UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 28, 2011
Commission File Number 1-10275
BRINKER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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75-1914582
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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6820 LBJ FREEWAY,
DALLAS, TEXAS 75240
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75240
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(Address of principal executive offices)
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(Zip Code)
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(972) 980-9917
(Registrants telephone number, including area code)
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.
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Class
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Outstanding at January 30, 2012
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Common Stock, $0.10 par value
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78,533,910 shares
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BRINKER INTERNATIONAL, INC.
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BRINKER INTERNATIONAL, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
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December 28,
2011
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June 29,
2011
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(Unaudited)
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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75,610
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$
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81,988
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Accounts receivable
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87,644
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42,785
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Inventories
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27,355
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25,365
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Prepaid expenses and other
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56,852
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59,698
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Deferred income taxes
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5,281
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11,524
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Total current assets
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252,742
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221,360
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Property and Equipment, at Cost:
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Land
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154,012
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156,731
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Buildings and leasehold improvements
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1,388,902
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1,383,311
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Furniture and equipment
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527,154
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543,682
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Construction-in-progress
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6,142
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6,425
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2,076,210
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2,090,149
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Less accumulated depreciation and amortization
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(1,037,512
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)
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(1,033,870
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)
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Net property and equipment
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1,038,698
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1,056,279
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Other Assets:
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Goodwill
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124,089
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124,089
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Deferred income taxes
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22,709
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30,365
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Other
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49,972
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52,475
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Total other assets
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196,770
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206,929
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Total assets
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$
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1,488,210
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$
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1,484,568
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current Liabilities:
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Current installments of long-term debt
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$
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27,211
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$
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22,091
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Accounts payable
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86,798
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87,549
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Accrued liabilities
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307,754
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287,365
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Income taxes payable
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386
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8,596
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Total current liabilities
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422,149
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405,601
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Long-term debt, less current installments
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561,482
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502,572
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Other liabilities
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135,884
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137,485
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Commitments and Contingencies (Note 8)
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Shareholders Equity:
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Common stock250,000,000 authorized shares; $0.10 par value; 176,246,649 shares issued and 78,854,603 shares outstanding at
December 28, 2011, and 176,246,649 shares issued and 82,938,493 shares outstanding at June 29, 2011
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17,625
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17,625
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Additional paid-in capital
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458,034
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463,688
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Retained earnings
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2,045,981
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2,013,189
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2,521,640
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2,494,502
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Less treasury stock, at cost (97,392,046 shares at December 28, 2011 and 93,308,156 shares at June 29, 2011)
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(2,152,945
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(2,055,592
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)
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Total shareholders equity
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368,695
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438,910
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Total liabilities and shareholders equity
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$
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1,488,210
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$
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1,484,568
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See accompanying notes to consolidated financial statements.
3
BRINKER INTERNATIONAL, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
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Thirteen Week Periods Ended
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Twenty-Six Week Periods Ended
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December 28,
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December 29,
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December 28,
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December 29,
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2011
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2010
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2011
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2010
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Revenues
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$
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681,904
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$
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671,886
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$
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1,350,306
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$
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1,326,779
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Operating Costs and Expenses:
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Cost of sales
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185,189
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179,298
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366,807
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353,778
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Restaurant labor
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214,317
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213,465
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430,262
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430,611
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Restaurant expenses
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160,077
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162,050
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325,642
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327,199
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Depreciation and amortization
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31,153
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32,452
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62,336
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65,025
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General and administrative
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31,215
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31,387
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64,034
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61,431
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Other gains and charges
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4,033
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2,774
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5,718
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5,894
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Total operating costs and expenses
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625,984
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621,426
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1,254,799
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1,243,938
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Operating income
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55,920
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50,460
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95,507
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82,841
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Interest expense
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6,509
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7,034
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13,557
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14,230
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Other, net
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(854
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(2,000
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(1,946
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(3,734
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Income before provision for income taxes
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50,265
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45,426
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83,896
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72,345
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Provision for income taxes
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14,591
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7,962
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24,601
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13,450
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Net income
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$
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35,674
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$
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37,464
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$
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59,295
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$
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58,895
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Basic net income per share
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$
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0.45
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$
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0.41
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$
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0.73
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$
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0.61
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Diluted net income per share
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$
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0.44
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$
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0.41
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$
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0.72
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$
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0.61
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Basic weighted average shares outstanding
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79,840
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90,936
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80,792
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95,815
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Diluted weighted average shares outstanding
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81,655
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92,111
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82,619
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96,847
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Dividends per share
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$
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0.16
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$
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0.14
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$
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0.32
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$
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0.28
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See accompanying notes to consolidated financial statements.
4
BRINKER INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Twenty-Six Week Periods Ended_
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December 28,
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December 29,
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2011
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2010
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Cash Flows from Operating Activities:
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Net income
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$
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59,295
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$
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58,895
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Adjustments to reconcile net income to net cash provided
by operating activities:
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Depreciation and amortization
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62,336
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65,025
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Deferred income taxes
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13,432
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19,467
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Restructure charges and other impairments
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4,898
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4,129
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Equity in earnings
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1,391
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(19
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Net loss (gain) on disposal of assets
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573
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(1,468
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Stock-based compensation
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6,449
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6,455
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Other
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606
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203
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Changes in assets and liabilities, excluding
effects of dispositions:
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Accounts receivable
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(43,811
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)
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(46,463
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Inventories
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(2,027
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)
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(782
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Prepaid expenses and other
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3,361
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2,899
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Other assets
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1,105
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849
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Accounts payable
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207
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(23,285
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)
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Accrued liabilities
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16,803
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25,556
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Current income taxes
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(9,070
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)
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(37,070
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Other liabilities
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(1,303
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(4,386
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)
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Net cash provided by operating activities
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114,245
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70,005
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Cash Flows from Investing Activities:
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Payments for property and equipment
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(53,475
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(31,842
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)
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Proceeds from sale of assets
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4,279
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6,873
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Investment in equity method investees
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(912
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)
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(1,556
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)
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Net cash used in investing activities
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(50,108
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)
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(26,525
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)
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Cash Flows from Financing Activities:
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Purchases of treasury stock
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(125,638
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)
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(251,818
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)
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Proceeds from issuances of long-term debt
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70,000
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0
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Payments of dividends
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(25,073
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)
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(28,562
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)
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Proceeds from issuances of treasury stock
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16,649
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12,165
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Payments on long-term debt
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(5,625
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)
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(5,564
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)
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Payments for deferred financing costs
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(1,620
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)
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0
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Excess tax benefits from stock-based compensation
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|
792
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|
140
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Net cash used in financing activities
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(70,515
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)
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(273,639
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)
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Net change in cash and cash equivalents
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(6,378
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)
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(230,159
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)
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Cash and cash equivalents at beginning of period
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|
81,988
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344,624
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Cash and cash equivalents at end of period
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$
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75,610
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$
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114,465
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|
See accompanying notes to consolidated financial statements.
5
BRINKER INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
References to Brinker, the Company, we, us, and our in this
Form 10-Q are references to Brinker International, Inc. and its subsidiaries and any predecessor companies of Brinker International, Inc.
Our consolidated financial statements as of December 28, 2011 and June 29, 2011 and for the thirteen week and twenty-six week periods ended December 28, 2011 and December 29, 2010 have
been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). We are principally engaged in the ownership, operation, development, and franchising of the Chilis Grill & Bar
(Chilis) and Maggianos Little Italy (Maggianos) restaurant brands. At December 28, 2011, we owned, operated, or franchised 1,574 restaurants in the United States and 31 countries and two territories
outside of the United States.
The preparation of the consolidated financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting period. Actual results could differ from those estimates.
The information furnished herein reflects all adjustments (consisting only of normal recurring accruals and adjustments) which are, in our opinion, necessary to fairly state the interim operating results
for the respective periods. However, these operating results are not necessarily indicative of the results expected for the full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to SEC rules and regulations. The notes to the consolidated financial statements (unaudited) should be read in conjunction with the
notes to the consolidated financial statements contained in the June 29, 2011 Form 10-K. We believe the disclosures are sufficient for interim financial reporting purposes.
6
2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number
of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the
calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and restricted share awards determined using the treasury stock method. We had approximately 1.8 million
stock options and restricted share awards outstanding at December 28, 2011 and 5.6 million stock options and restricted share awards outstanding at December 29, 2010 that were not included in the dilutive earnings per share
calculation because the effect would have been anti-dilutive.
3. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value, as follows:
|
|
|
Level 1inputs are quoted prices in active markets for identical assets or liabilities.
|
|
|
|
Level 2inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar
assets or liabilities.
|
|
|
|
Level 3inputs are unobservable and reflect our own assumptions.
|
(a) Non-Financial Assets Measured on a Non-Recurring Basis
In the second
quarter of fiscal 2012, ten underperforming restaurants with a carrying value of $1.5 million were written down to their fair value of $0.4 million resulting in an impairment charge of $1.1 million, which was included in other gains and charges in
the consolidated statement of income for the period. In the second quarter of fiscal 2011, two underperforming restaurants with a carrying value of $1.4 million were written down to their fair value of $0.3 million resulting in an impairment charge
of $1.1 million, which was included in other gains and charges in the consolidated statement of income for the period. We determined fair value based on projected discounted future operating cash flows of the restaurants over their remaining service
life using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model.
The
following table presents fair values for those assets measured at fair value on a non-recurring basis at December 28, 2011 and December 29, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-lived assets held for use
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 28, 2011
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
369.0
|
|
|
$
|
369.0
|
|
At December 29, 2010
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
255.0
|
|
|
$
|
255.0
|
|
7
(b) Other Financial Instruments
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The fair value
of cash and cash equivalents, accounts receivable and accounts payable approximates their carrying amounts while the fair value of the 5.75% notes is based on quoted market prices. At December 28, 2011, the 5.75% notes had a carrying value of
$289.6 million and a fair value of $304.8 million. At June 29, 2011, the 5.75% notes had a carrying value of $289.6 million and a fair value of $308.1 million.
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 28,
2011
|
|
|
June 29,
2011
|
|
Term loan
|
|
$
|
250,000
|
|
|
$
|
185,000
|
|
5.75% notes
|
|
|
289,633
|
|
|
|
289,557
|
|
Capital lease obligations
|
|
|
49,060
|
|
|
|
50,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588,693
|
|
|
|
524,663
|
|
Less current installments
|
|
|
(27,211
|
)
|
|
|
(22,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
561,482
|
|
|
$
|
502,572
|
|
|
|
|
|
|
|
|
|
|
In August 2011, we executed a revised unsecured senior credit facility increasing the total capacity from
$400 million to $500 million. The maturity date of the revised facility is August 2016. The facility includes a $250 million revolver and a $250 million term loan. The revised term loan and revolving credit facility bear interest of LIBOR plus an
applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 2.50%. Based on our current credit rating, we are paying interest at a rate of LIBOR plus 1.63%. One month LIBOR at
December 28, 2011 was approximately 0.30%. We also expensed $0.4 million of debt issuance costs associated with the initial borrowing due to changes in the composition and lending allocation within the bank syndicate. As of December 28,
2011, $250 million is available under our revolving credit facility.
5. OTHER GAINS AND CHARGES
Other gains and charges consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Periods Ended
|
|
|
Twenty-Six Week Periods Ended
|
|
|
|
December 28,
|
|
|
December 29,
|
|
|
December 28,
|
|
|
December 29,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Restaurant impairment charges
|
|
$
|
1,098
|
|
|
$
|
1,125
|
|
|
$
|
1,098
|
|
|
$
|
1,125
|
|
Restaurant closure charges
|
|
|
2,395
|
|
|
|
1,362
|
|
|
|
3,122
|
|
|
|
2,538
|
|
Severance and other benefits
|
|
|
0
|
|
|
|
892
|
|
|
|
100
|
|
|
|
3,653
|
|
Gains on the sale of assets, net
|
|
|
4
|
|
|
|
(600
|
)
|
|
|
(1,340
|
)
|
|
|
(1,176
|
)
|
Other gains and charges, net
|
|
|
536
|
|
|
|
(5
|
)
|
|
|
2,738
|
|
|
|
(246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,033
|
|
|
$
|
2,774
|
|
|
$
|
5,718
|
|
|
$
|
5,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded impairment charges of $1.1 million in the second quarter of fiscal 2012 and 2011,
respectively. The impairment charges, which were associated with underperforming restaurants that continue to operate, were measured as the excess of the carrying amount of property and equipment over the fair value. See Note 3 for fair value
disclosures related to the fiscal 2012 charges.
8
During the first two quarters of fiscal 2012, we recorded $3.1 million in charges, including
$2.4 million in lease termination charges associated with restaurants closed in prior years and $0.4 million related to long-lived asset impairments resulting from closures.
Additionally, we recorded $2.5 million in charges in the first quarter of fiscal 2012 related to litigation, partially offset by a $1.3 million gain related to the sale of land.
During the first two quarters of fiscal 2011, we recorded $2.5 million in charges, including $1.8 million in lease termination charges
associated with restaurants closed in prior years and $0.6 million related to long-lived asset impairments associated with two restaurant closures. We also incurred $3.7 million in severance and other benefits resulting from organizational changes
in fiscal 2011.
6. SHAREHOLDERS EQUITY
Our Board of Directors has authorized a total of $2,885.0 million of share repurchases. We repurchased approximately
5.4 million shares of our common stock for $125.6 million during the first two quarters of fiscal 2012. As of December 28, 2011, approximately $322 million was available under our share repurchase authorizations. Our stock repurchase plan
has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the future, we may consider additional share repurchases under our plan based on several factors,
including our cash position, share price, operational liquidity, proceeds from divestitures and planned investment and financing needs. During the first two quarters of fiscal 2012, approximately 829,000 stock options were exercised resulting in
cash proceeds of $16.6 million. Repurchased common stock is reflected as a reduction of shareholders equity.
During the
first two quarters of fiscal 2012, we paid dividends of $25.1 million to common stock shareholders, compared to $28.6 million in the prior year. Our Board of Directors approved a 14 percent increase in the quarterly dividend from $0.14 to $0.16 per
share effective with the September 2011 dividend which was declared in August 2011. Additionally, we declared a quarterly dividend of $12.8 million in November 2011 to be paid on December 29, 2011.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest for the first two quarters of fiscal 2012 and 2011 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 28,
2011
|
|
|
December 29,
2010
|
|
Income taxes, net of refunds
|
|
$
|
15,090
|
|
|
$
|
38,092
|
|
Interest, net of amounts capitalized
|
|
|
12,199
|
|
|
|
12,801
|
|
Non-cash investing activities for the first two quarters of fiscal 2012 and 2011 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 28,
2011
|
|
|
December 29,
2010
|
|
Retirement of fully depreciated assets
|
|
$
|
55,202
|
|
|
$
|
43,444
|
|
9
8. CONTINGENCIES
In connection with the sale of restaurants to franchisees and brand divestitures, we have, in certain cases, guaranteed
lease payments. As of December 28, 2011 and June 29, 2011, we have outstanding lease guarantees or are secondarily liable for $154.1 million and $166.1 million, respectively. This amount represents the maximum potential liability of future
payments under the guarantees. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2012 through fiscal 2023. In the event of default, the indemnity and default clauses in our
assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of December 28, 2011.
Certain current and former hourly restaurant team members filed a lawsuit against us in California Superior Court alleging violations of California labor laws with respect to meal and rest breaks. The
lawsuit seeks penalties and attorneys fees and was certified as a class action in July 2006. In July 2008, the California Court of Appeal decertified the class action on all claims with prejudice. In October 2008, the California Supreme Court
granted a writ to review the decision of the Court of Appeal and oral arguments were heard by the California Supreme Court in November 2011. A ruling on the case is expected by the end of April 2012. We intend to vigorously defend our position. It
is not possible at this time to reasonably estimate the possible loss or range of loss, if any.
We are engaged in various
other legal proceedings and have certain unresolved claims pending. Reserves have been established based on our best estimates of our potential liability in certain of these matters. Based upon consultation with legal counsel, Management is of the
opinion that there are no matters pending or threatened which are expected to have a material adverse effect, individually or in the aggregate, on our consolidated financial condition or results of operations.
10
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth selected operating data as a percentage of total revenues for the
periods indicated. All information is derived from the accompanying consolidated statements of income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Periods Ended
|
|
|
Twenty-Six Week Periods Ended
|
|
|
|
December 28,
2011
|
|
|
December 29,
2010
|
|
|
December 28,
2011
|
|
|
December 29,
2010
|
|
Revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
27.1
|
%
|
|
|
26.7
|
%
|
|
|
27.2
|
%
|
|
|
26.7
|
%
|
Restaurant labor
|
|
|
31.4
|
%
|
|
|
31.8
|
%
|
|
|
31.9
|
%
|
|
|
32.5
|
%
|
Restaurant expenses
|
|
|
23.5
|
%
|
|
|
24.1
|
%
|
|
|
24.1
|
%
|
|
|
24.7
|
%
|
Depreciation and amortization
|
|
|
4.6
|
%
|
|
|
4.8
|
%
|
|
|
4.6
|
%
|
|
|
4.9
|
%
|
General and administrative
|
|
|
4.6
|
%
|
|
|
4.7
|
%
|
|
|
4.7
|
%
|
|
|
4.6
|
%
|
Other gains and charges
|
|
|
0.6
|
%
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
91.8
|
%
|
|
|
92.5
|
%
|
|
|
92.9
|
%
|
|
|
93.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8.2
|
%
|
|
|
7.5
|
%
|
|
|
7.1
|
%
|
|
|
6.2
|
%
|
Interest expense
|
|
|
0.9
|
%
|
|
|
1.0
|
%
|
|
|
1.0
|
%
|
|
|
1.1
|
%
|
Other, net
|
|
|
(0.1
|
)%
|
|
|
(0.3
|
)%
|
|
|
(0.1
|
)%
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
7.4
|
%
|
|
|
6.8
|
%
|
|
|
6.2
|
%
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
2.2
|
%
|
|
|
1.2
|
%
|
|
|
1.8
|
%
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
5.2
|
%
|
|
|
5.6
|
%
|
|
|
4.4
|
%
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The following table details the number of restaurant openings during the second quarter,
year-to-date, total restaurants open at the end of the second quarter, and total projected openings in fiscal 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
Openings
|
|
|
Year-to-Date
Openings
|
|
|
Total Open at End
Of
Second Quarter
|
|
|
Projected
Openings
|
|
|
|
Fiscal
2012
|
|
|
Fiscal
2011
|
|
|
Fiscal
2012
|
|
|
Fiscal
2011
|
|
|
Fiscal
2012
|
|
|
Fiscal
2011
|
|
|
Fiscal
2012
|
|
Chilis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
821
|
|
|
|
825
|
|
|
|
0
|
|
Domestic Franchised
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
7
|
|
|
|
467
|
|
|
|
470
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
7
|
|
|
|
1,288
|
|
|
|
1,295
|
|
|
|
3
|
|
Maggianos:
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
44
|
|
|
|
44
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
International:(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Franchised
|
|
|
4
|
|
|
|
6
|
|
|
|
11
|
|
|
|
9
|
|
|
|
242
|
|
|
|
220
|
|
|
|
37-42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4
|
|
|
|
6
|
|
|
|
11
|
|
|
|
9
|
|
|
|
242
|
|
|
|
220
|
|
|
|
37-42
|
|
|
|
|
|
|
|
|
|
Grand Total
|
|
|
5
|
|
|
|
9
|
|
|
|
12
|
|
|
|
16
|
|
|
|
1,574
|
|
|
|
1,559
|
|
|
|
40-45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
At the end of the second quarter of fiscal 2012, international franchised restaurants by brand included 241 Chilis and one Maggianos restaurant.
|
At December 28, 2011, we owned the land and buildings for 188 of the 865 company-owned restaurants. The
net book values of the land and buildings associated with these restaurants totaled $141.8 million and $128.0 million, respectively.
12
GENERAL
The following Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand Brinker International, our
operations, and our current operating environment. For an understanding of the significant factors that influenced our performance during the quarters ended December 28, 2011 and December 29, 2010, the MD&A should be read in
conjunction with the consolidated financial statements and related notes included in this quarterly report.
OVERVIEW
We are principally engaged in the ownership, operation, development, and franchising of the Chilis Grill & Bar
(Chilis) and Maggianos Little Italy (Maggianos) restaurant brands. At December 28, 2011, we owned, operated, or franchised 1,574 restaurants.
We are committed to strategies and initiatives that are centered on long-term sales and profit growth, enhancing the guest experience and
team member engagement. These strategies are intended to differentiate our brands from the competition, reduce the costs associated with managing our restaurants and establish a strong presence for our brands in key markets around the
world. Key economic factors such as total employment, consumer confidence and spending levels have improved recently; however, the economy remains suppressed. We will continue to take actions that will allow us to maintain a strong balance
sheet and increase our ability to provide results in all operating environments.
Our current initiatives are designed to
drive profitable sales growth and improve the guest experience in our restaurants. We have implemented a team service model at Chilis which has resulted in labor efficiencies and better guest feedback. Additional labor savings were achieved
through improved food preparation procedures, a component of our kitchen retrofit initiative which was implemented last year. Another component of this initiative is the modification of our kitchens to include improved technology and equipment to
provide a more consistent, high quality product at a faster pace, while generating significant labor cost savings. We expect to install this equipment in a substantial number of Chilis restaurants in fiscal 2012. We are also implementing new
restaurant information systems which we anticipate will increase profits through increased kitchen efficiency and better inventory control. In addition to executing these operational strategies, we have repurchased shares of our common stock in
order to return value to our shareholders and executed a revision to our credit facility to increase our financial flexibility while taking advantage of more favorable interest rates. We believe that the successful implementation of these
operational and financial initiatives will help drive sales growth and operational efficiency while strengthening our competitive advantage and enhancing shareholder value.
In addition to these cost saving initiatives, we are also driving strategic initiatives that will further enhance sales and guest traffic. We continually evaluate our menu at Chilis to improve
quality, freshness and value by introducing new items and improving existing favorites. We are continuing to refresh our value offerings in both the lunch and dinner dayparts. We have recently added new items to our lunch combo platform and have
improved the pace of service. Additionally, we have introduced steaks to our successful dinner for two platform. These additions have shown positive guest response early on and we believe that these changes will further enhance the success of both
platforms. We will continue to utilize value offerings as a tool to drive incremental sales; however, this is only one aspect of our overall sales strategy. We are committed to offering a compelling everyday menu that provides items our guests
prefer at a solid value. We are remodeling a significant number of company-owned restaurants in fiscal 2012, revitalizing Chilis
13
in a way which enhances the relevance of the brand and raises guest expectations regarding the quality of the experience. Improvements at Chilis will have the most significant impact on the
business; however, our results will also benefit through additional contributions from Maggianos and our global business. Maggianos sales trends and traffic continue to improve, driven by offering guests a great value with Classic Pasta,
the new Marcos Meal offering, new menu items and direct marketing. We believe our unique food and signature drinks, improved service and updated atmospheres will result in stronger brands and sustainable sales and profit growth through
increased guest loyalty and traffic.
Global expansion allows further diversification which will enable us to build strength
in a variety of markets and economic conditions. This expansion will come through franchise relationships, joint venture arrangements and equity investments, taking advantage of demographic and eating trends that will accelerate in the
international market over the next decade. Our growing percentage of franchise operations both domestically and internationally enable us to improve margins as royalty payments impact the bottom line.
The casual dining industry is a competitive business which is sensitive to changes in economic conditions, trends in lifestyles and
fluctuating costs. Our priority remains increasing profitable growth over time. We believe that this focus, combined with discipline around the use of capital and efficient management of operating expenses, will enable us to maintain our
position as an industry leader. We remain confident in the financial health of our company, the long-term prospects of the industry as well as our ability to perform effectively in a competitive marketplace and a variety of economic environments.
REVENUES
Revenues for the second quarter of fiscal 2012 increased to $681.9 million, a 1.5% increase from the $671.9 million generated for the same
quarter of fiscal 2011. Revenues for the twenty-six week period ended December 28, 2011 were $1,350.3 million, a 1.8% increase from the $1,326.8 million generated for the same period in fiscal 2011. The increase in revenue was primarily
attributable to an increase in comparable restaurant sales as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period Ended December 28, 2011
|
|
|
Comparable
Sales
|
|
Price
Increase
|
|
Mix
Shift
|
|
Traffic
|
|
Capacity
|
Company-owned
|
|
1.7%
|
|
1.2%
|
|
(0.5)%
|
|
1.0%
|
|
(0.5)%
|
Chilis
|
|
1.4%
|
|
1.1%
|
|
(0.8)%
|
|
1.1%
|
|
(0.5)%
|
Maggianos
|
|
2.8%
|
|
1.8%
|
|
0.4%
|
|
0.6%
|
|
0.0%
|
Franchise (1)
|
|
2.6%
|
|
|
|
|
|
|
|
|
Domestic
|
|
1.7%
|
|
|
|
|
|
|
|
|
International
|
|
4.8%
|
|
|
|
|
|
|
|
|
System-wide (2)
|
|
2.0%
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Week Period Ended December 29, 2010
|
|
|
Comparable
Sales
|
|
Price
Increase
|
|
Mix
Shift
|
|
Traffic
|
|
Capacity
|
Company-owned
|
|
(3.5)%
|
|
1.0%
|
|
0.6%
|
|
(5.1)%
|
|
(3.0)%
|
Chilis
|
|
(4.9)%
|
|
1.0%
|
|
1.2%
|
|
(7.1)%
|
|
(3.1)%
|
Maggianos
|
|
4.7%
|
|
1.0%
|
|
(2.0)%
|
|
5.7%
|
|
0.0%
|
|
|
|
|
|
|
Franchise (1)
|
|
(4.1)%
|
|
|
|
|
|
|
|
|
Domestic
|
|
(6.5)%
|
|
|
|
|
|
|
|
|
International
|
|
2.9%
|
|
|
|
|
|
|
|
|
System-wide (2)
|
|
(3.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Week Period Ended December 28, 2011
|
|
|
Comparable
Sales
|
|
Price
Increase
|
|
Mix
Shift
|
|
Traffic
|
|
Capacity
|
Company-owned
|
|
1.8%
|
|
1.3%
|
|
(0.9)%
|
|
1.4%
|
|
(0.4)%
|
Chilis
|
|
1.6%
|
|
1.2%
|
|
(1.1)%
|
|
1.5%
|
|
(0.4)%
|
Maggianos
|
|
3.1%
|
|
1.9%
|
|
0.0%
|
|
1.2%
|
|
0.0%
|
|
|
|
|
|
|
Franchise (1)
|
|
2.3%
|
|
|
|
|
|
|
|
|
Domestic
|
|
1.0%
|
|
|
|
|
|
|
|
|
International
|
|
6.1%
|
|
|
|
|
|
|
|
|
System-wide (2)
|
|
2.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Week Period Ended December 29, 2010
|
|
|
Comparable
Sales
|
|
Price
Increase
|
|
Mix
Shift
|
|
Traffic
|
|
Capacity
|
Company-owned
|
|
(3.9)%
|
|
1.0%
|
|
1.0%
|
|
(5.9)%
|
|
(3.2)%
|
Chilis
|
|
(4.9)%
|
|
1.2%
|
|
1.5%
|
|
(7.6)%
|
|
(3.3)%
|
Maggianos
|
|
3.2%
|
|
0.6%
|
|
(1.8)%
|
|
4.4%
|
|
0.0%
|
|
|
|
|
|
|
Franchise (1)
|
|
(4.2)%
|
|
|
|
|
|
|
|
|
Domestic
|
|
(6.1)%
|
|
|
|
|
|
|
|
|
International
|
|
1.7%
|
|
|
|
|
|
|
|
|
System-wide (2)
|
|
(4.0)%
|
|
|
|
|
|
|
|
|
(1)
|
Revenues generated by franchisees are not included in revenues on the consolidated statements of income; however, we generate royalty revenue and advertising fees based
on franchise sales, where applicable. We believe including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.
|
15
(2)
|
System-wide comparable restaurant sales are derived from sales generated by company-owned Chilis and Maggianos restaurants in addition to the sales
generated at franchisee operated restaurants.
|
Chilis revenues increased 1.2% to $554.8 million in the
second quarter of fiscal 2012 from $548.3 million in the same quarter of fiscal 2011. For the year-to-date period, Chilis revenues increased 1.4% to $1,121.7 million from $1,106.1 million in fiscal 2011. These increases were primarily driven
by increases in comparable restaurant sales of 1.4% and 1.6% for the second quarter and year-to-date periods of fiscal 2012, repectively. The increases in comparable restaurant sales resulted from increases in customer traffic and menu prices,
partially offset by unfavorable product mix shifts.
Maggianos revenues increased 2.9% to $110.9 million in the second
quarter of fiscal 2012 from $107.8 million in the same quarter of fiscal 2011. For the year-to-date period, Maggianos revenues increased 3.5% to $196.2 million from $189.5 million in fiscal 2011. These increases were driven by increases in
comparable restaurant sales of 2.8% and 3.1% for the second quarter and year-to-date periods of fiscal 2012. The increases in comparable restaurant sales resulted from an increase in menu prices and customer traffic. Product mix shifts also
favorably impacted comparable sales in the second quarter.
Royalty and franchise revenues increased 2.5% to $16.2 million in
the second quarter of fiscal 2012 compared to $15.8 million in the prior year. For the year-to-date period, royalty and franchise revenues increased 4.2% to $32.4 million compared to $31.1 million in fiscal 2011. The increase is primarily due to an
increase in royalty revenues due to the net addition of 22 international franchised restaurants since December 29, 2010. Royalty revenues are recognized based on the sales generated by our franchisees and reported to us. Our franchisees
generated approximately $389 million in sales for the second quarter of fiscal 2012, an increase of 4.5% over prior year. For the year-to-date period, our franchisees generated approximately $778 million in sales, an increase of 4.7% over prior
year.
COSTS AND EXPENSES
Cost of sales, as a percent of revenues, increased to 27.1% for the second quarter and 27.2% for the year-to-date periods of fiscal 2012 from 26.7% for the respective prior year periods. Cost of sales was
negatively impacted in the current year by an increase in commodity pricing on oils, beef, produce and dairy.
Restaurant
labor, as a percent of revenues, decreased to 31.4% for the second quarter of fiscal 2012 from 31.8% in the prior year and decreased to 31.9% for the year-to-date period from 32.5% in the prior year. The decrease was primarily driven by decreased
hourly labor costs resulting from food preparation initiatives at Chilis as well as changes in the vacation policy and lower health insurance expenses. Restaurant labor includes all compensation-related expenses, including benefits and
incentive compensation, for restaurant employees at the general manager level and below.
Restaurant expenses, as a percent of
revenues, decreased to 23.5% for the second quarter of fiscal 2012 from 24.1% in the prior year and decreased to 24.1% for the year-to-date period from 24.7% in the prior year. The decrease was primarily driven by lower repair and maintenance
expenses, credit card fees, workers compensation insurance expenses and sales leverage on fixed costs.
Depreciation and
amortization decreased $1.3 million for the second quarter of fiscal 2012 and $2.7 million for the year-to-date period of fiscal 2012 compared to the same periods of the prior year primarily driven by fully depreciated assets and restaurant
closures. These decreases were partially offset by an increase in depreciation due to asset replacements and investments in existing restaurants.
16
General and administrative expenses remained flat for the second quarter of fiscal 2012 as
compared to the same period of the prior year primarily due to a decrease in performance based compensation offset by the impact of the expiration of the transition services agreements with Macaroni Grill and On The Border. General and
administrative expenses increased $2.6 million for the year-to-date period of fiscal 2012 as compared to the same period of the prior year due to the impact of the expiration of the transaction services agreements mentioned above, partially offset
by a decrease in performance based compensation.
Other gains and charges in fiscal 2012 include charges of $1.1 million
related to the impairment of long-lived assets held for use associated with underperforming restaurants. Additionally, we incurred $2.4 million in lease termination charges associated with restaurants closed in prior years and $0.4 million related
to long-lived asset impairments resulting from closures. We also recorded $2.5 million in charges in the first quarter of fiscal 2012 related to litigation, partially offset by a $1.3 million gain related to the sale of land.
Other gains and charges in fiscal 2011 include charges of $1.1 million related to the impairment of long-lived assets held for use
associated with underperforming restaurants. Additionally, we incurred $1.8 million in lease termination charges related to previously closed restaurants and a $0.6 million charge related to long-lived asset impairments associated with two
restaurant closures. We also incurred $3.7 million in severance and other benefits resulting from organizational changes.
Interest expense decreased to $6.5 million for the second quarter of fiscal 2012 and $13.6 million for the year-to-date period of fiscal
2012 compared to $7.0 million for the second quarter and $14.2 million for the year-to-date period of the prior year resulting from lower interest rates, partially offset by a $0.4 million write-off of deferred financing fees related to the revision
of the unsecured senior credit facility that was executed in August 2011.
INCOME TAXES
The effective income tax rate increased to 29.0% and 29.3% for the second quarter and year-to-date periods of fiscal 2012 compared to
17.5% and 18.6% for the second quarter and year-to-date periods of the prior year. The increase was primarily due to the resolution of certain state tax positions resulting in a positive impact in the prior year as well as increased earnings in the
current year.
17
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash Flow from Operating Activities
During the first two quarters of fiscal 2012, net cash flow provided by operating activities was $114.2 million compared to $70.0 million
in the prior year. The increase was driven by significant changes in working capital during the prior fiscal year resulting primarily from the sale of On The Border. The On The Border sale negatively impacted cash paid for taxes in the prior year
due to the gain realized on the transaction. Additionally, the settlement of liabilities and payment of transaction costs subsequent to the sale of the On The Border negatively impacted prior year cash flow.
Working capital changed to a deficit of $169.4 million at December 28, 2011 from a deficit of $184.2 million at June 29, 2011
primarily due to an increase in accounts receivable due to third party gift card sales during the holiday season and timing of operational payments, partially offset by treasury stock repurchases and the seasonal increase in the gift card liability
in the first six months of fiscal 2012.
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Week Periods Ended
|
|
|
|
December 28,
2011
|
|
|
December 29,
2010
|
|
Net cash used in investing activities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property and equipment
|
|
$
|
(53,475
|
)
|
|
$
|
(31,842
|
)
|
Proceeds from sale of assets
|
|
|
4,279
|
|
|
|
6,873
|
|
Investment in equity method investee
|
|
|
(912
|
)
|
|
|
(1,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(50,108
|
)
|
|
$
|
(26,525
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities for the first six months of fiscal 2012 increased to approximately
$50.1 million compared to $26.5 million in the prior year. Capital expenditures increased to $53.5 million for the first six months of fiscal 2012 compared to $31.8 million for the same period of fiscal 2011. The increase in capital spending was
primarily related to purchases of new and replacement restaurant furniture and equipment, our kitchen retrofit initiative and the ongoing Chilis reimage program. We estimate that our capital expenditures during fiscal 2012 will be
approximately $130 million and will be funded entirely by cash from operations.
18
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Week Periods Ended
|
|
|
|
December 28,
|
|
|
December 29,
|
|
|
|
2011
|
|
|
2010
|
|
Net cash used in financing activities (in thousands):
|
|
|
|
|
|
|
|
|
Purchases of treasury stock
|
|
$
|
(125,638
|
)
|
|
$
|
(251,818
|
)
|
Proceeds from issuance of longterm debt
|
|
|
70,000
|
|
|
|
0
|
|
Payments of dividends
|
|
|
(25,073
|
)
|
|
|
(28,562
|
)
|
Proceeds from issuances of treasury stock
|
|
|
16,649
|
|
|
|
12,165
|
|
Payments on long-term debt
|
|
|
(5,625
|
)
|
|
|
(5,564
|
)
|
Other
|
|
|
(828
|
)
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(70,515
|
)
|
|
$
|
(273,639
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities for the first six months of fiscal 2012 decreased to approximately
$70.5 million compared to $273.6 million in the prior year primarily due to lower spending on share repurchases and the $70.0 million in proceeds received from the revised term loan in the first quarter.
We repurchased approximately 2.0 million shares of our common stock for $47.8 million during the second quarter of fiscal 2012 and a
total of 5.4 million shares for approximately $125.6 million year-to-date. Subsequent to the end of the quarter, we repurchased approximately 1.1 million shares for $29.7 million.
In August 2011, we executed a revised unsecured senior credit facility increasing total capacity from $400 million to $500 million. The
maturity date of the revised credit facility is August 2016. The revised facility includes a $250 million revolver and a $250 million term loan. In connection with the revision of the facility, we increased the term loan borrowings by $70.0 million.
The revised term loan and revolving credit facility bears interest at LIBOR plus an applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 2.50%. Based on our current credit
rating, we are paying interest at a rate of LIBOR plus 1.63%. One month LIBOR at December 28, 2011 was approximately 0.30%.
As of December 28, 2011, $250 million is available under our revolving credit facility, and we are in compliance with all financial debt covenants.
As of December 28, 2011, our credit rating by Standard and Poors (S&P) was BBB- (investment grade) with a
stable outlook. Our corporate family rating by Moodys was Ba1 (non-investment grade) and our senior unsecured rating was Ba2 (non-investment grade) with a stable outlook. Our goal is to retain our investment grade rating from S&P and
ultimately regain our investment grade rating from Moodys.
We paid dividends of $25.1 million to common stock
shareholders in the first six months of fiscal 2012 compared to $28.6 million in dividends paid in same period of fiscal 2011. Our Board of Directors approved a 14 percent increase in the quarterly dividend from $0.14 to $0.16 per share effective
with the September 2011 dividend which was declared in August 2011. Additionally, we declared a quarterly dividend of $12.8 million in November 2011 to be paid on December 29, 2011. We will continue to target a 40 percent dividend payout ratio
to provide additional return to shareholders.
19
Our Board of Directors has authorized a total of $2,885.0 million of share repurchases. As
of December 28, 2011, approximately $322 million was available under our share repurchase authorizations. Our stock repurchase plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options
and other share-based awards. During the first two quarters of fiscal 2012, approximately 829,000 stock options were exercised resulting in cash proceeds of $16.6 million. Repurchased common stock is reflected as a reduction of shareholders
equity.
We have evaluated ways to monetize the value of our owned real estate and determined that the alternatives considered
are more costly than other financing options currently available due to a combination of the income tax impact and higher effective borrowing rates.
Cash Flow Outlook
We believe that our various sources
of capital, including future cash flow from operating activities of continuing operations and availability under our existing credit facility are adequate to finance operations as well as the repayment of current debt obligations. We are not aware
of any other event or trend that would potentially affect our liquidity. In the event such a trend develops, we believe that there are sufficient funds available under our credit facility and from our internal cash generating capabilities to
adequately manage our ongoing business.
RECENT ACCOUNTING PRONOUNCEMENTS
We reviewed all significant newly issued accounting pronouncements and concluded that they either are not applicable to our operations or
that no material effect is expected on our financial statements as a result of future adoption.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our quantitative and
qualitative market risks since the prior reporting period.
Item 4. CONTROLS AND PROCEDURES
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange
Act of 1934 [the Exchange Act]), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting during our second quarter ended December 28, 2011, that have
materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
FORWARD-LOOKING
STATEMENTS
We wish to caution you that our business and operations are subject to a number of risks and uncertainties. We
have identified certain factors in Part I, Item IA Risk Factors in our Annual Report on Form 10-K for the year ended June 29, 2011 and below in Part II, Item 1A Risk Factors in this report on Form 10-Q, that could
cause actual results to differ materially from our historical results and from those projected in forward-looking statements contained in this report, in our other filings with the SEC, in our news releases, written or electronic communications, and
verbal statements by our representatives. We further caution that it is not possible to see all such factors, and you should not consider the identified factors as a complete list of all risks and uncertainties.
20
You should be aware that forward-looking statements involve risks and uncertainties. These
risks and uncertainties may cause our or our industrys actual results, performance or achievements to be materially different from any future results, performances or achievements contained in or implied by these forward-looking statements.
Forward-looking statements are generally accompanied by words like believes, anticipates, estimates, predicts, expects, and other similar expressions that convey uncertainty about future
events or outcomes.
The risks related to our business include:
|
|
|
The effect of competition on our operations and financial results.
|
|
|
|
The impact of the global economic crisis on our business and financial results in fiscal 2012 and the material affect of a prolonged recession on our
future results.
|
|
|
|
The impact of the current economic crisis on our landlords or other tenants in retail centers in which we or our franchisees are located, which in turn
could negatively affect our financial results.
|
|
|
|
The risk inflation may increase our operating expenses.
|
|
|
|
The effect of potential changes in governmental regulation on our ability to maintain our existing and future operations and to open new restaurants.
|
|
|
|
Increases in energy costs and the impact on our profitability.
|
|
|
|
Increased costs or reduced revenues from shortages or interruptions in the availability and delivery of food and other supplies.
|
|
|
|
Our ability to consummate successful mergers, acquisitions, divestitures and other strategic transactions that are important to our future growth and
profitability.
|
|
|
|
The inability to meet our business strategy plan and the impact on our profitability in the future.
|
|
|
|
The importance of the success of our franchisees to our future growth.
|
|
|
|
The general decrease in sales volumes during winter months.
|
|
|
|
Unfavorable publicity relating to one or more of our restaurants in a particular brand tainting public perception of the brand.
|
|
|
|
Dependence on information technology and any material failure of that technology impairing our ability to efficiently operate our business.
|
|
|
|
Outsourcing of certain business processes to third-party vendors that subject us to risk, including disruptions in business and increased costs.
|
21
|
|
|
The impact of disruptions in the financial markets on the availability and cost of credit and consumer spending patterns.
|
|
|
|
Declines in the market price of our common stock or changes in other circumstances that may indicate an impairment of goodwill possibly adversely
affecting our financial position and results of operations.
|
|
|
|
Changes to estimates related to our property and equipment, or operating results that are lower than our current estimates at certain restaurant
locations, possibly causing us to incur impairment charges on certain long-lived assets.
|
|
|
|
Failure to protect the integrity and security of individually identifiable data of our guests and teammates possibly exposing us to litigation and
damage our reputation.
|
|
|
|
Identification of material weakness in internal control may adversely affect our financial results.
|
|
|
|
Other risk factors may adversely affect our financial performance, including, pricing, consumer spending and consumer confidence, changes in economic
conditions and financial and credit markets, credit availability, increased costs of food commodities, increased fuel costs and availability for our team members, customers and suppliers, health epidemics or pandemics or the prospects of these
events, consumer perceptions of food safety, changes in consumer tastes and behaviors, governmental monetary policies, changes in demographic trends, availability of employees, terrorist acts, energy shortages and rolling blackouts, and weather and
other acts of God.
|
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Information regarding legal proceedings is incorporated by reference from Note 8 to our consolidated financial statements set forth in Part I of this report.
Item 1A. RISK FACTORS
There has been no material change in the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended June 29, 2011.
The above risks and other risks described in this report and our other filings with the SEC could have a material impact on our business,
financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our operations.
Therefore, the risks identified are not intended to be a complete discussion of all potential risks or uncertainties.
22
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Shares repurchased during the second quarter of fiscal 2012 are as follows (in thousands, except share and per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
of
Shares
Purchased (a)
|
|
|
Average
Price
Paid per
Share
|
|
|
Total Number
of Shares
Purchased as
Part
of
Publicly
Announced
Program
|
|
|
Approximate
Dollar Value
that May Yet
be Purchased
Under the
Program
|
|
September 29, 2011 through
November 2, 2011
|
|
|
68
|
|
|
$
|
22.05
|
|
|
|
0
|
|
|
$
|
369,825
|
|
November 3, 2011 through
November 30, 2011
|
|
|
996,730
|
|
|
$
|
22.75
|
|
|
|
996,730
|
|
|
$
|
347,129
|
|
December 1, 2011 through
December 28, 2011
|
|
|
1,043,054
|
|
|
$
|
24.06
|
|
|
|
1,042,500
|
|
|
$
|
322,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,039,852
|
|
|
$
|
23.42
|
|
|
|
2,039,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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(a)
|
These amounts include shares purchased as part of our publicly announced programs and shares owned and tendered by team members to satisfy tax withholding obligations
on the vesting of restricted share awards, which are not deducted from shares available to be purchased under publicly announced programs. Unless otherwise indicated, shares owned and tendered by team members to satisfy tax withholding obligations
were purchased at the average of the high and low prices of the Companys shares on the date of vesting. During the second quarter of fiscal 2012, 622 shares were tendered by team members at an average price of $22.74.
|
Item 6. EXHIBITS
|
|
|
|
|
31(a)
|
|
Certification by Douglas H. Brooks, Chairman of the Board, President and Chief Executive Officer of the Registrant, pursuant to 17 CFR 240.13a 14(a) or 17 CFR 240.15d
14(a).
|
|
|
31(b)
|
|
Certification by Guy J. Constant, Executive Vice President and Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a 14(a) or 17 CFR 240.15d
14(a).
|
|
|
32(a)
|
|
Certification by Douglas H. Brooks, Chairman of the Board, President and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32(b)
|
|
Certification by Guy J. Constant, Executive Vice President and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
101.SCH
|
|
XBRL Schema Document
|
|
|
101.CAL
|
|
XBRL Calculation Linkbase Document
|
23
|
|
|
|
|
101.DEF
|
|
XBRL Definition Linkbase Document
|
|
|
101.LAB
|
|
XBRL Label Linkbase Document
|
|
|
101.PRE
|
|
XBRL Presentation Linkbase Document
|
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the
undersigned thereunto duly authorized.
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|
|
|
|
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|
|
|
|
|
BRINKER INTERNATIONAL, INC.
|
|
|
|
|
Date: February 6, 2012
|
|
|
|
By:
|
|
/s/ Douglas H. Brooks
|
|
|
|
|
|
|
Douglas H. Brooks,
|
|
|
|
|
|
|
Chairman of the Board,
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
Date: February 6, 2012
|
|
|
|
By:
|
|
/s/ Guy J. Constant
|
|
|
|
|
|
|
Guy J. Constant,
|
|
|
|
|
|
|
Executive Vice President and
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
25
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