Chili's 2008 Annual Report Download - page 38

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
company-owned restaurants in fiscal 2009 and even fewer restaurants in fiscal 2010. As a result, our overall
revenues will now be driven in a more balanced manner of comparable restaurant sales and increasing
franchise royalties. Our fiscal 2009 capital expenditure budget also includes up to $25 million for re-images
at Chili’s restaurants and up to $30 million in kitchen technology that we believe will dramatically change
the casual dining experience for our guests. Finally, we will continue our focus on creating a culture of
hospitality through additional team member training as well as utilization of our Guest Experience
Measurement program. We expect to realize operating margin improvement from this focus on our
existing restaurants and less effort towards opening new restaurants, the removal of underperforming
restaurants from our system and a more focused organization.
As evidenced during fiscal 2008, the casual dining industry is a highly competitive business which is
sensitive to changes in economic conditions, trends in lifestyles and fluctuating costs. We are encouraged
by the successes we realized from our initiatives in place during 2008 to address these challenges and
remain confident in the financial health of our company, the long-term prospects of the industry as well as
in our ability to perform effectively in an extremely competitive marketplace and a variety of economic
environments.
RESULTS OF OPERATIONS FOR FISCAL YEARS 2008, 2007, AND 2006
The following table sets forth income and expense items as a percentage of total revenues for the
periods indicated:
Percentage of Total Revenues
Fiscal Years
2008 2007 2006
Revenues ............................. 100.0% 100.0% 100.0%
Operating Costs and Expenses:
Cost of sales ......................... 28.4% 27.9% 28.0%
Restaurant expenses ................... 56.6% 55.7% 55.0%
Depreciation and amortization ............ 3.9% 4.3% 4.6%
General and administrative .............. 4.0% 4.4% 5.0%
Other gains and charges ................ 4.8% (0.2)% (0.5)%
Total operating costs and expenses ....... 97.7% 92.1% 92.1%
Operating income ....................... 2.3% 7.9% 7.9%
Interest expense ........................ 1.1% 0.7% 0.5%
Other, net ............................ (0.1)% (0.1)% 0.0%
Income before provision for income taxes ..... 1.3% 7.3% 7.4%
Provision for income taxes ................ 0.1% 2.0% 2.2%
Income from continuing operations ........ 1.2% 5.3% 5.2%
Loss from discontinued operations, net of
taxes ............................. 0.0% 0.0% (0.1)%
Net income ........................ 1.2% 5.3% 5.1%
F-4