Chili's 2015 Annual Report Download - page 43

pricing related to fajita beef and salmon. Cost of sales, as a percent of company sales, decreased 0.5% in fiscal
2014 due to increased menu pricing, menu item changes, improved waste control, and efficiency gains in oil
usage related to new fryer equipment. Commodity pricing was favorable primarily driven by other items and
bread, partially offset by unfavorable pricing primarily related to cheese, seafood and pork.
Restaurant labor, as a percent of company sales, decreased 0.1% in fiscal 2015 primarily driven by leverage
related to higher company sales coupled with lower health insurance expenses, partially offset by increased wage
rates. Restaurant labor, as a percent of company sales, decreased 0.2% in fiscal 2014 primarily driven by
leverage related to higher company sales, decreased employee health insurance expenses resulting from favorable
claims experience and decreased employee training costs, partially offset by increased manager salaries primarily
due to merit.
Restaurant expenses, as a percent of company sales, were flat in 2015 primarily driven by leverage related to
higher company sales and lower workers’ compensation insurance expenses, partially offset by equipment
charges associated with tabletop devices and higher credit card fees. Restaurant expenses, as a percent of
company sales, increased 0.4% in fiscal 2014 primarily driven by higher advertising, workers’ compensation
insurance expenses, new restaurant development, utilities expense and tabletop equipment charges, partially
offset by sales leverage on fixed costs related to higher company sales, lower research and development, and
higher equity income.
Depreciation and amortization increased $9.2 million in fiscal 2015 primarily due to investments in the
Chili’s reimage program, new restaurant openings and new fryer equipment, partially offset by an increase in
fully depreciated assets. Depreciation and amortization increased $4.6 million in fiscal 2014 primarily due to
investments in the Chili’s reimage program, fryers and kitchen equipment, new restaurant openings, as well as
the acquisition of 11 restaurants in Canada, partially offset by an increase in fully depreciated assets.
General and administrative expenses increased $1.4 million in fiscal 2015 due to higher performance-based
compensation and technology and innovation expenditures made in support of sales driving initiatives, partially
offset by lower stock-based compensation and professional fees. General and administrative expenses decreased
$2.4 million in fiscal 2014 primarily due to lower performance based compensation, a reduction in payroll
primarily due to lower headcount, as well as a reduction in other benefits, partially offset by higher legal fees.
Other gains and charges in fiscal 2015 were $4.8 million. We were a plaintiff in the antitrust litigation
against Visa and MasterCard styled as Progressive Casualty Insurance Co., et al. v. Visa, Inc., et al. A settlement
agreement was fully executed by all parties in January 2015 and we recognized a gain of approximately $8.6
million. During the second quarter of fiscal 2015, the class action lawsuit styled as Hohnbaum, et al. v. Brinker
Restaurant Corp., et al. (“Hohnbaum case”) was finalized resulting in an additional charge of approximately $5.8
million to adjust our previous estimate of the final settlement amount. In February 2015, we funded the
settlement in the amount of $44.0 million against our previously established reserve. Additionally, during fiscal
2015 we recorded restaurant impairment charges of $2.3 million related to underperforming restaurants that
either continue to operate or are scheduled to close. We also recorded restaurant closure charges of $1.7 million
primarily related to lease termination charges and a $1.1 million loss primarily related to the sale of two company
owned restaurants located in Mexico. We incurred $1.2 million in severance other benefits related to
organizational changes made during the fiscal year. The severance charges include expenses related to the
accelerated vesting of stock-based compensation awards. We incurred expenses of approximately $1.1 million
during fiscal 2015 related to the acquisition of a franchisee which owns 103 Chili’s restaurants subsequent to the
end of the year.
Other gains and charges in fiscal 2014 included charges of approximately $39.5 million related to various
litigation matters including the Hohnbaum case. We also recorded restaurant impairment charges of $4.5 million
related to underperforming restaurants that either continue to operate or are scheduled to close. Additionally, we
recorded $3.4 million of restaurant closure charges consisting primarily of lease termination charges and other
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