Chili's 2009 Annual Report Download

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Annual Report 2009

Table of contents

  • Page 1
    Annual Report 2009

  • Page 2
    ...In restaurants across the world, whose leaders were once your protégés. In our global company that bears your name. You did much more than build successful businesses ... Chairman Emeritus • Our Beloved Leader and Friend Norman Brinker, 1931-2009 With much love and admiration from all 125,000 ...

  • Page 3
    To our Team Members, Guests, Supplier Partners, Franchise Partners and Shareholders 2009 has been a year of transformation for Brinker International as we worked through one of the most difficult operating environments in our company history. Continued Challenge hroughout the year, external ...

  • Page 4
    ... Create Your Own Combo special value menu offered all day, everyday; and they enjoy new dishes such as Taco Melts, Mahi Mahi Tacos and Border SmartSM Citrus Chipotle Chicken Salad. And delivering on our guests' priorities for value, speed and healthy options, the brand's new Border Lunch menu...

  • Page 5
    ... hosting launch parties for children and their families in Maggiano's banquet rooms. At our Restaurant Support Center in Dallas, Team Members regularly lend their time, talents and donations to organizations close to our hearts such as The Wilkinson Center, The North Texas Food Bank, The Rise School...

  • Page 6

  • Page 7
    ... Freeway, Dallas, Texas 75240 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (972) 980-9917 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class BRINKER INTERNATIONAL, INC. Common Stock, $0.10 par value Securities...

  • Page 8

  • Page 9
    ... our guests for more than 34 years. Every day at Chili's locations around the world, our guests are greeted with ''Welcome to Chili's''. Chili's menu features signature offerings such as Big Mouth Burgers and Bites, smoked in-house Baby Back Ribs, hand-battered Chicken Crispers, Sizzling Fajitas and...

  • Page 10
    ...and desserts. Our Maggiano's restaurants also offer a full range of alcoholic beverages, including a selection of quality premium wines. In addition, Maggiano's offers delivery service from simple drop-off to pre-event set-up. During the year ending June 24, 2009, entr´ ee selections ranged in menu...

  • Page 11
    ... and internationally) increased in fiscal 2009. The following table illustrates the percentages of franchise operations as of June 24, 2009 for the Company and by restaurant brand: Percentage of Franchise Operated Restaurants (domestic and international) Brinker ...Chili's ...On The Border Maggiano...

  • Page 12
    ... 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 24, 2009, not including any restaurants we sold to our franchisees, our domestic franchisees opened 27 Chili...

  • Page 13
    ... table illustrates the system-wide restaurants opened in fiscal 2009 and the planned openings in fiscal 2010: Fiscal 2009 Openings(1) Fiscal 2010 Projected Openings Chili's: Company-operated . . Franchise(2) ...On The Border: Company-operated . . Franchise(2) ...Maggiano's ...International: Company...

  • Page 14
    ... in new restaurants may differ in the future due to building design specifications, site location, and site characteristics. The following table illustrates the approximate average capital investment for company-owned restaurants opened in fiscal 2009: Chili's On the Border(3) Maggiano's Land...

  • Page 15
    ... 4,600 were restaurant area directors, managers or trainees and 71,800 were employed in non-management restaurant positions. Our executive officers have an average of approximately 25 years of experience in the restaurant industry. We consider our team member relations to be positive and continue to...

  • Page 16
    ... future events or outcomes. 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 location, nutritional and dietary trends and food quality, and is often affected by changes...

  • Page 17
    ... impacting the public's ability and/or desire to spend discretionary dollars as a result of job losses, home foreclosures, significantly reduced home values, investment losses in the financial markets, personal bankruptcies and reduced access to credit, resulting in lower levels of guest traffic in...

  • Page 18
    ...tightened credit market, food safety warnings or advisories or the prospect of such pronouncements, or other conditions beyond our control could adversely affect the availability, quality and cost of items we buy and the operations of our restaurants. Our inability to effectively manage supply chain...

  • Page 19
    ...at suitable prices, and maintain construction schedules; and • hire and train or retain qualified managers and team members for the restaurants. The success of our franchisees is important to our future growth. We have significantly increased the percentage of restaurants owned and operated by our...

  • Page 20
    ... material failure of that technology could impair our ability to efficiently operate our business. We rely on information systems across our operations, including, for example, point-of-sale processing in our restaurants, management of our supply chain, collection of cash, payment of obligations and...

  • Page 21
    ... conditions 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; health epidemics or...

  • Page 22
    ... brand) as of June 24, 2009 (company-owned and franchised): Domestic (No. of States) Foreign (No. of countries) Chili's ...On The Border ...Maggiano's ...Restaurant Property Information 1,292 (50) 152 (37) 44 (21 & D.C.) 193 (29) 8 (5) None The following table illustrates the approximate average...

  • Page 23
    ..., California, Colorado, Florida, Georgia, 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. Certain current and former hourly restaurant employees filed...

  • Page 24
    PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on the New York Stock Exchange (''NYSE'') under the symbol ''EAT''. Bid prices quoted represent interdealer prices without adjustment for retail ...

  • Page 25
    ... in our stock and each of the indexes on June 30, 2004 and its relative performance is tracked through June 24, 2009. The values shown are neither indicative nor determinative of future performance. 2004 2005 2006 2007 2008 2009 Brinker International ...S&P 500 ...S&P Restaurants(1) ... $100.00...

  • Page 26
    ... tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company's shares on the date of vesting. Item 6. SELECTED FINANCIAL DATA. The information set forth in that section entitled ''Selected Financial Data'' in our 2009 Annual Report to Shareholders...

  • Page 27
    ...for the annual meeting of shareholders on October 29, 2009. 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 employees, including, the principal executive officer...

  • Page 28
    ... ''Committees of the Board of Directors'' in our Proxy Statement to be dated on or about September 15, 2009, for the annual meeting of shareholders on October 29, 2009. We incorporate that information in this document by reference. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. If you would like...

  • Page 29
    ...on its behalf by the undersigned, thereunto duly authorized. BRINKER INTERNATIONAL, INC., a Delaware corporation By: /s/ CHARLES M. SONSTEBY Charles M. Sonsteby, Executive Vice President and Chief Financial Officer Dated: August 24, 2009 Pursuant to the requirements of the Securities Exchange Act of...

  • Page 30

  • Page 31
    ...of Exhibit 13. Page Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Consolidated Statements of Income-Fiscal Years Ended June 24, 2009, June 25, 2008, and June 27, 2007 ...Consolidated Balance Sheets-June 24, 2009 and June 25, 2008...

  • Page 32
    ... 1992 Incentive Stock Option Plan.(5) Registrant's Stock Option and Incentive Plan.(6) Registrant's 1999 Stock Option and Incentive Plan for Non-Employee Directors and Consultants.(7) Transition Agreement dated June 5, 2003, by and among Registrant, Brinker International Payroll Company, L.P. and Mr...

  • Page 33
    ... exhibit to current report on Form 8-K dated May 28, 2009, and incorporated herein by reference. (3) Included in exhibit 4(d) to annual report on Form 10-K for year ended June 30, 2004, and incorporated herein by reference. (4) Filed as an exhibit to registration statement on Form S-4 filed June 25...

  • Page 34

  • Page 35
    ... 13 BRINKER INTERNATIONAL, INC. SELECTED FINANCIAL DATA (In thousands, except per share amounts and number of restaurants) Fiscal Years 2007 2009 2008 2006 2005 Income Statement Data: Revenues ...$3,620,580 $4,235,223 $4,376,904 $4,151,291 $3,749,539 Operating Costs and Expenses: Cost of sales...

  • Page 36
    ... restaurants or scaling back on check totals. We also experienced a decline in gift card sales of approximately 15% during the holiday season compared to the prior year which negatively impacted fiscal 2009 revenue. We will continually evaluate how we manage the business and make necessary changes...

  • Page 37
    ...company by engaging and delighting our guests, differentiating our brands from the competition, reducing the costs associated with managing our restaurants and establishing a strong presence in key markets around the world. However, we will monitor the results closely as well as the current business...

  • Page 38
    ...net declines in capacity at company-owned restaurants as well as a decrease in comparable restaurant sales across all brands as follows: Fiscal Year Ended June 24, 2009 Price Comparable Capacity Increase Mix Shift Sales Brinker International Chili's ...On The Border . . Maggiano's ...Macaroni Grill...

  • Page 39
    ... product mix shifts at On The Border and Maggiano's. These decreases were partially offset by an increase in menu prices at all brands and favorable mix shifts at Chili's and Macaroni Grill. COSTS AND EXPENSES Cost of sales, as a percent of revenues, decreased 0.5% in fiscal 2009. Cost of sales...

  • Page 40
    ... driven by organizational changes and the sale of Macaroni Grill, a decrease in professional fees, and income related to transitional services provided to Macaroni Grill that offset the internal cost of providing the services. The decrease was partially offset by higher annual performance based...

  • Page 41
    ... 24, 2009 from $188.2 million at June 25, 2008 primarily due to the timing of operational payments related to the sale of Macaroni Grill, restaurant closures and the reduction of company-owned new restaurant development in the current year. The decrease was also due to the retention of cash to fund...

  • Page 42
    ... of the Macaroni Grill divestiture, reduced new company-owned restaurant development and our focus on debt repayment. In fiscal 2009, Standard and Poor's (''S&P'') reaffirmed our debt rating of BBB- (investment grade) with a stable outlook. However, Moody's downgraded our corporate family rating to...

  • Page 43
    ... the table above, $27.7 million of unrecognized tax benefits have been recorded as liabilities in accordance with Financial Accounting Standards Board (''FASB'') Interpretation No. 48, ''Accounting for Uncertainty in Income Taxes'' (''FIN 48''). The timing and amounts of future cash payments related...

  • Page 44
    ...In addition, at least annually we assess the recoverability of goodwill related to our restaurant brands. This impairment test requires us to estimate fair values of our restaurant brands by making assumptions regarding future profits and cash flows, expected growth rates, terminal values, and other...

  • Page 45
    ... losses related to health, general liability and workers' compensation. We maintain stop loss coverage with third party insurers to limit our total exposure. The self-insurance liability represents an estimate of the ultimate cost of claims incurred and unpaid as of the balance sheet date. The...

  • Page 46
    ... 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 24, 2009 would be approximately $3.9 million. We may from time to time utilize interest rate swaps to manage overall borrowing costs and reduce...

  • Page 47
    BRINKER INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Fiscal Years 2008 2009 2007 Revenues ...Operating Costs and Expenses: Cost of sales ...Restaurant expenses ...Depreciation and amortization General and administrative ...Other gains and charges ...

  • Page 48
    BRINKER INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) 2009 2008 ASSETS Current Assets: Cash and cash equivalents . Accounts receivable ...Inventories ...Prepaid expenses and other Income taxes receivable . . Deferred income taxes ...Assets held ...

  • Page 49
    ... ...Change in fair value of investments, net of tax . Realized gain on sale of investments, net of tax Cash dividends ($0.34 per share) ...Stock-based compensation ...Purchases of treasury stock ...Issuances of common stock ...Tax benefit from stock options exercised ...Issuance of restricted stock...

  • Page 50
    ... ...Proceeds from issuances of treasury stock ...Payments of dividends ...Excess tax benefits from stock-based compensation ... Net cash used in financing activities ...Net change in cash and cash equivalents ...Cash and cash equivalents at beginning of year ...Cash and cash equivalents at end of...

  • Page 51
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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''), On The Border Mexican Grill &...

  • Page 52
    ... consolidated balance sheets. The fair value of the 5.75% notes, based on quoted market prices, totaled approximately $269.0 million and $283.4 million at June 24, 2009 and June 25, 2008, respectively. The fair value of capital lease obligations is based on the amount of future cash flows discounted...

  • Page 53
    ...purchase price after allocation to all other identifiable net assets acquired. Goodwill is not subject to amortization but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Statement of Financial Accounting Standards...

  • Page 54
    ... payments to the captive insurance company and accrue for claims costs based on the actuarially predicted ultimate losses, and the captive insurance company then pays administrative fees and the insurance claims. (o) Income Taxes Income taxes are accounted for under the asset and liability method...

  • Page 55
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The weighted average fair values of option grants were $5.52, $7.18 and $7.37 during fiscal 2009, 2008 and 2007, respectively. The fair value of stock options...

  • Page 56
    ...Type or class of customer • Methods used to distribute products or provide services • The nature of the regulatory environment, if applicable Our three brands have similar types of products, contracts, customers, and employees and all operate as full-service restaurants offering lunch and dinner...

  • Page 57
    ...whereby we provide corporate support services for the new entity for one year following closing with an option for one additional year. During fiscal 2008, we recorded impairment charges of $152.7 million to write-down the net assets of Macaroni Grill to their estimated fair value less costs to sell...

  • Page 58
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. OTHER GAINS AND CHARGES 2009 2008 2007 Restaurant closure charges ...Charges related to the sale of Macaroni Grill (see Note 2) ...Restaurant impairment charges ...Impairment of goodwill ...Severance and other ...

  • Page 59
    ... to support this evolving business model, which resulted in the restructuring of our Restaurant Support Center and the elimination of certain administrative positions. In connection with these actions, we incurred $13.2 million in charges related to asset write-offs for sites under development and...

  • Page 60
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. ACCRUED AND OTHER LIABILITIES Accrued liabilities consist of the following (in thousands): 2009 2008 Payroll ...Gift cards . . Property tax Insurance . . Sales tax ...Other ... ... ... ... ... ... ... ... ... ......

  • Page 61
    ... liabilities as of June 24, 2009 and June 25, 2008 are as follows (in thousands): 2009 2008 Deferred income tax assets: Leasing transactions ...Stock-based compensation ...Restructure charges and impairments Insurance reserves ...Employee benefit plans ...Federal credit carryforward ...Other, net...

  • Page 62
    ... benefits for the fiscal years ended June 24, 2009 and June 25, 2008 are as follows (in thousands): 2009 2008 Balance at beginning of year ...Additions based on tax positions related to the current year . (Reductions) additions based on tax positions related to prior years ...Settlements with tax...

  • Page 63
    ... of the Macaroni Grill divestiture, reduced new company-owned restaurant development and our focus on debt repayment. In fiscal 2009, Standard and Poor's (''S&P'') reaffirmed our debt rating of BBB- (investment grade) with a stable outlook. However, Moody's downgraded our corporate family rating to...

  • Page 64
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. DEBT (Continued) Excluding capital lease obligations (see Note 10) our long-term debt maturities for the five years following June 24, 2009 are as follows (in thousands): Fiscal Year Long-Term Debt 2010 ...2011 ...

  • Page 65
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. LEASES (Continued) (c) Commitments As of June 24, 2009, future minimum lease payments on capital and operating leases were as follows (in thousands): Fiscal Year Capital Leases Operating Leases 2010 ...2011 ......

  • Page 66
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. STOCK-BASED COMPENSATION (Continued) Transactions during fiscal 2009 were as follows (in thousands, except option prices): Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) ...

  • Page 67
    ...June 24, 2009. Certain current and former hourly restaurant employees 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 attorney's fees and was certified as a class action in July...

  • Page 68
    BRINKER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. CONTINGENCIES (Continued) 2008, the California Supreme Court granted a writ to review the decision of the Court of Appeal. We intend to vigorously defend our position. It is not possible at this time to ...

  • Page 69
    Report of Independent Registered Public Accounting Firm The Board of Directors Brinker International, Inc.: We have audited the accompanying consolidated balance sheets of Brinker International, Inc. and subsidiaries (''the Company'') as of June 24, 2009 and June 25, 2008, and the related ...

  • Page 70
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Brinker International, Inc. and subsidiaries as of June 24, 2009 and June 25, 2008, and the related consolidated statements of operations, shareholders' equity, and...

  • Page 71
    ... inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. The effectiveness of our internal control over financial reporting as of June 24, 2009 has been audited by KPMG LLP, an independent registered public accounting firm, as...

  • Page 72
    ...'S subsidiaries operate full-service restaurants in various locations throughout the United States under the names Chili's Grill & Bar, On The Border Mexican Grill & Cantina, and Maggiano's Little Italy. BRINKER RESTAURANT CORPORATION, a Delaware corporation BRINKER INTERNATIONAL PAYROLL COMPANY...

  • Page 73
    ... three-year period ended June 24, 2009, and the effectiveness of internal control over financial reporting as of June 24, 2009, which reports appear in the 2009 Annual Report on Form 10-K of Brinker International, Inc. Our report dated August 24, 2009, with respect to the consolidated balance sheets...

  • 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 24, 2009 /s/ DOUGLAS H. BROOKS Douglas H. Brooks Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

  • Page 75
    ... material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b. Dated: August 24, 2009 /s/ CHARLES M. SONSTEBY Charles M. Sonsteby Executive Vice President and Chief Financial Officer (Principal Financial Officer)

  • Page 76
    ... 32(a) CERTIFICATION Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Brinker International, Inc. (the ''Company''), hereby certifies that the Company's Annual Report on Form 10-K for the year ended June 24, 2009 (the ''Report'') fully complies with the requirements of Section 13(a) or...

  • Page 77
    ... 32(b) CERTIFICATION Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Brinker International, Inc. (the ''Company''), hereby certifies that the Company's Annual Report on Form 10-K for the year ended June 24, 2009 (the ''Report'') fully complies with the requirements of Section 13(a) or...

  • Page 78

  • Page 79
    ... Annual Report on Form 10-K for the year ended June 24, 2009. Chili's Grill & Bar, On The Border Mexican Grill & Cantina, and Maggiano's Little Italy are registred and/or proprietary trademarks of Brinker International Payroll Company, L.P. PRINCIPAL OFFICERS Douglas H. Brooks Chairman of the Board...

  • Page 80
    6820฀LBJ฀Freeway,฀Dallas,฀TX฀75240฀฀•฀฀www.brinker.com Cert no. SW-COC-XXXX