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FE&SFlashNews — 2004-12-20 — News

December 20, 2004

Chain Update: Brinker And Elmer's

Two major chain restaurants have announced significant financial or operational news in recent days.

* Brinker International has resolved its tax dispute with the Internal Revenue Service (IRS).

The dispute involved the Dallas-based casual-dining chain’s Tip Reporting Alternative Commitment. The company said it will record a $17.3 million assessment in its second quarter for taxes on unreported cash tips for 2000 through 2002 to resolve the dispute, according to AP. The company also expects to record a $16.9 million gain mostly from federal income tax credits, which will result in net income being reduced by about $400,000 in the quarter.

Brinker, which operates the Chili's Grill & Bar chain, had claimed it was in full compliance with all regulations and that the IRS action was "unjustified." Despite that, the chain said in a press release that it had “agreed to the resolution to avoid potentially costly and protracted litigation.”

* The chairman and directors of Elmer's Restaurants launched a bid on Monday to take the company private for $7.50 per share.

A corporation formed by Elmer's Chairman Bruce Davis, members of the company's board and other shareholders, who own a combined 59% of Elmer's common stock, said they felt the costs of staying public outweighed the benefits, according to Reuters.

The offer by ERI Acquisition Corp. is conditioned, among other things, on it acquiring at least 90% of the company's outstanding common stock.

Elmer's, which owns a chain of restaurants in the western United States, had announced the Davis-led group's plans back in August.

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