Chili's 2002 Annual Report Download - page 34

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
For an understanding of the significant factors that influenced the performance of Brinker
International, Inc. (the ‘‘Company’’) during the past three fiscal years, the following discussion should be read in
conjunction with the consolidated financial statements and related notes found elsewhere in this annual report.
The Company has a 52/53 week fiscal year ending on the last Wednesday in June. Fiscal years 2002, 2001 and
2000, which ended on June 26, 2002, June 27, 2001 and June 28, 2000, respectively, each contained 52 weeks.
RESULTS OF OPERATIONS FOR FISCAL YEARS 2002, 2001, AND 2000
The following table sets forth expenses as a percentage of total revenues for the periods indicated for
revenue and expense items included in the consolidated statements of income:
Percentage of Total Revenues
Fiscal Years
2002 2001 2000
Revenues ................................................... 100.0% 100.0% 100.0%
Operating Costs and Expenses:
Cost of sales ............................................... 27.6% 27.6% 27.4%
Restaurant expenses .......................................... 55.1% 54.1% 54.2%
Depreciation and amortization .................................. 4.5% 4.2% 4.3%
General and administrative ..................................... 4.2% 4.5% 4.8%
Total operating costs and expenses .............................. 91.4% 90.4% 90.7%
Operating income ............................................. 8.6% 9.6% 9.3%
Interest expense ............................................... 0.5% 0.4% 0.5%
Other, net................................................... 0.1% — 0.2%
Income before provision for income taxes ............................ 8.0% 9.2% 8.6%
Provision for income taxes ....................................... 2.7% 3.2% 3.0%
Net income............................................... 5.3% 6.0% 5.6%
REVENUES
Revenue growth of 20.0% and 14.6% in fiscal 2002 and 2001, respectively, was attributable primarily to the
increases in sales weeks driven by new unit expansion, acquisitions of units from former franchise partners and
increases in comparable store sales. Revenues for fiscal 2002 increased due to a 19.1% increase in sales weeks
and a 1.5% increase in comparable store sales. Revenues for fiscal 2001 increased due to a 9.9% increase in sales
weeks and a 4.4% increase in comparable store sales. Menu price increases were 1.8% and 2.2% in fiscal 2002
and 2001, respectively.
COSTS AND EXPENSES (as a Percent of Revenues)
Cost of sales remained flat for fiscal 2002 due to unfavorable commodity price variances for dairy and cheese
and product mix changes to menu items with higher percentage food costs, offset by menu price increases and
favorable commodity price variances for seafood. Cost of sales increased for fiscal 2001 due to unfavorable
commodity price variances for beef and seafood, produce, and beverages and product mix changes 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 the settlement of certain California labor law issues, an approximate $8.7 million impairment charge related to
the write-off of a portion of the notes receivable from Eatzi’s Corporation, and increased labor wage rates. These
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