Chili's 2012 Annual Report Download

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Annual Report 2012
฀฀฀฀฀฀฀฀฀

Table of contents

  • Page 1
    Annual Report 2012

  • Page 2

  • Page 3
    ... stock price appreciation And today, the entire Brinker organization - from hourly, management and restaurant support center team members to our valued domestic and global franchise partners, and the hundreds of suppliers who make it possible to run our restaurants every day - is working...

  • Page 4
    ... with great food and drinks. The brand's refreshed logo is incorporated into a new signage on the brand's popular menu items using the latest restaurant technology. Our newly developed across the menu, as well improves pace of service, impacting the overall guest experience ฀ ฀ Our...

  • Page 5
    ... to deliver new platforms that expand our guest base while adding new news to our popular value platforms, and support our operators by simplifying and tightening up execution in the restaurant-so they can focus on taking their guest and team member experience from good to great. Maggiano's Little...

  • Page 6
    ...evident as cost of sales was reduced As Maggiano's seeks to return to new restaurant growth this fiscal year, we're applying comparable rigor to our growth strategy. We're refining our footprint and business model to efficiently invest capital while retaining the brand attributes our guests know...

  • Page 7
    ... reï¬,ection of the one we create for our own team restaurant brands and at the restaurant support center-our team members' belief in the future direction of the company is on the rise. It's not only our team members and guests telling the story of our organizational excellence; the demonstrates...

  • Page 8

  • Page 9
    ... year ended June 27, 2012 Commission File No. 1-10275 BRINKER INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 75-1914582 (I.R.S. employer identification no.) 6820 LBJ Freeway, Dallas, Texas (Address...

  • Page 10
    ...-line or via mobile app, and most Chili's offer a separate To Go entrance for service. During the year ending June 27, 2012, at our company-owned restaurants, entrée selections ranged in menu price from $6.00 to $17.69. The average revenue per meal, including alcoholic beverages, was approximately...

  • Page 11
    ...restaurant revenues for the year. Our average annual sales volume per Maggiano's restaurant during this same year was $8.75 million. Business Strategy We are committed to strategies and initiatives that are centered on long-term sales and profit growth, enhancing the guest experience and team member...

  • Page 12
    ... to benefit through additional contributions from Maggiano's and our global business. Maggiano's sales trends and traffic continue to improve, driven by offering guests a great value with classic pasta, the new Marco's Meal offering, new menu items and direct marketing. Additionally, Maggiano's has...

  • Page 13
    ...27, 2012 for the Company and by restaurant brand, respectively: Percentage of Franchise Operated Restaurants Domestic International Brinker ...Chili's ...Maggiano's ...Domestic 29% 30% - 16% 17% 2% Domestic expansion is focused primarily through growth in our number of franchised restaurants. We...

  • Page 14
    ... on smaller market areas and non-traditional locations (such as airports, college campuses, toll plazas and food courts) that can adequately support our restaurant brands. During the year ended June 27, 2012, our domestic franchisees opened 6 Chili's restaurants. Additionally, we purchased two Chili...

  • Page 15
    ... and joint venture operations may encounter cultural and regulatory differences resulting in differences with product specifications for international restaurant locations. Advertising and Marketing Our brands generally target the twenty-four to fifty-four year-old age group, which constitutes...

  • Page 16
    ... to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Risks Related to Our Business Competition may adversely affect our operations and financial results. The restaurant business is highly competitive as to price, service, restaurant...

  • Page 17
    ...the gross sales or profitability at our restaurants, which would reduce the revenues generated by company-owned restaurants and royalty payments from franchisees. Changing health or dietary preferences may cause consumers to avoid our products in favor of alternative foods. The food service industry...

  • Page 18
    ...and future operations and to open new restaurants. We are subject to the Fair Labor Standards Act (which governs such matters as minimum wages, overtime and other working conditions), along with the Americans with Disabilities Act, the Immigration Reform and Control Act of 1986, various family leave...

  • Page 19
    ...impact our guests discretionary funds and ability to patron our restaurants or guests' menu choices. Shortages or interruptions in the availability and delivery of food and other supplies may increase costs or reduce revenues. Possible shortages or interruptions in the supply of food items and other...

  • Page 20
    ...ability to meet our business strategy plan is dependent upon, among other things, our and our franchisees' ability to increase gross sales and operating profits at existing restaurants with food and beverage options and high quality service desired by our guests through successful implementation of...

  • Page 21
    ... restaurant businesses can be adversely affected by publicity resulting from poor food quality, illness or health concerns or operating issues stemming from one or a limited number of restaurants. In particular, since we depend heavily on the Chili's brand for a majority of our revenues, unfavorable...

  • Page 22
    ... of credit. Declines in the market price of our common stock or changes in other circumstances that may indicate an impairment of goodwill could adversely affect our financial position and results of operations. We perform our annual goodwill impairment test in the second quarter of each fiscal year...

  • Page 23
    ...and financial and credit markets (including rising interest rates and costs for consumers and reduced disposable income); credit availability; increased costs of food commodities; increased fuel costs and availability for our team members, customers and suppliers; increased health care costs; health...

  • Page 24
    ..., Florida, New Jersey and Texas for use as regional operation offices. The size of these office leases range from approximately 100 square feet to approximately 4,000 square feet. Item 3. LEGAL PROCEEDINGS. In August 2004, certain current and former hourly restaurant team members filed a putative...

  • Page 25
    .../or commissions, and may not necessarily represent actual transactions. The following table sets forth the quarterly high and low closing sales prices of the common stock, as reported by the NYSE. Fiscal year ended June 27, 2012: High Low First Quarter ...Second Quarter ...Third Quarter ...Fourth...

  • Page 26
    ... 6/30/10 6/29/11 6/27/12 Brinker International, Inc. S&P 500 S&P Restaurants *$100 invested on 6/27/07 in stock or index, including reinvestment of dividends. Fiscal year ending June 27. Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. The graph assumes...

  • Page 27
    ..., 1,239 shares were tendered by team members at an average price of $29.62. (b) The final amount shown is as of June 27, 2012. Item 6. SELECTED FINANCIAL DATA. The information set forth in that section entitled "Selected Financial Data" in our 2012 Annual Report to Shareholders is presented on page...

  • Page 28
    ... Management's Report on Internal Control over Financial Reporting "Management's Report on Internal Control over Financial Reporting" and the attestation report of the independent registered public accounting firm of KPMG, LLP on internal control over financial reporting are in our 2012 Annual Report...

  • Page 29
    ...2012. We incorporate that information in this document by reference. The Board of Directors has adopted a code of ethics that applies to all of the members of Board of Directors and all of our team members, including, the principal executive officer, principal financial officer, principal accounting...

  • Page 30
    Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. If you would like information about principal accountant fees and services, you should read the section entitled "Ratification of Independent Auditors" in our Proxy Statement to be dated on or about September 18, 2012, for the annual meeting of ...

  • Page 31
    ... IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a)(1) Financial Statements. We make reference to the Index to Financial Statements attached to this document on page 25 for a listing of all financial statements attached as Exhibit 13 to this document. (a)(2) Financial Statement Schedules...

  • Page 32
    ...has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRINKER INTERNATIONAL, INC., a Delaware corporation By: GUY J. CONSTANT Guy J. Constant, Executive Vice President and Chief Financial Officer /S/ Dated: August 27, 2012 Pursuant to the requirements...

  • Page 33
    ... Financial Statements ...Reports of Independent Registered Public Accounting Firm ...Management's Responsibility for Consolidated Financial Statements ...Management's Report on Internal Control over Financial Reporting ... F-1 F-2 F-14 F-15 F-16 F-17 F-18 F-33 F-35 F-35 All schedules are...

  • Page 34

  • Page 35
    ... Amendment No. 1, dated as of August 9, 2011.(8) 2012 Annual Report to Shareholders.(9) Subsidiaries of the Registrant.(10) Consent of Independent Registered Public Accounting Firm.(10) Certification by Douglas H. Brooks, Chairman of the Board, President and Chief Executive Officer of the Registrant...

  • Page 36
    ... 29, 2006, and incorporated herein by reference. (8) Filed as an exhibit to current report on Form 8-K dated August 9, 2011, and incorporated herein by reference. (9) Portions filed herewith, to the extent indicated herein. (10) Filed herewith. (11) To be filed on or about September 18, 2012. E-2

  • Page 37
    ...Diluted weighted average shares outstanding ...Balance Sheet Data: Working capital ...Total assets ...Long-term obligations ...Shareholders' equity ...Dividends per share ...Number of Restaurants Open (End of Period): Company-operated ...Franchised/Joint venture ...Total ...Revenues of franchisees...

  • Page 38
    ...a strong balance sheet and maintain 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 Chili's which has resulted in labor...

  • Page 39
    ... our results will also benefit through additional contributions from Maggiano's and our global business. Maggiano's sales trends continue to improve, driven by offering guests a great value with Classic Pasta, the new Marco's Meal offering, new menu items and direct marketing. Additionally, Maggiano...

  • Page 40
    ... restaurant sales resulting from favorable menu pricing and improved guest traffic at company-owned restaurants as follows: Comparable Sales Fiscal Year Ended June 27, 2012 Price Mix Increase Shift Traffic Capacity Company-owned ...Chili's ...Maggiano's ...Franchise(1) ...Domestic ...International...

  • Page 41
    ... restaurants revenues provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development. (3) System-wide comparable restaurant sales are derived from sales generated by company-owned Chili's and Maggiano's restaurants...

  • Page 42
    ... team service and food preparation initiatives at Chili's, partially offset by higher restaurant manager incentive compensation resulting from improved performance. Restaurant expenses, as a percent of revenues, decreased 0.6% in fiscal 2012 primarily driven by sales leverage on fixed costs related...

  • Page 43
    ...resulting primarily from the sale of On The Border. The settlement of liabilities and payment of transaction costs subsequent to the sale of the brand negatively impacted prior year operating cash flow. Increased earnings and working capital changes during fiscal 2012 also contributed to the current...

  • Page 44
    ... Flow from Investing Activities-Continuing Operations 2012 2011 Net cash used in investing activities (in thousands): Payments for property and equipment ...Proceeds from sale of assets ...Investments in equity method investees ...Payments for purchases of restaurants ... $(125,226) 8,112 (3,170...

  • Page 45
    ... shares resulting from repurchase activity reduced our total dividend payment in the current year. Additionally, we declared a quarterly dividend late in fiscal 2012 which was paid early in fiscal 2013 on June 28, 2012. Subsequent to the end of the fiscal year, our Board of Directors approved...

  • Page 46
    ... a combination of menu price increases and reviewing, then implementing, alternative products or processes, or by implementing other cost reduction procedures. CRITICAL ACCOUNTING ESTIMATES Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements. The...

  • Page 47
    ... amount over the fair value. We determine 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. This process requires the...

  • Page 48
    ... value based on projected discounted future operating cash flows of the restaurant brands using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model. We make assumptions regarding future profits and cash flows, expected growth rates, terminal values...

  • Page 49
    ...outstanding under the revolving credit facility. The impact on our annual results of operations of a one-point interest rate change on the outstanding balance of these variable rate financial instruments as of June 27, 2012 would be approximately $2.8 million. We purchase certain commodities such as...

  • Page 50
    ... amounts) 2012 Fiscal Years 2011 2010 Revenues ...Operating Costs and Expenses: Cost of sales ...Restaurant labor ...Restaurant expenses ...Depreciation and amortization ...General and administrative ...Other gains and charges ...Total operating costs and expenses ...Operating income ...Interest...

  • Page 51
    ... authorized shares; $.10 par value; 176,246,649 shares issued and 74,342,115 shares outstanding at June 27, 2012, and 176,246,649 shares issued and 82,938,493 shares outstanding at June 29, 2011 ...Additional paid-in capital ...Retained earnings ...Less treasury stock, at cost (101,904,534 shares at...

  • Page 52
    ... 29, 2011 ...Net income and comprehensive income ...Dividends ($0.64 per share) ...Stock-based compensation ...Purchases of treasury stock ...Issuances of common stock ...Tax benefit from stock options exercised ...Balances at June 27, 2012 ... 102,125 0 0 0 (1,046) 518 0 (25) 101,572 0 0 0 (20,585...

  • Page 53
    ... and equipment ...Proceeds from sale of assets ...Investment in equity method investees ...Payments for purchase of restaurants ...Decrease in restricted cash ...Net cash used in investing activities ...Cash Flows from Financing Activities: Purchases of treasury stock ...Proceeds from issuance of...

  • Page 54
    ... INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Nature of Operations We are principally engaged in the ownership, operation, development, and franchising of the Chili's Grill & Bar ("Chili's") and Maggiano...

  • Page 55
    ... amount over the fair value. We determine 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. Impairment charges are...

  • Page 56
    ...'s fair value with its carrying value. We determine fair value based on a combination of market based values and projected discounted future operating cash flows of the restaurant brands using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model. If...

  • Page 57
    .... The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted average assumptions: 2012 2011 2010 Expected volatility ...Risk-free interest rate ...Expected lives ...Dividend yield ... 56.7% 0.9% 5 years 2.6% 55.6% 1.6% 5 years 3.1% 53...

  • Page 58
    ... and in assessing performance. Two or more operating segments may be aggregated into a single operating segment if they have similar economic characteristics and are similar in the following areas The nature of products and services Nature of production processes Type or class of customer F-22

  • Page 59
    ...• Methods used to distribute products or provide services The nature of the regulatory environment, if applicable Our two brands have similar types of products, contracts, customers and employees and all operate as fullservice restaurants offering lunch and dinner in the casual-dining segment of...

  • Page 60
    ...to restaurants closed in prior years. During fiscal 2011 and 2010, we made organizational changes designed to streamline decision making and support our strategic goals and evolving business model. We incurred $5.0 million and $1.9 million in severance and other benefits resulting from these actions...

  • Page 61
    ... to restaurant brands that we no longer own. (b) Additions reflect goodwill acquired as a result of the purchase of restaurants from a franchisee. 6. ACCRUED AND OTHER LIABILITIES Accrued liabilities consist of the following (in thousands): 2012 2011 Payroll ...Gift cards ...Sales tax ...Insurance...

  • Page 62
    ... and June 29, 2011 are as follows (in thousands): 2012 2011 Deferred income tax assets: Leasing transactions ...Stock-based compensation ...Restructure charges and impairments ...Insurance reserves ...Employee benefit plans ...Gift cards ...Other, net ...Total deferred income tax assets ...Deferred...

  • Page 63
    ... unrecognized tax benefits for the fiscal years ended June 27, 2012 and June 29, 2011 are as follows (in thousands): 2012 2011 Balance at beginning of year ...Additions based on tax positions related to the current year ...Additions based on tax positions related to prior years ...Settlements with...

  • Page 64
    ...June 27, 2012, future minimum lease payments on capital and operating leases were as follows (in thousands): Fiscal Year Capital Leases Operating Leases 2013 ...2014 ...2015 ...2016 ...2017 ...Thereafter ...Total minimum lease payments(a) ...Imputed interest (average rate of 7%) ...Present value of...

  • Page 65
    ... million. 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. In fiscal 2012, certain transferable liquor...

  • Page 66
    ... option prices): Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Number of Options Aggregate Intrinsic Value Options outstanding at June 29, 2011 ...Granted ...Exercised ...Forfeited or canceled ...Options outstanding at June 27, 2012 ...Options exercisable...

  • Page 67
    ..., 2012. In August 2004, certain current and former hourly restaurant team members filed a putative class action lawsuit against us in California Superior Court alleging violations of California labor laws with respect to meal periods and rest breaks. The lawsuit sought penalties and attorney's fees...

  • Page 68
    15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following table summarizes the unaudited consolidated quarterly results of operations for fiscal 2012 and 2011 (in thousands, except per share amounts): Fiscal Year 2012 Quarters Ended Dec. 28 March 28 Sept. 28 June 27 Revenues ...Income before ...

  • Page 69
    Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders Brinker International, Inc.: We have audited the accompanying consolidated balance sheets of Brinker International, Inc. and subsidiaries ("the Company") as of June 27, 2012 and June 29, 2011, and the ...

  • Page 70
    ... Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board...

  • Page 71
    ...as required. The consolidated financial statements have been audited and reported on by our independent registered public accounting firm, KPMG LLP, who were given free access to all financial records and related data, including minutes of the meetings of the Board of Directors and Committees of the...

  • Page 72
    ... PURCHASING, INC., a Delaware corporation BIPC MANAGEMENT, LLC, a Delaware limited liability company BIPC INVESTMENTS, LLC, a Delaware limited liability company BRINKER BRAZIL, LLC, a Delaware limited liability company BRINKER INTERNATIONAL GOLF CLASSIC, a Texas non-profit corporation BRINKER FAMILY...

  • Page 73
    ... for each of the years in the three-year period ended June 27, 2012, and the effectiveness of internal control over financial reporting as of June 27, 2012, which reports appear in the 2012 Annual Report to Shareholders on Form 10-K of Brinker International, Inc. KPMG LLP Dallas, Texas August 27...

  • Page 74
    ..., that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b. Dated: August 27, 2012 /S/ DOUGLAS H. BROOKS Douglas H. Brooks Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

  • Page 75
    ... and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b. Dated: August 27, 2012 /S/ GUY J. CONSTANT Guy J. Constant Executive Vice President...

  • Page 76
    ... information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 27, 2012 By: /S/ DOUGLAS H. BROOKS Name: Douglas H. Brooks Title: Chairman of the Board, President and Chief Executive Officer (Principal...

  • Page 77
    ... the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 27, 2012 By: /S/ GUY J. CONSTANT Name: Guy J. Constant Title: Executive Vice President and Chief Financial Officer (Principal Financial...

  • Page 78

  • Page 79
    ...฀ ฀ SHAREHOLDER INFORMATION Executive Offices ฀ ฀ 6820 LBJ Freeway Dallas, TX 75240 (972) 980-9917 Annual Meeting 6700 LBJ Freeway Dallas,TX 75240 ฀ George R. Mrkonic Rosendo G. Parra Cece Smith Independent Public Accountants Dallas, TX 75201 ฀ ฀EAT Stock Transfer Agent And...

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