Chili's 2014 Annual Report Download - page 43

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, as well as decreased employee training costs, partially offset by increased manager salaries primarily
due to merit. Restaurant labor, as a percent of company sales, decreased 0.2% in fiscal 2013 primarily driven by
reduced hourly labor costs resulting from the installation of new kitchen equipment and lower manager bonuses,
partially offset by increased employee health insurance expenses resulting from an increase in both the severity
and number of claims.
Restaurant expenses, as a percent of company sales, increased 0.5% in fiscal 2014 primarily driven by
higher advertising, workers’ compensation insurance expenses, new restaurant development, utilities expense and
Ziosk equipment charges, partially offset by sales leverage on fixed costs related to higher company sales, lower
research and development, and higher equity income. Restaurant expenses, as a percent of company sales,
increased 0.1% in fiscal 2013 primarily driven by higher workers’ compensation insurance expenses and
advertising, partially offset by lower repair and maintenance expenses resulting from cost control initiatives and
limitations on discretionary spending, lower utilities expense and sales leverage on fixed costs related to higher
company sales.
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. Depreciation and amortization
increased $6.4 million in fiscal 2013 primarily due to Chili’s reimage, kitchen equipment and software
investments in existing restaurants, partially offset by an increase in fully depreciated assets.
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. General and administrative expenses decreased $8.9 million
in fiscal 2013 primarily due to lower performance based compensation, professional fees and relocation
expenses, partially offset by higher stock-based compensation expense driven by a higher grant price in fiscal
2013.
Other gains and charges in fiscal 2014 included charges of approximately $39.5 million related to various
litigation matters including a class action litigation pending in California. 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 costs associated with closed restaurants. We also incurred $2.1 million in
severance and other benefits related to organization changes made during the fiscal year. The severance charges
include expense related to the accelerated vesting of stock-based compensation awards. Furthermore, a
$0.6 million gain was recorded primarily related to land sales.
Other gains and charges in fiscal 2013 primarily included a charge of $15.8 million representing the remaining
interest payments and unamortized debt issuance costs and discount resulting from the redemption of the 5.75%
notes. Additionally, other gains and charges included $5.3 million of charges related to the impairment of the
company-owned restaurant in Brazil and certain underperforming restaurants, $2.3 million of lease termination
charges related to previously closed restaurants, and $2.2 million in severance and other benefits. These charges
were partially offset by net gains of $11.2 million on the sale of assets, including an $8.3 million gain on the sale of
our remaining 16.6% interest in Macaroni Grill and net gains of $2.9 million related to land sales.
Other gains and charges in fiscal 2012 primarily included $3.2 million of lease termination charges related
to previously closed restaurants, $3.1 million of charges related to the impairment of certain underperforming
restaurants, $2.6 million of charges related to the impairment of certain liquor licenses, $1.3 million of litigation
charges and $0.4 million of long-lived asset impairment charges resulting from closures. These charges were
partially offset by net gains of $3.3 million related to land sales.
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