Chili's 2005 Annual Report Download - page 33

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
5
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased to a deficit of $179.7 million at June 29, 2005 from a surplus of $21.8 million at
June 30, 2004, primarily due to the cash redemption of the convertible senior debentures and purchases of
treasury stock during fiscal 2005. Net cash provided by operating activities decreased to $443.5 million for fiscal
2005 from $489.7 million for fiscal 2004 due to the additional week in fiscal 2004 and the timing of operational
receipts and payments. The Company believes that its various sources of capital, including availability under
existing credit facilities, ability to raise additional financing, and cash flow from operating activities, are adequate
to finance operations as well as the repayment of current debt obligations.
Payments due under the Company’s contractual obligations for outstanding indebtedness, purchase
obligations as defined by the Securities and Exchange Commission (“SEC”), and the expiration of credit facilities
as of June 29, 2005 are as follows:
Payments Due by Period
(in thousands)
Total
Less than
1 Year
1-3
Years
3-5
Years
More than
5 Years
Long-term debt(a)............................ $ 535,420 $ 66,878 $ 37,247 $ 52,110 $ 379,185
Capital leases................................. 57,562 3,361 6,981 7,339 39,881
Operating leases.............................. 892,375 111,568 210,093 179,859 390,855
Purchase obligations(b)........................ 120,563 44,080 62,993 13,490 —
Amount of Credit Facility Expiration by Period
(in thousands)
Total
Commitment
Less than
1 year(c)
1-3
Years
3-5
Years
More than
5 Years
Credit facilities............................... $ 375,000 $ 75,000 $ — $ 300,000 $ —
(a) Long-term debt consists of amounts owed on the 5.75% notes, mortgage loan obligations, credit facilities and accrued interest on fixed-
rate obligations totaling $162.1 million.
(b) A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on the Company
and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. The Company’s purchase obligations primarily consist of long-term obligations
for the purchase of telecommunication services, certain non-alcoholic beverages and baked goods and exclude agreements that are
cancelable without significant penalty.
(c) The portion of the credit facilities that expires in less than one year is an uncommitted obligation giving the lenders the option not to
extend the Company funding. Should any or all of these obligations not be extended, the Company has adequate capacity under the
committed facility, which does not expire until October 2009.
Capital expenditures consist of purchases of land for future restaurant sites, new restaurants under
construction, purchases of new and replacement restaurant furniture and equipment, and ongoing remodeling
programs. Capital expenditures were $334.9 million in fiscal 2005 compared to $314.3 million in fiscal 2004. The
Company estimates that its fiscal 2006 capital expenditures will approximate $434.0 million. These capital
expenditures will be funded entirely from operations and existing credit facilities.
In April 2005, the Company paid the remaining $14.9 million principal balance on the senior notes. In
January 2005, the Company redeemed all of its convertible senior debentures. Debenture holders chose to
convert a total of $10.8 million of the accreted debenture value into 308,092 shares of common stock. The
Company redeemed the balance of $262.7 million of the accreted debenture value for cash. In November 2004,
the Company paid $23.9 million as a result of the early extinguishment of certain mortgage loan obligations. The
Company funded these payments with cash on hand and available lines of credit.
In December 2004, the Company resolved a dispute with the IRS and paid an assessment of $17.3 million for
employer-only FICA taxes. In connection with this payment, the Company also recorded an income tax benefit of
approximately $16.9 million, consisting of federal income tax credits related to the additional FICA taxes paid.