cards . . Sales tax ...Property...): Retirement plan (see Note 11...2002 2001 2000 $ 27,371 24,590 $ 51,961 Current income tax expense: Federal ...State ...Foreign ...Total current...

  • Page 51
    ...000 Debenture is convertible into 18.08 shares of the Company's common stock if the stock's market price exceeds 120% of the accreted conversion price at specified dates, the Company exercises its option to redeem the Debentures, the credit rating of the Debentures is reduced below both Baa3 and BBB...

  • Page 52
    ... 2020, and bear interest at rates ranging from 8.44% to 10.75% per year. The obligations are collateralized by the acquired restaurant properties. Excluding capital lease obligations (see Note 8), the Company's long-term debt maturities for the five years following June 26, 2002 are as follows (in...

  • Page 53
    ... 2002, the Company acquired the remaining assets leased under the real estate leasing facility for $56.8 million and terminated the lease arrangement. (c) Commitments At June 26, 2002, future minimum lease payments on capital and operating leases were as follows (in thousands): Fiscal Year Capital...

  • Page 54
    ... shares of Company common stock may be granted to officers, directors, and eligible employees, as defined. Options are granted at the market value of the underlying common stock on the date of grant, are exercisable beginning one to two years from the date of grant, with various vesting periods, and...

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    ...of Company common stock. The authority to issue the remaining stock options under the 1991 Stock Option Plan for Non-Employee Directors and Consultants has been terminated. Options are granted at the market value of the underlying common stock on the date of grant, vest one-third each year beginning...

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    ... to the common stock account. 11. SAVINGS PLANS The Company sponsors a qualified defined contribution retirement plan (''Plan I'') covering salaried and hourly employees who have completed one year of service and have attained the age of twenty-one. Plan I allows eligible employees to defer receipt...

  • Page 57
    ...eligible bonuses, as defined in the plan. The Company matches in Company common stock 25% of the first 5% of non-officer contributions while officers' contributions are matched at the same rate with cash. Employee contributions vest immediately while Company contributions vest 25% annually beginning...

  • Page 58
    ... expenses stemming from an agreement reached with the California Department of Labor Standards Enforcement (''DLSE''). The DLSE's primary allegation involved the Company's documentation policies related to breaks provided to employees. The Company believes it has been in substantial compliance with...

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    ... 2001, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended June 26, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on...

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    ... are identified. The Audit Committee of the Board of Directors, which is comprised solely of outside directors, provides oversight to the financial reporting process through periodic meetings with our independent auditors, internal auditors, and management. Both our independent auditors and internal...

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