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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 1994 Commission File No. 1-10275
BRINKER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1914582
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
6820 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (214) 980-9917
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $0.10 par value
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ______
The aggregate market value of the voting stock held by persons other
than directors and officers of registrant (who might be deemed to be
affiliates of registrant) at September 9, 1994 was $1,754,066,362.00.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Outstanding at
Class September 9, 1994
Common Stock, $0.10 par value 71,647,592 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended June 29, 1994 are incorporated by reference into Parts I, II
and IV hereof, to the extent indicated herein. Portions of the registrant's
Proxy Statement dated September 29, 1994, for its annual meeting of
shareholders on November 3, 1994, are incorporated by reference into Part III
hereof, to the extent indicated herein.
PART I
Item 1. BUSINESS.
General
Brinker International, Inc. (the "Company") is principally engaged in
the operation and development of the Chili's Grill & Bar ("Chili's"),
Grady's American Grill ("Grady's"), Romano's Macaroni Grill ("Macaroni
Grill"), Spageddies Italian Kitchen ("Spageddies") and On The Border
Cafes ("On The Border") restaurant concepts. The Company was
organized under the laws of the State of Delaware in September 1983 to
succeed to the business operated by Chili's, Inc., a Texas
corporation, organized in August 1977. The Company completed the
acquisitions of Grady's, Macaroni Grill, Spageddies and On The Border
in February 1989, November 1989, June 1993 and May 1994 respectively.
Restaurant Concepts and Menus
Chili's Grill & Bar
Chili's establishments are full-service Southwestern-themed
restaurants, featuring a casual atmosphere and a limited menu of
freshly prepared chicken, beef and seafood entrees, hamburgers, ribs,
fajitas, sandwiches, salads, appetizers and desserts, all of which are
prepared fresh daily according to special Chili's recipes.
Chili's restaurants feature quick, efficient and friendly table
service designed to minimize customer waiting time and facilitate
table turnover, with an average turnover time per table of
approximately 45 minutes. Service personnel are dressed casually in
jeans or slacks, knit shirts and aprons to reinforce the casual,
informal environment. The decor of a Chili's restaurant consists of
booth seating, tile-top tables, hanging plants and wood and brick
walls covered with interesting memorabilia.
Emphasis is placed on serving substantial portions of fresh, quality
food at modest prices. Entree selections range in menu price from
$4.75 to $9.95, with the average revenue per meal, including alcoholic
beverages, approximating $8.55 per person. A full-service bar is
available at each Chili's restaurant, with frozen margaritas offered
as the concept's specialty drink. During the year ended June 29,
1994, food and non-alcoholic beverage sales constituted approximately
86% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 14%.
Grady's American Grill
Grady's restaurants are casual, upscale dinner house restaurants which
feature a broad menu focusing on fresh seafood, prime rib, steaks,
chicken and pasta entrees, salads, sandwiches, appetizers, desserts
and a full-service bar. Grady's restaurants feature booth and table
seating, wood and brick walls, and brass fixtures. Service personnel
are dressed smartly, in casual slacks, buttoned-down shirts and ties,
to reinforce the upscale atmosphere.
The restaurant appeals to a slightly more sophisticated customer than
Chili's. Entree selections range in price from $5.45 to $16.95, with
the average revenue per meal, including alcoholic beverages,
approximating $10.95 per person. During the year ended June 29, 1994,
food and non-alcoholic beverage sales constituted approximately 88%
of the concept's total restaurant revenues, with alcoholic beverage
sales accounting for the remaining 12%.
Romano's Macaroni Grill
Macaroni Grill is an upscale Italian theme restaurant which
specializes in family-style recipes and features seafood, meat,
chicken and pasta entrees, salads, pizza, appetizers and desserts with
a limited wine and beer selection in most restaurants and a full-
service bar in recent and future openings. Exhibition cooking, wood-
burning ovens and rotisseries provide an enthusiastic and exciting
environment in the restaurants. Macaroni Grill restaurants feature
white linen-clothed tables, fireplaces, a pizza oven, sous stations,
rotisseries and prominent displays of wines. Service personnel are
dressed in white, starched shirts and aprons, dark slacks, and bright
ties.
Entree selections range in menu price from $6.25 to $15.95 with
certain specialty items priced on a daily basis. The average revenue
per meal, including alcoholic beverages, is approximately $13.50 per
person. During the year ended June 29, 1994, food and non-alcoholic
beverage sales constituted approximately 83% of the concept's total
restaurant revenues, with alcoholic beverage sales accounting for the
remaining 17%.
Spageddies Italian Kitchen
Spageddies restaurants are casual, full-service, moderately-priced,
family oriented Italian restaurants featuring rotisserie chicken,
steak and pasta entrees, salads, pizza, appetizers and desserts with a
full-service bar. Spageddies restaurants feature an exhibition
kitchen, a wood-burning pizza oven, booth and table seating, and
prominent displays of peppers, parmesan and tomatoes. Service
personnel are dressed casually in black pants and striped polo shirts
to reinforce the casual, informal, open environment.
Entree selections range in menu price from $4.25 to $12.95, with the
average revenue per meal, including alcoholic beverages, approximating
$9.25 per person. During the year ended June 29, 1994, food and non-
alcoholic beverage sales constituted approximately 92% of the
concept's total restaurant revenues, with alcoholic beverage sales
accounting for the remaining 8%.
On The Border Cafes
On The Border restaurants are full-service, casual Tex-Mex theme
restaurants featuring Southwest mesquite-grilled specialties and
traditional Tex-Mex entrees and appetizers served in generous portions
at modest prices. On The Border serves "Texas-sized" non-alcoholic
beverages in addition to offering a full-service bar. On The Border
restaurants feature an outdoor patio, booth and table seating and
brick and wood walls with a Southwest decor. On The Border
restaurants also offer enthusiastic table service intended to minimize
customer waiting time and facilitate table turnover while
simultaneously providing customers with a satisfying casual dining
experience.
Entree selections range in menu price from $5.45 to $12.95, with the
average revenue per meal, including alcoholic beverages, approximating
$10.00 per person. During the year ended June 29, 1994, food and non-
alcoholic beverage sales constituted approximately 74% of the
concept's total restaurant revenues, with alcoholic beverage sales
accounting for the remaining 26%.
Restaurant Locations
At June 29, 1994, Brinker International, Inc.'s system of company-
operated, joint venture and franchised units included 458 restaurants
located in 43 states, Canada, Singapore, Malaysia and Mexico. The
Company's portfolio of restaurants is illustrated below:
June 29, 1994
Chili's:
Company-Operated 277
Franchise 83
Grady's 34
Macaroni Grill:
Company-Operated 34
Franchise 1
Spageddies 6
On The Border:
Company-Operated 14
Franchise 7
R&D Concepts:
Company-Operated 1
Joint Venture 1
TOTAL 458
Business Development
The Company's long-term objective is to continue expansion of its
restaurant concepts by opening Company-operated units in strategically
desirable markets. The Company intends to concentrate on development
of certain identified markets to achieve penetration levels deemed
desirable by the Company in order to improve the Company's competitive
position, marketing potential and profitability. Expansion efforts
will be focused on major metropolitan areas in the United States and
smaller market areas which can adequately support any of the Company's
restaurant concepts.
The Company considers the restaurant site selection process critical
to its long-term success and devotes significant effort to the
investigation of new locations utilizing a variety of sophisticated
analytical techniques. The site selection process focuses on a
variety of factors including: trading-area demographics such as
target population density and household income levels; an evaluation
of site characteristics such as visibility, accessibility and traffic
volume; proximity to activity centers such as shopping malls,
hotel/motel complexes and offices; and an analysis of the potential
competition. Members of senior management inspect and approve each
restaurant site prior to its acquisition.
The Company periodically reevaluates restaurant sites to ensure that
site selection attributes have not deteriorated below minimum
standards. In the event site deterioration were to occur, the Company
makes a concerted effort to improve the restaurant's performance by
providing physical, operating and marketing enhancements unique to
each restaurant's situation. If internal efforts to restore the
restaurant's performance to acceptable minimum standards are
unsuccessful, the Company considers relocation to a proximate, more
desirable site, or evaluates closing the restaurant if the Company's
criteria, such as return on investment and area demographic data do
not support a relocation. Since inception, the Company has closed
only three restaurants, including one in fiscal 1993 and two in the
second quarter of fiscal 1994, which were performing below the
Company's standards primarily due to declining trading-area
demographics. These and future closings will be key to a successful
reallocation of resources to the stronger performing stores.
The following table illustrates the system-wide restaurants either
opened or acquired in fiscal 1994 and the planned openings in fiscal
1995:
Restaurant Openings
Fiscal 1994 Fiscal 1994 Fiscal 1995
Openings Net Acquisitions Projected Openings
Chili's:
Company-Operated 31 11 30-34
Franchise 14 (13) 25-30
Grady's 10 -0- 10-11
Macaroni Grill:
Company-Operated 12 -0- 15-16
Franchise 1 -0- 0-2
Spageddies 3 -0- 6-7
On The Border:
Company-Operated -0- 14 3-4
Franchise -0- 7 -0-
R&D Concept--
Joint Venture 1 -0- 2-3
TOTAL 72 19 91-107
The restaurants acquired by the Company in fiscal 1994 relate to three
acquisitions. In October 1993, the Company acquired the assets of a
franchisee, which operated four Chili's restaurants in Pennsylvania
and Ohio for approximately $8,165,000.00 in cash. In May 1994, the
Company acquired 100% ownership interest in On The Border in exchange
for 1,239,130 shares of Company common stock. On The Border
operations included 14 company-operated and 7 franchised On The Border
restaurants in Texas, Florida, Tennessee, Colorado and Missouri. Also
in May 1994, the Company acquired the remaining 50% interest in
Northwest Restaurants Joint Venture ("NRJV") from its joint venture
partner in exchange for 256,576 shares of Company common stock. NRJV
operated nine Chili's restaurants in California and Nevada.
The Company anticipates that some of the fiscal 1995 projected
restaurant openings will be constructed pursuant to "build-to-suit"
agreements, in which the lessor contributes the land cost and all, or
substantially all, of the building construction costs. In other
cases, the Company either leases the land, and pays for the building,
furniture, fixtures and equipment from its own funds, or owns the
land, building, furniture, fixtures and equipment. The Company's
restaurant concept portfolio allows the Company to purchase multiple
site locations, which offers the Company a competitive advantage in
the real estate market.
As of June 29, 1994, the Company has completed obtaining sites for
fiscal 1995 projected openings and has lease or purchase commitments
for future construction of 44 Chili's, 12 Grady's, 17 Macaroni Grill,
6 Spageddies and 2 On The Border restaurant sites. The Company is
currently in the process of locating sites for fiscal 1996 projected
openings.
The following table illustrates the approximate average capital
investment for a typical unit in our primary restaurant concepts:
Chili's Grady's Macaroni Grill Spageddies On The Border
Land $620,000 $ 800,000 $ 900,000 $750,000 $720,000
Building 850,000 1,100,000 1,050,000 975,000 975,000
Furniture and
Equipment 450,000 560,000 475,000 550,000 575,000
Other 80,000 90,000 125,000 75,000 80,000
TOTAL $2,000,000 $2,550,000 $2,550,000 $2,350,000 $2,350,000
The specific rate at which the Company is able to open new restaurants
is determined by its success in locating satisfactory sites,
negotiating acceptable lease or purchase terms, securing appropriate
local governmental permits and approvals, and by its capacity to
supervise construction and recruit and train management personnel.
Joint Venture and Franchise Operations
The Company intends to continue its expansion through joint venture
and franchise development, both domestically and internationally.
During the year ended June 29, 1994, 14 new Chili's and one Macaroni
Grill franchised restaurants were opened.
During the past two years, the Company entered into several
international franchise agreements, which will bring Chili's to
Australia, France, Puerto Rico, and the United Kingdom in the next 12
months. In fiscal 1994, the first Chili's restaurants outside North
America opened in Singapore and Malaysia on February 4, 1994 and
June 15, 1994, respectively. The third, fourth and fifth overseas
Chili's locations opened in Egypt, Australia and Puerto Rico on
July 19, 1994, August 28, 1994 and September 6, 1994, respectively.
The Company intends to continue pursuing international expansion and
is currently contemplating development in other countries. The
Company has entered into a separate joint venture agreement for
research and development activities related to the testing of a new
restaurant concept and has a 50% interest in this joint venture, which
is accounted for under the equity method. A typical joint venture or
franchise development agreement provides for payment of area
development and initial franchise fees in addition to subsequent
royalty and advertising fees based on the annual gross sales of each
restaurant. Future joint venture or franchise development agreements
are expected to remain limited to enterprises having significant
experience as restaurant operators and proven financial ability to
develop multi-unit operations.
At June 29, 1994, 20 total joint venture or franchise development
agreements existed. The Company anticipates that an additional 25 to
30 franchised Chili's, 0-2 franchised Macaroni Grill restaurants, and
1 franchised Spageddies restaurant will be opened during fiscal 1995.
Restaurant Management
The Company's philosophy to maintain and operate each concept as a
distinct and separate entity ensures that the culture, recruitment and
training programs and unique operating environments are preserved.
These factors are critical to the viability of each concept.
The Company's restaurant management structure varies by concept. The
individual restaurants themselves are led by a management team
including a General Manager and between three to five additional
managers. The level of restaurant supervision depends upon the
operating complexity and sales volume of each concept. An Area
Director/Supervisor is responsible for the supervision of, on average,
three to seven restaurants. For those concepts with a significant
number of units within a geographical region, additional levels of
management may be provided. Each concept is directed by a President
or Senior Vice President.
The Company believes that there is a high correlation between the
quality of restaurant management and the long-term success of a
concept. In that regard, the Company encourages increased tenure at
all management positions through various short and long-term incentive
programs, including equity ownership. These programs, coupled with a
general management philosophy emphasizing quality of life, have
enabled the Company to attract and retain management employees at
levels above the industry norm.
The Company ensures consistent quality standards in all concepts
through the issuance of Operations Manuals covering all elements of
operations and Food & Beverage Manuals which provide guidance for
preparation of Company formulated recipes. Routine visitation to the
restaurants by all levels of supervision enforce strict adherence to
Company standards.
The Director of Training for each concept is responsible for
maintaining each concept's operational training program, which
includes a four to five month training period for restaurant
management trainees, a continuing management training process for
managers and supervisors, and training teams consisting of groups of
employees experienced in all facets of restaurant operations that
train employees to open new restaurants. The training teams typically
begin on-site training at a new restaurant seven to ten days prior to
opening and remain on location two to three weeks following the
opening to ensure the smooth transition to operating personnel.
Purchasing
The Company's ability to maintain consistent quality of products
throughout each of its restaurant concepts depends upon acquiring food
products and related items from reliable sources. Suppliers are pre-
approved by the Company and are required along with the restaurants to
adhere to strict product specifications established through the
Company's newly created quality assurance program to ensure that high
quality, wholesome food and beverage products are served in the
restaurants. The Company negotiates directly with the major suppliers
to obtain competitive prices and uses purchase commitment contracts to
stabilize the potentially volatile pricing associated with certain
commodity items. All essential food and beverage products are
available, or upon short notice can be made available, from
alternative qualified suppliers in all cities in which the Company's
restaurants are located. Because of the relatively rapid turnover of
perishable food products, inventories in the restaurants, consisting
primarily of food, beverages and supplies, have a modest aggregate
dollar value in relation to revenues.
Advertising and Marketing
The Company's concepts generally focus on the 18 to 54 year old age
group, which constitutes approximately half of the United States
population. Members of this population segment grew up on fast food,
but the Company believes that, with increasing maturity, they prefer a
more adult, upscale dining experience. To attract this target group,
the Company relies primarily on television, radio, direct mail
advertising and word-of-mouth information communicated by customers.
The Company's franchise agreements require advertising contributions
to the Company to be used exclusively for the purpose of maintaining,
directly administering and preparing standardized advertising and
promotional activities. Franchisees spend additional amounts on local
advertising when approved by the Company.
Competition
The restaurant business is highly competitive with respect to price,
service, restaurant location and food quality, and is often affected
by changes in consumer tastes, economic conditions, population and
traffic patterns. The Company competes within each market with
locally-owned restaurants as well as national and regional restaurant
chains, some of which operate more restaurants and have greater
financial resources and longer operating histories than the Company.
There is active competition for management personnel and for
attractive commercial real estate sites suitable for restaurants.
Employees
At June 29, 1994, the Company employed approximately 38,000 persons,
of whom approximately 650 were corporate personnel, 1,300 were
restaurant managers or trainees and 36,050 were employed in
non-management restaurant positions. Of the 650 corporate employees,
250 were in management positions and approximately 400 were general
office employees. The executive officers of the Company have an
average of more than 19 years of experience in the restaurant
industry.
The Company considers its employee relations to be good and believes
that its employee turnover rate is lower than the industry average.
Most employees, other than restaurant management and corporate
personnel, are paid on an hourly basis. The Company believes that it
provides working conditions and wages that compare favorably with
those of its competition. The Company's employees are not covered by
any collective bargaining agreements.
Service Marks
The Company has registered, among other marks, "Brinker
International", "Chili's", "Grady's", "Romano's Macaroni Grill",
"Spageddies", "Spageddies Italian Italian Food", and "On The Border"
as service marks with the United States Patent and Trademark Office.
In addition, the Company has a service mark application pending for
"Grady's American Grill" and "Spageddies Italian Kitchen".
Seasonality
The Company's sales volumes fluctuate seasonally, and are generally
higher in the summer months and lower in the winter months.
Governmental Regulation
Each of the Company's restaurants is subject to licensing and
regulation by alcoholic beverage control, health, sanitation, safety
and fire agencies in the state and/or municipality in which the
restaurant is located. The Company has not encountered any
difficulties or failures in obtaining the required licenses or
approvals that could delay or prevent the opening of a new restaurant
and does not, at this time, anticipate any.
The Company is subject to federal and state environmental regulations,
but these have not had a material negative effect on the Company's
operations. More stringent and varied requirements of local and state
governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent development of new restaurants in
particular locations. The Company is subject to the Fair Labor
Standards Act which governs such matters as minimum wages, overtime
and other working conditions, along with the American With
Disabilities Act and various family leave mandates. The Company
anticipates legislation concerning mandated health care benefits which
may have significant consequences to the Company.
Item 2. PROPERTIES.
The following table illustrates the approximate average dining
capacity for each unit in primary restaurant concepts:
Chili's Grady's Macaroni Grill Spageddies On The Border
Square Feet 5,800 6,900 7,100 7,000 7,900
Dining Seats 210-220 230-250 230-250 240-260 340-360
Dining Tables 50-60 50-60 60-70 50-60 75-85
Certain of the Company's restaurants are leased for an initial term of
5 to 30 years, with renewal terms of 1 to 30 years. The leases
typically provide for a fixed rental plus percentage rentals based on
sales volume. At June 29, 1994, the Company owned the land and/or
building for 236 of the 366 Company-operated restaurants. The Company
has closed three restaurants since inception and considers that its
properties are suitable, adequate, well-maintained and sufficient for
the operations contemplated.
The Company leases warehouse space totalling approximately 31,500
square feet in Dallas, Texas, which it uses for menu development
activity and for storage of equipment and supplies. The Company
purchased an office building containing approximately 105,000 square
feet for its corporate headquarters in July 1989. Approximately 5,600
square feet of this building is leased to third party tenants. In
March 1992, the Company leased additional office space for the
expansion of its corporate headquarters. This additional office lease
was expanded in July 1994 and currently includes approximately 46,400
square feet of office space.
Item 3. LEGAL PROCEEDINGS.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
The Company's 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 markup, markdown
and/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 29, 1994:
First Quarter 26 1/12 22 1/6
Second Quarter 30 2/3 25 2/3
Third Quarter 33 1/3 26 5/6
Fourth Quarter 31 1/2 20 3/8
Fiscal year ended June 30, 1993:
First Quarter 18 13 8/9
Second Quarter 18 8/9 14 17/18
Third Quarter 21 2/3 18 5/9
Fourth Quarter 24 2/3 18 1/3
On March 9, 1994, the Company declared a stock split, effected in the
form of a 50% stock dividend ("Stock Dividend") to shareholders of
record on March 21, 1994, payable March 30, 1994. Stock prices in the
preceding table have been restated to reflect the Stock Dividend.
As of September 9, 1994, there were 2,107 holders of record of the
Company's Common Stock.
The Company has never paid cash dividends on its Common Stock and does
not currently intend to do so as profits are reinvested into the
Company to fund expansion of its restaurant business. Payment of
dividends in the future will depend upon the Company's growth,
profitability, financial condition and other factors which the Board
of Directors may deem relevant.
Item 6. SELECTED FINANCIAL DATA.
"Selected Financial Data" on page 42 of the Company's 1994 Annual
Report to Shareholders is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 43 through 47 of the Company's 1994
Annual Report to Shareholders is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14(a).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to the Company's directors (including those
officers who are directors) is incorporated herein by reference from
pages 4 through 9 of the Company's Proxy Statement dated September
29, 1994, for the annual meeting of shareholders on November 3, 1994.
Item 11. COMPENSATION INFORMATION.
"Executive Compensation" on pages 9 through 11 of the Company's Proxy
Statement dated September 29, 1994, for the annual meeting of
shareholders on November 3, 1994, is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
"Principal Shareholders" on page 2 and "Security Ownership of
Management and Election of Directors" on pages 3 through 4 of the
Company's Proxy Statement dated September 29, 1994, for the annual
meeting of shareholders on November 3, 1994, are incorporated herein
by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) and (2) Financial Statements and Schedules.
Reference is made to the listing preceding the financial statements
and schedules attached hereto on page 15 of all financial statements
and schedules filed as a part of this Report.
(a) (3) Exhibits.
Reference is made to the Exhibit Index preceding the exhibits
attached hereto on page E-1 for a list of all exhibits filed as a
part of this Report.
(b) Reports on Form 8-K
The Company was not required to file a current report on Form 8-K
during the three months ended June 29, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRINKER INTERNATIONAL, INC.,
a Delaware corporation
By: Debra L. Smithart
Debra L. Smithart, Executive Vice
President - Chief Financial Officer
Dated: September 27, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons of the registrant and in
the capacities indicated on September 27, 1994.
Name Title
Norman E. Brinker Chairman of the Board, Chief
Norman E. Brinker Executive Officer and Director
(Principal Executive Officer)
Debra L. Smithart Executive Vice President - Chief
Debra L. Smithart Financial Officer and Director
(Principal Financial and Accounting
Officer)
Ronald A. McDougall Director
Ronald A. McDougall
Creed L. Ford, III Director
Creed L. Ford, III
F. Lane Cardwell, Jr. Director
F. Lane Cardwell, Jr.
Roger F. Thomson Director
Roger F. Thomson
Director
Jack W. Evans, Sr.
Director
Rae F. Evans
Director
J.M. Haggar, Jr.
Director
Ray L. Hunt
Director
J. Ira Harris
Director
Frederick S. Humphries
James E. Oesterreicher Director
James E. Oesterreicher
Director
William F. Regas
Roger T. Staubach Director
Roger T. Staubach
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following is a listing of the financial statements and financial statement
schedules which are included in this Form 10-K or which are incorporated
herein by reference. The financial statements of the Company included in the
Company's 1994 Annual Report to Shareholders are incorporated herein by
reference in Item 8.
Reference Page
1994 Annual
Form 10-K Report Page
Independent Auditors' Report 62
Consolidated Balance Sheets -
June 29, 1994 and June 30, 1993 48-49
Consolidated Statements of Income -
Years Ended June 29, 1994, June 30, 1993 and 1992 50
Consolidated Statements of Shareholders'
Equity - Years Ended June 29, 1994 and
June 30, 1993 and 1992 51
Consolidated Statements of Cash Flows -
Years Ended June 29, 1994, June 30, 1993 and 1992 52
Notes to Consolidated Financial Statements 53-61
Independent Auditors' Report on Financial
Statement Schedules 16
Schedules:
I - Marketable Securities - Other Investments 17
V - Consolidated Property and Equipment 18
VI - Consolidated Accumulated Depreciation and
Amortization of Property and Equipment 19
IX - Consolidated Short-term Borrowings 20
X - Supplemental Income Statement Information 21
All other schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements, related notes or other schedules.
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors
Brinker International, Inc.:
Under date of July 29, 1994, we reported on the consolidated balance sheets of
Brinker International, Inc. and subsidiaries as of June 29, 1994 and June 30,
1993, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the years in the three-year period ended June 29,
1994, as contained in the 1994 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year ended June 29, 1994.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedules as
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Dallas, Texas
July 29, 1994
SCHEDULE I
BRINKER INTERNATIONAL, INC.
MARKETABLE SECURITIES-OTHER INVESTMENTS
JUNE 29, 1994
(In thousands, except share amounts)
Number of Shares or Market and
Type of Issue Principal Amounts Cost Carrying Value
Preferred Stocks:
Financial Institutions 768,578 $ 24,714 $ 24,501
Consumer Products 284,030 9,434 9,371
Energy 180,000 4,311 4,277
High Tech 120,000 3,800 3,790
Utilities 100,000 2,543 2,450
Insurance 50,000 878 850
Total Long-Term Investments $ 45,680 $ 45,239
SCHEDULE V
BRINKER INTERNATIONAL, INC.
CONSOLIDATED PROPERTY AND EQUIPMENT
(In thousands)
Balance at
Beginning of Balance at
Period Additions (1) Retirements End of Period
For the Year Ended
June 30, 1992:
Land $ 38,752 $ 26,008 $ (480) $ 64,280
Buildings and Lease-
hold Improvements 136,927 35,462 (805) 171,584
Furniture & Equipment 89,056 33,168 (6,751) 115,473
Construction-in-
Progress 7,564 3,362 --- 10,926
Total $ 272,299 $ 98,000 $ (8,036) $ 362,263
For the Year Ended
June 30, 1993:
Land $ 64,280 $ 24,128 $ (847) $ 87,561
Buildings and Lease-
hold Improvements 171,584 52,894 (893) 223,585
Furniture & Equipment 115,473 31,693 (2,341) 144,825
Construction-in-
Progress 10,926 18,116 --- 29,042
Total $ 362,263 $ 126,831 $ (4,081) $ 485,013
For the Year Ended
June 29, 1994:
Land $ 87,561 $ 20,734 $(2,255) $ 106,040
Buildings and Lease-
hold Improvements 223,585 65,252 (2,521) 286,316
Furniture & Equipment 144,825 33,949 (7,384) 171,390
Construction-in-
Progress 29,042 2,258 --- 31,300
Total $ 485,013 $ 122,193 $ (12,160) $ 595,046
(1) Additions primarily represent costs for acquiring land, constructing new restaurants, and
equipping new restaurants.
SCHEDULE VI
BRINKER INTERNATIONAL, INC.
CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(In thousands)
Balance at
Beginning of Balance at
Period Additions Retirements End of Period
For the Year Ended
June 30, 1992:
Buildings and Leasehold
Improvements $ (26,222) $ ( 8,434) $ 188 $ (34,468)
Furniture & Equipment (48,752) (15,225) 5,124 (58,853)
Total Accumulated
Depreciation and
Amortization $ (74,974) $ (23,659) $ 5,312 $ (93,321)
For the Year Ended
June 30, 1993:
Buildings and Leasehold
Improvements $ (34,468) $ (10,147) $ 72 $ (44,543)
Furniture & Equipment (58,853) (21,015) 2,147 (77,721)
Total Accumulated
Depreciation and
Amortization $ (93,321) $ (31,162) $ 2,219 $ (122,264)
For the Year Ended
June 29, 1994:
Buildings and Leasehold
Improvements $ (44,543) $ (17,611) $ 807 $ (61,347)
Furniture & Equipment (77,721) (23,988) 2,198 (99,511)
Total Accumulated
Depreciation and
Amortization $(122,264) $ (41,599) $ 3,005 $ (160,858)
SCHEDULE IX
BRINKER INTERNATIONAL, INC.
CONSOLIDATED SHORT-TERM BORROWINGS
(In thousands)
Maximum Average Weighted
Amount Amount Average
Weighted Outstanding Outstanding Interest
Category of Aggregate Balance At Average During During During
Short Term Borrowings End of Period Interest Rate The Period The Period (2) The Period (3)
NOTES PAYABLE
TO BANKS (Bank Borrowings)(1)
Years Ended June 30,
1992 --- --- $ 4,000 $ 612 7.094%
1993 --- --- $12,650 $ 3,008 3.590%
Year Ended June 29,
1994 --- --- $ 9,950 $ 4,229 5.005%
(1) Notes payable to banks represent obligations payable under line of credit agreements with local
banks. Borrowings are arranged on an as needed basis at various terms.
(2) The average amount outstanding during the year represents the average monthly principal balances
outstanding during the year.
(3) The weighted average interest rates during the year were computed by dividing the actual
interest accrued on short-term borrowings by the average short-term borrowings.
SCHEDULE X
BRINKER INTERNATIONAL, INC.
SUPPLEMENTAL INCOME STATEMENT INFORMATION
(In thousands)
FOR THE YEARS ENDED
June 29, 1994 June 30, 1993 June 30, 1992
Repair and Maintenance 17,740 12,010 10,593
Amortization 9,902 6,573 5,401
Property Tax 10,285 7,244 5,651
Advertising 27,507 23,922 17,694
INDEX TO EXHIBITS
Exhibit
3(a) Certificate of Incorporation of the registrant, as amended. (1)
3(b) Bylaws of the registrant. (2)
10(a) Registrant's 1983 Incentive Stock Option Plan. (3)
10(b) Registrant's 1991 Stock Option Plan for Non-Employee Directors and
Consultants (4)
10(c) Registrant's 1992 Incentive Stock Option Plan. (5)
13 1994 Annual Report to Shareholders. (6)
21 Subsidiaries of the registrant. (7)
23 Independent Auditors' Consent. (7)
27 Financial Data Schedule. (8)
99 Proxy Statement of registrant dated September 29, 1994. (6)
(1) Filed as an exhibit to Registration Statement No. 32-52705 on
Form S-4 and incorporated herein by reference.
(2) Filed as an exhibit to Registration Statement No. 2-87736 on Form
S-1 and incorporated herein by reference.
(3) Filed as an exhibit to report on Form 10-K for year ended June 30,
1990 and incorporated herein by reference.
(4) Filed as an exhibit to report on Form 10-K for year ended June 30,
1991 and incorporated herein by reference.
(5) Filed as an exhibit to Registration Statement No. 33-61594 on Form
S-8 and incorporated herein by reference.
(6) Portions filed herewith, to the extent indicated herein.
(7) Filed herewith.
(8) Filed with EDGAR version.
E-1
EXHIBIT 13
1994 ANNUAL REPORT TO SHAREHOLDERS
SELECTED FINANCIAL DATA
(In thousands, except per share amounts and number of restaurants)
Fiscal Years
1994 1993 1992 1991 1990
Income Statement Data:
Revenues $878,473 $697,396 $562,361 $468,926 $385,847
Costs and Expenses:
Cost of Sales 239,835 193,794 156,246 135,365 113,521
Restaurant Expenses 446,845 355,040 294,095 245,583 202,957
Depreciation and
Amortization 51,501 38,223 29,031 23,245 19,232
General and Administrative 45,662 37,170 30,761 26,338 21,501
Interest Expense 430 395 622 1,063 2,850
Merger Expenses 1,949 --- --- --- ---
Lawsuit Settlement 2,248 --- --- --- ---
Other, Net (5,435) (5,232) (3,255) (1,516) (1,287)
Total Costs and Expenses 783,035 619,390 507,500 430,078 358,774
Income Before Provision for
Income Taxes 95,438 78,006 54,861 38,848 27,073
Provision for Income Taxes 33,832 27,083 18,836 13,565 9,328
Net Income $ 61,606 $ 50,923 $ 36,025 $ 25,283 $ 17,745
Primary Net Income
Per Share $ 0.83 $ 0.70 $ 0.50 $ 0.39 $ 0.31
Primary Weighted Average
Shares Outstanding 74,572 72,911 71,454 65,336 56,526
Balance Sheet Data
(end of period):
Working Capital
(Deficit) $(56,193) $(40,596) $(24,871) $ 1,944 $(19,713)
Total Assets 558,709 454,354 354,748 276,407 207,891
Long-term Obligations 38,003 30,782 26,409 24,270 28,543
Shareholders' Equity 417,290 343,905 261,523 207,048 131,972
Number of Restaurants Open
at End of Period:
Company Operated 366 305 255 220 189
Franchised 92 78 60 51 41
Total 458 383 315 271 230
Prior year financial results have been restated to reflect the fiscal 1994 acquisitions accounted for
as poolings of interests and the fiscal 1994 stock split effected in the form of a 50% stock dividend.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR FISCAL YEARS 1994, 1993, AND 1992
The following table sets forth expenses as a percentage of total revenues for
the periods indicated for revenue and expense items included in the
Consolidated Statements of Income.
PERCENTAGE OF TOTAL REVENUES
Fiscal Years
1994 1993 1992
Revenues 100.0% 100.0% 100.0%
Costs and Expenses:
Cost of Sales 27.3% 27.8% 27.8%
Restaurant Expenses 50.9% 50.9% 52.3%
Depreciation and Amortization 5.9% 5.5% 5.2%
General and Administrative 5.2% 5.3% 5.5%
Interest Expense 0.0% 0.0% 0.0%
Merger Expenses 0.2% --- ---
Lawsuit Settlement 0.2% --- ---
Other, Net (0.6%) (0.7%) (0.6%)
Total Costs and Expenses 89.1% 88.8% 90.2%
Income Before Provision
for Income Taxes 10.9% 11.2% 9.8%
Provision for Income Taxes 3.9% 3.9% 3.4%
Net Income 7.0% 7.3% 6.4%
REVENUES
Increases in revenues of 26% and 24% in fiscal 1994 and 1993, respectively,
primarily relate to the increases in the number of Company-owned restaurants
and comparable store sales. The percentage increase in the average number of
Company-owned restaurants in operation was 20% for both fiscal 1994 and 1993.
Increases in comparable store sales were 2.1% and 3.8% in fiscal 1994 and
1993, respectively. These favorable trends were due to increased customer
counts resulting from the Company's commitment to providing quality food and
service at an exceptional value, its ongoing evolution of the menu, and its
continued remodeling program to keep its restaurants updated and the ambiance
inviting to the guests. In addition, the Company continues to refine its real
estate site selection process which focuses on trading-area demographics,
visibility, accessibility, and complementary concept locations. Quality sites
provide a competitive advantage and contribute to stronger sales for new
restaurants. Menu price increases had little impact on the increase in
revenues as weighted average price increases over the past two years averaged
less than 1% per year.
COSTS AND EXPENSES (as a percent of Revenues)
Cost of sales decreased in fiscal 1994 compared to fiscal 1993. Favorable
price changes in produce, dairy, poultry, and pasta, recipe changes toward
lower food cost items, implementation of meat waste control systems, and
increased purchasing leverage offset unfavorable price changes in non-
alcoholic beverages. Cost of sales remained constant in fiscal 1993 compared
to fiscal 1992 as the favorable impact from continued emphasis on food
portioning and waste and yield management programs were offset by product mix
changes to menu items with higher percentage food costs.
Restaurant expenses were flat in fiscal 1994. Insurance costs were flat as
aggressive safety and loss management programs implemented in the restaurants
in fiscal 1993 have continued to be successful and offset rising insurance and
health care costs. Occupancy costs, however, decreased due to an increase in
percentage of restaurants owned versus leased. Liquor taxes also decreased
due to the Company's expansion into states with lower liquor tax rates. These
decreases were offset by increases in manager salaries due to annual merit
increases, manager training expenses to support expansion, and property taxes
due to increased rates. In fiscal 1993, restaurant expenses declined as the
administrative hours required of restaurant managers was reduced, programs to
contain insurance costs were introduced, and rent expense decreased due to the
increase in percentage of owned restaurants versus leased.
Depreciation and amortization increased in fiscal 1994 and 1993 primarily due
to continued investments in computer hardware and software which has generated
operating efficiencies at both the restaurants and corporate office support
groups. Also, the ongoing restaurant remodeling program, the continued
replacement of restaurant furniture and equipment, and the trend to purchase
new restaurant sites in favor of leasing have contributed to the increases.
General and administrative expenses have decreased in the past two fiscal
years as a result of the Company's focus on controlling corporate
expenditures. Efficiencies resulting from investments in computer hardware
and software allowed the Company to continue with the aggressive expansion of
its restaurant concepts without incurring significant increases in staff and
support costs.
Merger expenses are one-time charges related to the acquisition of On The
Border, such as consulting fees, legal fees, and severance costs.
Lawsuit settlement represents a one-time charge to settle an injury claim
arising from an airplane accident involving several former officers of On The
Border.
Other, net, decreased in fiscal 1994. A gain of approximately $1 million
related to the sale of land in fiscal 1994 was offset by losses resulting from
recognition of a permanent decline in market value for certain securities.
Net realized gains on investment transactions were down slightly in fiscal
1994. Dividend and interest income, however, was flat. The increase in
fiscal 1993 compared to fiscal 1992 is the result of increased realized gains
from investment transactions experienced in fiscal 1993 offset somewhat by a
decrease in dividend and interest income.
INCOME BEFORE PROVISION FOR INCOME TAXES
As a result of changes in the relationships between revenues and costs and
expenses, income before provision for income taxes has increased at rates of
22.3% and 42.2% in fiscal 1994 and 1993, respectively.
INCOME TAXES
The Company's effective income tax rate of 35.4%, 34.7%, and 34.3% in fiscal
1994, 1993, and 1992, respectively, continues to increase as a result of
incremental earnings taxed at higher effective rates and additional state
income tax liabilities resulting from expansion, particularly relating to
growth in Florida and California.
The Omnibus Budget Reconciliation Act, enacted in August 1993, mandated
certain changes in Federal income tax laws, which among other items, included
an increase in the statutory Federal corporate income tax rate from 34% to
35%, retroactive to January 1993, reinstatement of the targeted jobs tax
credit, retroactive to January 1993, and a tax credit for FICA taxes paid on
tips, effective January 1994. These changes did not have a material impact on
Brinker's fiscal 1994 and 1993 effective income tax rate or the consolidated
financial statements.
NET INCOME AND NET INCOME PER SHARE
Net income and primary net income per share as a percent of revenues decreased
slightly in fiscal 1994 as a result of one-time charges, including the $2.2
million lawsuit settlement and $1.9 million of costs incurred in connection
with the On The Border acquisition. Net income and primary net income per
share increased as a percent of revenues in fiscal 1993 as a result of
controlling costs and expenses while continuing with the expansion of the
restaurant concepts. The increases in the weighted average number of common
shares outstanding arose from common stock options exercised each year.
STOCK DIVIDENDS
Stock splits in each of March 1994, May 1993, and November 1991, effected in
the form of 50% stock dividends, resulted in the issuance of 23.2 million,
22.8 million, and 21.5 million shares of the Company's common stock, in fiscal
1994, 1993, and 1992, respectively.
IMPACT OF INFLATION
The Company has not experienced a significant overall impact from inflation.
As operating expenses increase, the Company, to the extent permitted by
competition, recovers increased costs by increasing menu prices.
LIQUIDITY AND CAPITAL RESOURCES
The working capital deficit increased from $40.6 million at June 30, 1993 to
$56.2 million at June 29, 1994. Strong operating results from new and
existing units and the exercise of employee stock options generated cash
proceeds that were offset by the Company's capital expenditures and the
investment of available cash in long-term marketable securities. Net cash
provided by operating activities increased to $125.5 million in fiscal 1994
from $106.2 million in fiscal 1993 due to the increased number of restaurants
in operation, strong operating results from existing units, and the effective
containment of costs.
The Company had available funds from credit facilities totalling $41.2 million
at June 29, 1994. The Company estimates that its capital expenditures during
fiscal 1995 will approximate $200 million. These capital expenditures, which
will primarily relate to the planned expansion of each restaurant concept and
the Company's ongoing remodel program, will be funded from internal
operations, income earned from investments, build-to-suit lease agreements
with landlords, and draw downs on the Company's available lines of credit.
The Clinton administration continues to analyze and propose new legislation
which could adversely impact the entire business community. Mandated health
care and minimum wage measures, if passed, could increase the Company's
operating costs. The Company would attempt to offset increased costs through
continued improvements in operating efficiencies and menu price increases.
The Company is not aware of any other event or trend which would potentially
affect its liquidity. In the event such a trend would develop, the Company
believes that there are sufficient funds available under the lines of credit
and from strong internal cash generating capabilities to adequately manage the
expansion of the business.
NEW ACCOUNTING PRONOUNCEMENT
In November 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 112 ("SFAS No. 112"),
Employers' Accounting for Postemployment Benefits. SFAS No. 112 sets forth
standards of accounting and reporting for employers that offer postemployment
benefits. SFAS No. 112 is effective for the Company in fiscal 1995. The
Company does not believe the adoption of SFAS No. 112 will have a material
impact on its consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
1994 1993
ASSETS
Current Assets:
Cash and Cash Equivalents $ 3,614 $ 12,429
Accounts Receivable, Net 12,573 6,016
Assets Held for Sale and Leaseback --- 1,155
Inventories 8,152 6,907
Prepaid Expenses 18,229 12,564
Deferred Income Taxes (Note 7) 4,655 ---
Total Current Assets 47,223 39,071
Property and Equipment, at Cost (Note 9):
Land $ 106,040 $ 87,561
Buildings and Leasehold Improvements 286,316 223,585
Furniture and Equipment 171,390 144,825
Construction-in-Progress 31,300 29,042
595,046 485,013
Less Accumulated Depreciation
and Amortization 160,858 122,264
Net Property and Equipment 434,188 362,749
Other Assets:
Preopening Costs $ 7,927 $ 9,781
Long-term Marketable Securities (Note 3) 45,239 28,693
Long-term Notes Receivable 2,231 2,773
Other (Notes 2 and 10) 21,901 11,287
Total Other Assets 77,298 52,534
Total Assets $ 558,709 $ 454,354
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current Installments of Long-Term
Debt (Note 9) $ 501 $ 886
Accounts Payable 45,037 31,902
Accrued Liabilities (Note 4) 57,878 45,960
Deferred Income Taxes (Note 7) --- 919
Total Current Liabilities 103,416 79,667
Long-Term Debt, Less Current
Installments (Note 9) 4,464 7,845
Senior Subordinated Convertible
Debentures (Note 6) 1,200 1,200
Deferred Income Taxes (Note 7) 12,143 8,837
Other Liabilities 20,196 12,900
Commitments and Contingencies
(Notes 9, 10 and 11)
Shareholders' Equity (Notes 2 and 8):
Preferred Stock-1,000,000 Authorized Shares;
$1.00 Par Value; No Shares Issued --- ---
Common Stock-100,000,000 Authorized Shares;
$.10 Par Value; 71,029,522 and 69,946,814
Shares Issued and Outstanding in
1994 and 1993, Respectively 7,103 6,995
Additional Paid-In Capital 182,579 170,467
Unrealized Loss on Marketable Securities
(Note 3) (441) ---
Retained Earnings 228,049 166,443
Total Shareholders' Equity 417,290 343,905
Total Liabilities and
Shareholders' Equity $ 558,709 $ 454,354
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
FISCAL YEARS
1994 1993 1992
Revenues $878,473 $697,396 $562,361
Costs and Expenses:
Cost of Sales 239,835 193,794 156,246
Restaurant Expenses (Note 9) 446,845 355,040 294,095
Depreciation and Amortization 51,501 38,223 29,031
General and Administrative 45,662 37,170 30,761
Interest Expense 430 395 622
Merger Expenses (Note 2) 1,949 --- ---
Lawsuit Settlement (Note 11) 2,248 --- ---
Other, Net (Note 3) (5,435) (5,232) (3,255)
Total Costs and Expenses 783,035 619,390 507,500
Income Before Provision
for Income Taxes 95,438 78,006 54,861
Provision for Income Taxes (Note 7) 33,832 27,083 18,836
Net Income $ 61,606 $ 50,923 $ 36,025
Primary Net Income Per Share $ 0.83 $ 0.70 $ 0.50
Primary Weighted Average
Shares Outstanding 74,572 72,911 71,454
Fully Diluted Net Income
Per Share $ 0.83 $ 0.70 $ 0.50
Fully Diluted Weighted Average
Shares Outstanding 74,668 73,040 71,609
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Unrealized
Additional Loss On
Common Stock Paid-In Marketable Retained
Shares Amount Capital Securities Earnings Total
Balances at June 30, 1991 64,670 $ 6,467 $122,927 $ (1,841) $ 79,495 $207,048
Net Income --- --- --- --- 36,025 36,025
Recovery of Unrealized Loss on
Marketable Securities (Note 3) --- --- --- 1,841 --- 1,841
Issuances of Common Stock 1,638 164 16,445 --- --- 16,609
Balances at June 30, 1992 66,308 $ 6,631 $139,372 $ --- $115,520 $261,523
Net Income --- --- --- --- 50,923 50,923
Issuances of Common Stock 3,639 364 31,095 --- --- 31,459
Balances at June 30, 1993 69,947 $ 6,995 $170,467 $ --- $166,443 $343,905
Net Income --- --- --- --- 61,606 61,606
Unrealized Loss on Marketable
Securities (Note 3) --- --- --- (441) --- (441)
Issuances of Common Stock 1,083 108 12,112 --- --- 12,220
Balances at June 29, 1994 71,030 $ 7,103 $182,579 $ (441) $228,049 $417,290
See Accompanying Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FISCAL YEARS
1994 1993 1992
Cash Flows From Operating Activities:
Net Income $ 61,606 $ 50,923 $ 36,025
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities:
Depreciation and Amortization of
Property and Equipment 41,599 31,162 23,659
Amortization of Preopening Costs 9,902 7,061 5,372
Gain on Sale of Land (1,000) --- ---
Net Gain on Sale of Long-term
Marketable Securities (1,543) (1,579) (15)
Loss on Impairment of Long-term
Marketable Securities 1,072 --- ---
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (6,557) (948) 809
Increase in Inventories (1,245) (1,251) (1,017)
Increase in Prepaid Expenses (5,665) (2,678) (1,329)
Increase in Other Assets (11,179) (12,989) (6,681)
Increase in Accounts Payable 21,522 24,604 15,208
Increase in Accrued Liabilities 11,918 10,166 12,353
(Decrease) Increase in Deferred
Income Taxes (2,268) (5,753) 3,622
Increase (Decrease) in Other
Liabilities 7,296 7,487 (418)
Net Cash Provided by Operating
Activities 125,458 106,205 87,588
Cash Flows From Investing Activities:
Payments for Property and Equipment (114,994) (124,969) (95,276)
Proceeds from Sale of Land 4,180 --- ---
Payment for Purchase of Restaurants
(Note 2) (8,165) --- ---
Decrease (Increase) in Assets Held
for Sale and Leaseback 1,155 13 (442)
Purchases of Long-term Marketable
Securities (58,986) (62,796) (45,016)
Proceeds from Sales of Long-term
Marketable Securities 42,470 61,630 36,407
Net Cash Used in Investing Activities (134,340) (126,122) (104,327)
Cash Flows From Financing Activities:
Payments of Long-Term Debt (3,766) (298) (2,282)
Proceeds from Issuance of Debentures --- --- 1,200
Proceeds from Issuances of Common Stock 3,833 12,477 10,792
Net Cash Provided by Financing Activities 67 12,179 9,710
Net Decrease in Cash and Cash Equivalents (8,815) (7,738) (7,029)
Cash and Cash Equivalents at Beginning
of Year 12,429 20,167 27,196
Cash and Cash Equivalents at End of Year $ 3,614 $ 12,429 $ 20,167
Cash Paid During the Year:
Interest, Net of Amounts Capitalized $ 430 $ 395 $ 622
Income Taxes $ 26,579 $ 11,687 $ 8,847
Non-Cash Transactions During the Year:
Tax Benefit from Stock Options Exercised $ 8,387 $ 18,982 $ 5,817
Property and Equipment Received in
Exchange for Note Receivable $ --- $ --- $ 2,305
Property and Equipment Received in
Exchange for Property and Equipment $ --- $ --- $ 1,483
See Accompanying Notes to Consolidated Financial Statements
Brinker International, Inc.
Notes To Consolidated Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of Brinker
International, Inc. and its wholly-owned subsidiaries ("Brinker"). All
significant intercompany accounts and transactions have been eliminated
in consolidation.
On March 9, 1994, Brinker declared a stock split in the form of a 50%
stock dividend to shareholders of record on March 21, 1994, payable on
March 30, 1994. As a result, 23.2 million shares of common stock were
issued, and cash was paid in lieu of fractional shares. All references
to the number of shares and per share amounts of common stock have been
restated to reflect this stock dividend. In addition, Brinker's
consolidated financial statements and notes thereto have been restated
to include the accounts and operations of On The Border Cafes, Inc. ("On
The Border") and Northwest Restaurants Joint Venture ("NRJV") for all
periods presented (see Note 2).
Effective July 1, 1993, Brinker adopted a 52 week fiscal year ending on
the last Wednesday in June. Most retailing and restaurant companies
operate on an accounting calendar that is measured in weeks rather than
months. Thus, a normal fiscal year only contains 364 days. Every fifth
or sixth year, lost days are recaptured by having a 53 week fiscal year.
This change enhances Brinker's ability to measure comparative operating
results. The impact of this change was not significant. Fiscal years
1994, 1993, and 1992 ended June 29, 1994, June 30, 1993, and June 30,
1992, respectively.
Certain amounts in the fiscal 1993 consolidated financial statements
have been reclassified to conform with the fiscal 1994 presentation.
(b) Cash and Cash Equivalents
Brinker's policy is to invest cash in excess of operating requirements
in income-producing investments. Cash invested in instruments with
maturities of three months or less at the time of investment is
reflected as cash equivalents. Cash equivalents of $110,000 and
$11,142,000 at June 29, 1994 and June 30, 1993, respectively, consist
primarily of money market funds, short-term municipal funds, and
commercial paper. The carrying value of these instruments approximates
market value due to their short-term maturities.
(c) Inventories
Inventories, which consist of food, beverages, and supplies, are stated
at the lower of cost (first-in, first-out method) or market.
(d) Property and Equipment
Buildings and leasehold improvements are amortized using the
straight-line method over the lesser of the life of the lease, including
renewal options, or the estimated useful lives of the assets, which
range from 5 to 20 years.
Furniture and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets, which range from 3 to 8
years.
(e) Capitalized Interest
Interest costs capitalized during the construction period of restaurants
were approximately $690,000, $800,000, and $1,300,000 during fiscal
1994, 1993, and 1992, respectively.
(f) Preopening Costs
Capitalized preopening costs include the direct and incremental costs
typically associated with the opening of a new restaurant which
primarily consist of costs incurred to develop new restaurant management
teams, travel and lodging for both the training and opening unit
management teams, and the food, beverage, and supplies costs incurred to
perform role play testing of all equipment, concept systems, and
recipes. Effective July 1, 1993, Brinker prospectively revised its
policy for capitalizing and amortizing preopening costs associated with
the opening of new restaurant sites. The amortization period was
reduced from 24 months to 12 months. The impact of the change in
accounting policy did not have a material impact on Brinker's
consolidated financial statements.
(g) Stock Options
Proceeds from the exercise of common stock options issued to officers,
directors, key employees, and certain non-employees under Brinker's
stock option plans are credited to common stock to the extent of par
value and to additional paid-in capital for the excess.
(h) Net Income Per Share
Both primary and fully diluted net income per share are based on the
weighted average number of shares outstanding during the fiscal year
increased by common equivalent shares (stock options) determined using
the treasury stock method. Primary weighted average equivalent shares
are determined based on the average market price exceeding the exercise
price of the stock options. Fully diluted weighted average equivalent
shares are determined based on the higher of the average or ending
market price exceeding the exercise price of the stock options.
2. BUSINESS COMBINATIONS
On June 30, 1993, Brinker acquired the remaining 50% interest in its
three unit Spageddies Italian Kitchen restaurant concept ("Spageddies")
from its joint venture partner in exchange for 205,716 shares of
Brinker's common stock. The acquisition was accounted for as a pooling
of interests, and accordingly, Brinker's 1993 consolidated financial
statements include the accounts and operations of Spageddies since the
commencement of its operations in July 1992.
On October 7, 1993, Brinker acquired the assets of a franchisee, which
operated four Chili's restaurants in Pennsylvania and Ohio, for
approximately $8,165,000 in cash. The acquisition was accounted for as
a purchase. Goodwill of approximately $6,941,000, representing the
excess of cost over the fair value of the assets acquired, was recorded
in connection with the acquisition and is included in other assets.
Goodwill is being amortized on a straight-line basis over 30 years. The
operations of the restaurants are included in Brinker's consolidated
results of operations from the date of acquisition. The results of
operations on a pro forma basis are not presented separately as the
results do not differ significantly from historical amounts reported
herein.
On May 18, 1994, Brinker consummated a merger agreement with On The
Border, pursuant to which Brinker acquired a 100% ownership interest in
On The Border. Under the terms of the merger agreement, 3,767,711 fully
diluted shares of On The Border common stock were converted to 1,239,130
shares of Brinker common stock (approximately 0.3 for 1 exchange). On
The Border's operations included fourteen company-operated and seven
franchised casual dining Tex-Mex theme restaurants. This acquisition
was accounted for as a pooling of interests.
On May 25, 1994, Brinker acquired the remaining 50% interest in NRJV
from its joint venture partner in exchange for 256,576 shares of Brinker
common stock. NRJV owned and operated nine Chili's restaurants in
California and Nevada. This acquisition was accounted for as a pooling
of interests.
Revenues, net income (loss), primary net income (loss) per share, and
fully diluted net income (loss) per share for the period ended May 4,
1994, fiscal 1993, and fiscal 1992 are presented below for Brinker, On
The Border, and NRJV on a separate and combined basis (in thousands,
except per share amounts):
Period Ended May 4 Year Ended June 30
1994 (1) 1993 1992
(Unaudited)
Revenues:
Brinker $684,901 $652,943 $519,260
On The Border 28,169 25,615 21,765
NRJV 19,634 22,755 24,143
Pro forma adjustments (2,573) (3,917) (2,807)
Combined $730,131 $697,396 $562,361
Net income (loss):
Brinker $ 53,722 $ 48,933 $ 35,712
On The Border (4,234) 970 (20)
NRJV 2,135 4,020 2,119
Pro forma adjustments (749) (3,000) (1,786)
Combined $ 50,874 $ 50,923 $ 36,025
Primary and fully diluted
net income (loss) per share:
Brinker $ 0.72 $ 0.67 $ 0.50
On The Border (0.06) 0.01 0.00
NRJV 0.03 0.06 0.02
Pro forma adjustments (0.01) (0.04) (0.02)
Combined $ 0.68 $ 0.70 $ 0.50
(1) On The Border amounts are based on financial results through
April 25, 1994.
Pro forma adjustments represent the elimination of royalty fees,
franchise fees, development fees, accounting fees, and management fees
charged to NRJV by Brinker, and the elimination of Brinker's investment
in NRJV including partnership distributions and equity income. In
addition, a pro forma adjustment was made in fiscal 1994 to reinstate an
On The Border deferred income tax asset of approximately $1,024,000
which was not recognized on an On The Border stand-alone basis due to
the uncertainty of On The Border's ability to utilize the asset against
future earnings.
Merger expenses of $1,949,000 incurred in fiscal 1994 related to the
acquisition of On The Border are reported separately to reflect the
impact of nonrecurring charges. These costs primarily relate to
consulting fees, legal fees, and severance costs.
3. INVESTMENTS
Brinker adopted Statement of Financial Accounting Standards No. 115
("SFAS No. 115"), Accounting for Certain Investments in Debt and Equity
Securities, effective June 29, 1994. Under SFAS No. 115, debt and
equity securities are classified into three categories: trading,
available-for-sale, and held-to-maturity. Trading securities represent
debt and equity securities held for a very short period with the intent
on making a profit on the difference between retail versus dealer
prices. Held-to-maturity securities represent debt securities that a
company has the intent and ability to hold to maturity. Available-for-
sale securities represent debt and equity securities that can not be
classified as trading or held-to-maturity.
As of June 29, 1994, Brinker's investment portfolio consists entirely of
equity securities classified as available-for-sale. SFAS No. 115
requires available-for-sale securities to be carried at fair value with
unrealized gains and unrealized losses reported as a separate component
of shareholders' equity. A decline in market value of any available-
for-sale security below cost that is deemed other than temporary is
charged to earnings resulting in the establishment of a new cost basis
for the security.
Brinker's investment position at June 29, 1994 and June 30, 1993 is as
follows (in thousands):
1994 1993
Cost $45,680 $28,693
Gross unrealized holding gains 66 917
Gross unrealized holding losses (507) (34)
Fair value $45,239 $29,576
Realized gains and realized losses are determined on a specific
identification basis. Realized gains and realized losses from
investment transactions were $1,871,000 and $1,400,000 (including
$1,072,000 of realized losses resulting from recognition of a permanent
decline in market value for certain securities) during fiscal 1994,
$2,137,000 and $558,000 during fiscal 1993, and $965,000 and $950,000
during fiscal 1992. Dividend and interest income during fiscal 1994,
1993, and 1992 was $3,624,000, $2,800,000, and $3,200,000, respectively.
Realized gains and realized losses as well as dividend and interest
income are included in other, net.
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
1994 1993
Insurance $16,956 $10,651
Payroll 13,810 11,171
Profit sharing 6,259 5,630
Property tax 6,023 3,948
Sales tax 4,843 4,324
Other 9,987 10,236
$57,878 $45,960
5. CREDIT FACILITIES
Brinker has available credit facilities aggregating $41.2 million at
June 29, 1994. These credit facilities bear interest based upon the
lower of the banks' "Base" or prime rate plus 1%, CD rates, or
Eurodollar rates, and expire through fiscal 1995. Commitment fees
related to these credit facilities were not material.
6. SENIOR SUBORDINATED CONVERTIBLE DEBENTURES
Prior to its acquisition by Brinker, On The Border completed the private
placement of $1,200,000 of senior subordinated convertible debentures
("debentures") on March 10, 1992. The debentures bear interest at 8.5%
per annum and are payable semi-annually. If not previously converted,
Brinker will be required to redeem $300,000 of debentures on each of
January 15, 1996, 1997, 1998, and December 31, 1998. The debentures may
be converted into Brinker common stock at a rate of $24.32 per share by
the holders at any time and may be prepaid at the election of Brinker.
7. INCOME TAXES
Brinker adopted Statement of Financial Accounting Standards No. 96
("SFAS No. 96"), "Accounting for Income Taxes", in fiscal 1988. The
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes", in February 1992. SFAS No. 109, which supersedes SFAS No. 96,
retained the asset and liability approach for financial accounting and
reporting for income taxes as in SFAS No. 96, but reduced the complexity
of SFAS No. 96 and changed the criteria for recognition and measurement
of deferred tax assets. Effective July 1, 1993, Brinker adopted SFAS
No. 109 without restatement of prior periods and the impact on Brinker's
consolidated financial statements was not material.
The provision for income taxes consists of the following (in thousands):
1994 1993 1992
Current income tax expense:
Federal $32,120 $29,335 $13,445
State 3,980 3,501 1,769
Total current income tax expense 36,100 32,836 15,214
Deferred income tax expense (benefit):
Federal (1,935) (5,551) 3,002
State (333) (202) 620
Total deferred income tax expense
(benefit): (2,268) (5,753) 3,622
$33,832 $27,083 $18,836
A reconciliation between the reported provision for income taxes and the
amount computed by applying the statutory Federal income tax rate of 35%
in fiscal 1994 and 34% in fiscal 1993 and 1992 to income before
provision for income taxes follows (in thousands):
1994 1993 1992
Income tax expense at statutory rate $33,403 $26,522 $18,653
Targeted jobs tax credit (709) (588) (919)
FICA tax credit (1,097) --- ---
Foreign tax credit (55) (50) (31)
Net investment activities (870) (1,094) (650)
State income taxes 2,228 2,177 1,577
Other 932 116 206
$33,832 $27,083 $18,836
The income tax effects of temporary differences that give rise to
significant portions of deferred income tax assets and liabilities as
determined under SFAS No. 109 as of June 29, 1994 follows (in
thousands):
Deferred income tax assets:
Insurance reserves $10,399
Leasing transactions 2,004
Net operating loss carryforwards 2,255
Other, net 4,509
Total deferred income tax assets 19,167
Deferred income tax liabilities:
Depreciation and capitalized interest
on property and equipment 16,116
Preopening costs amortization 5,670
Prepaid expenses 480
Other, net 4,389
Total deferred income tax liabilities 26,655
Net deferred income tax liability $ 7,488
The income tax effects of temporary differences that give rise to
significant portions of deferred income tax (assets) liabilities as
determined under SFAS No. 96 as of June 30, 1993 are as follows (in
thousands):
Depreciation and capitalized interest
on property and equipment $13,269
Insurance reserves (6,948)
Preopening costs amortization 5,796
Leasing transactions (1,898)
Net operating loss carryforwards (398)
Other, net (65)
Net deferred income tax liability $ 9,756
At June 29, 1994, Brinker has available net operating loss carryforwards
for Federal income tax purposes of $5,981,000 (arising from the On The
Border merger), which are available to offset future Federal taxable
income through fiscal 2008.
The Omnibus Budget Reconciliation Act, enacted in August 1993, mandated
certain changes in Federal income tax laws, which among other items,
included an increase in the statutory Federal corporate income tax rate
from 34% to 35%, retroactive to January 1993, reinstatement of the
targeted jobs tax credit, retroactive to January 1993, and a tax credit
for FICA taxes paid on tips, effective January 1994. These changes did
not have a material impact on Brinker's fiscal 1994 and 1993 effective
income tax rate or the consolidated financial statements.
8. STOCK OPTION PLANS
(a) 1983 and 1992 Employee Incentive Stock Option Plans
In accordance with the Incentive Stock Option Plans adopted in October
1983 and November 1992, options to purchase approximately 16.3 million
shares of Brinker's common stock may be granted to officers, directors,
and key employees. Options are granted at market value on the date of
grant, are exercisable beginning one year from the date of grant, with
various vesting periods, and expire ten years from the date of grant.
Option prices under these plans range from $1.27 to $26.83.
Transactions during fiscal 1994, 1993, and 1992 were as follows (in
thousands, except option prices):
1994 1993 1992
Options outstanding at beginning of year 6,284 6,498 6,318
Granted 1,474 1,539 1,277
Exercised (771) (1,562) (944)
Canceled (90) (191) (153)
Options outstanding at end of year 6,897 6,284 6,498
Option price range for options
granted during the year $20.38 $18.95 $11.22
to to to
$26.83 $19.33 $14.55
Options exercisable at end of year 3,282 2,702 3,059
Options available for grant
at end of year 2,321 3,705 1,677
(b) 1984 Non-Qualified Stock Option Plan
In accordance with the Non-Qualified Stock Option Plan adopted in
December 1984, options to purchase approximately 5.0 million shares of
Brinker's common stock were authorized for grant. Options were granted
at market value on the date of grant, are exercisable beginning one year
from the date of grant, with various vesting periods, and expire ten
years from the date of grant. Option prices under this plan range from
$.35 to $5.30.
On November 30, 1989, the Non-Qualified Stock Option Plan was
terminated. Consequently, no options were granted subsequent to fiscal
1990. Options granted prior to the termination of this plan remain
exercisable through June 1999.
Transactions during fiscal 1994, 1993, and 1992 were as follows (in
thousands):
1994 1993 1992
Options outstanding at beginning of year 858 2,741 2,871
Exercised (309) (1,871) (127)
Canceled --- (12) (3)
Options outstanding at end of year 549 858 2,741
Options exercisable at end of year 549 858 2,741
(c) 1991 Non-Employee Stock Option Plan
In accordance with the Stock Option Plan for Non-Employee Directors and
Consultants adopted in May 1991, options to purchase 337,500 shares of
Brinker's common stock were authorized for grant. Options are granted at
market value on the date of grant, are exercisable beginning two years
from the date of grant, with a three year vesting period, and expire ten
years from the date of grant. Option prices under this plan range from
$11.22 to $23.92.
Transactions during fiscal 1994, 1993, and 1992 were as follows (in
thousands, except option prices):
1994 1993 1992
Options outstanding at beginning of year 107 80 ---
Granted 18 27 80
Exercised (3) --- ---
Options outstanding at end of year 122 107 80
Option price for options granted
during the year $23.92 $14.67 $11.22
Options exercisable at end of year 36 --- ---
Options available for grant
at end of year 213 231 258
(d) On The Border 1989 Stock Option Plan
In accordance with the Stock Option Plan for On The Border employees and
consultants, options to purchase 550,000 shares of On The Border's pre-
acquisition common stock were authorized for grant. Options were
granted at market value on the date of grant, were exercisable in
installments, and expired three to five years from date of grant.
Effective May 18, 1994, the 376,000 unexercised On The Border stock
options became exercisable immediately in accordance with the Stock
Option Plan's change in control clause (see Note 2) and were converted
to approximately 124,000 Brinker stock options. These options are
outstanding at June 29, 1994 and are exercisable at prices ranging from
$17.48 to $24.32.
9. LEASES
(a) Capital Leases
Brinker leases certain buildings under various leases which are
classified as capital leases. The asset value of $7,900,000 at June 29,
1994 and at June 30, 1993, and the related accumulated amortization of
$5,100,000 and $4,800,000 at June 29, 1994 and June 30, 1993,
respectively, are included in property and equipment.
(b) Operating Leases
Brinker leases restaurant facilities and certain equipment under
operating leases having terms expiring at various dates through fiscal
2022. The restaurant leases have renewal clauses of 5 to 30 years at
the option of Brinker and have provisions for contingent rent based upon
a percentage of gross sales, as defined in the leases. Rent expense for
fiscal 1994, 1993, and 1992 was $31,700,000, $27,400,000, and
$24,900,000, respectively. Contingent rent included in rent expense for
fiscal 1994, 1993, and 1992 was $2,800,000, $2,500,000, and $1,900,000,
respectively.
(c) Commitments
At June 29, 1994, future minimum lease payments on capital and operating
leases were as follows (in thousands):
Fiscal Year Capital Leases Operating Leases
1995 $ 965 $ 26,724
1996 955 26,577
1997 949 26,390
1998 771 25,938
1999 657 25,355
Thereafter 2,881 186,927
Total minimum lease payments 7,178 $317,911
Imputed interest
(average rate of 11.5%) 2,213
Present value of
minimum payments 4,965
Less current installments 501
Capital lease obligations $4,464
In July 1993, Brinker entered into operating lease agreements with
unaffiliated groups to begin leasing certain restaurant sites. These
unaffiliated groups have committed to make available up to $30,000,000
for the development of restaurants to be leased by Brinker for up to 5
years. The agreements with these groups expire in fiscal 1998, and do
not provide for renewal. Upon expiration, Brinker may either purchase
the properties or allow the lessor to sell the restaurants to an
unrelated party and guarantee the residual value of approximately
$25,500,000. At June 29, 1994, $12,400,000 of this financing facility
had been utilized.
At June 29, 1994, Brinker had entered into other lease agreements for
restaurant facilities currently under construction or yet to be
constructed. In addition to a base rent, the leases also contain
provisions for additional contingent rent based upon gross sales, as
defined in the leases. Classification of these leases as capital or
operating has not been determined as construction of the leased
properties has not been completed.
10. SAVINGS PLANS
Effective January 1, 1993, Brinker established the Brinker Savings
Plan I ("Plan I"), a qualified defined contribution retirement plan
covering salaried employees who have completed one year or 1,000 hours
of service. Plan I allows eligible employees to defer receipt of up to
20% of their compensation and contribute such amounts to various
investment funds. Brinker matches 25% of the first 5% an employee
contributes with Brinker common stock. Employee contributions vest
immediately while Brinker contributions vest 25% annually beginning in
the participants' second year of eligibility since plan inception. In
fiscal 1994 and 1993, Brinker contributed approximately $345,000
(representing 11,666 shares of Brinker common stock) and $173,000
(representing 8,162 shares of Brinker common stock), respectively, and
incurred approximately $116,000 and $48,000 in administrative fees,
respectively.
Effective January 1, 1993, Brinker established the Brinker Savings
Plan II ("Plan II"), a non-qualified defined contribution retirement
plan covering highly compensated employees, as defined in the plan.
Plan II allows eligible employees to defer receipt of up to 20% of their
base compensation and 100% of their eligible bonuses, as defined in the
plan, and contribute such amounts to various investment funds. Brinker
matches 25% of the first 5% a non-officer contributes with Brinker
common stock while officers' contributions are matched at the same rate
with cash. Employee contributions vest immediately while Brinker
contributions vest 25% annually beginning in the participants' second
year of employment since plan inception. In fiscal 1994 and 1993,
Brinker contributed approximately $231,000 (of which approximately
$175,000 was used to purchase 7,096 shares of Brinker common stock) and
$69,000 (of which approximately $49,000 was used to purchase 2,373
shares of Brinker common stock), respectively, and incurred
approximately $116,000 and $48,000 in administrative fees, respectively.
Brinker has a Rabbi Trust to fund Plan II obligations. As of June 29,
1994 and June 30, 1993, assets of the trust aggregated approximately
$2,599,000 and $566,000, respectively, and are included in other assets.
The aggregate market value of these assets at June 29, 1994 and June 30,
1993 approximated aggregate cost.
11. LAWSUIT SETTLEMENT AND CONTINGENCIES
On March 13, 1993, certain officers of On The Border and various family
members were involved in an airplane accident. In fiscal 1994, the
claim was settled for approximately $2,248,000 and On The Border was
released from further liability.
Brinker is engaged in various legal proceedings and has certain
unresolved claims pending. The ultimate liability, if any, for the
aggregate amounts claimed cannot be determined at this time. However,
management of Brinker, based upon consultation with legal counsel, is of
the opinion that there are not matters pending or threatened which are
expected to have a material adverse effect on Brinker's consolidated
financial condition or results of operations.
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following summarizes the unaudited consolidated quarterly results of
operations for fiscal 1994 and 1993.
(in thousands, except per share amounts)
Fiscal 1994
Quarters Ended
Sept. 29 Dec. 29 March 30 June 29
Revenues $205,368 $212,196 $224,508 $236,401
Income Before Provision
for Income Taxes 22,771 20,024 24,818 27,825
Net Income 14,758 12,995 15,966 17,887
Primary Net Income Per Share 0.20 0.17 0.21 0.24
Primary Weighted Average
Shares Outstanding 74,148 74,682 74,824 74,512
Fiscal 1993
Quarters Ended
Sept. 30 Dec. 31 March 31 June 30
Revenues $161,336 $163,097 $175,286 $197,677
Income Before Provision
for Income Taxes 17,524 16,457 20,321 23,704
Net Income 11,777 10,789 13,077 15,280
Primary Net Income Per Share 0.16 0.15 0.18 0.21
Primary Weighted Average
Shares Outstanding 71,912 72,383 73,167 73,606
Amounts differ from those previously reported to reflect the fiscal 1994
acquisitions accounted for as poolings of interest as discussed in Note 2.
INDEPENDENT AUDITORS' REPORT
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 29, 1994 and
June 30, 1993, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended June 29, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Brinker
International, Inc. and subsidiaries as of June 29, 1994 and June 30, 1993,
and the results of their operations and cash flows for each of the years in
the three-year period ended June 29, 1994, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
July 29, 1994
EXHIBIT 21
BRINKER INTERNATIONAL, INC., A DELAWARE CORPORATION
SUBSIDIARIES
REGISTRANT has other wholly-owned subsidiaries not shown herein, all of which
operate full-service restaurants in various locations throughout the United
States.
ON THE BORDER CAFES, INC., a Texas corporation, is a wholly-owned subsidiary
of Registrant. ON THE BORDER CAFES, INC. has other wholly-owned subsidiaries
not shown herein.
BRINKER RESTAURANT CORPORATION, a Delaware corporation, is a wholly-owned
subsidiary of Registrant. BRINKER RESTAURANT CORPORATION has other wholly-
owned subsidiaries not shown herein.
BRINKER SPAGEDDIES CORPORATION, a Delaware corporation (a wholly-
owned subsidiary of Brinker Restaurant Corporation)
CHILI'S BEVERAGE COMPANY, INC., a Texas corporation (an indirect
wholly-owned subsidiary of Brinker Restaurant Corporation)
GRADY'S, INC., a Tennessee corporation (a wholly-owned subsidiary
of Brinker Restaurant Corporation)
MODERNAGE, INC., a Delaware corporation (a wholly-owned subsidiary
of Brinker Restaurant Corporation)
ROMANO'S MACARONI GRILL, INC., a Texas corporation (a wholly-owned
subsidiary of Brinker Restaurant Corporation)
BRINKER TEXAS, L.P., a Texas limited partnership (an indirect
wholly-owned subsidiary of Brinker Restaurant Corporation)
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Brinker International, Inc.:
We consent to incorporation by reference in the Registration Statement No. 33-
61594 on Form S-8, No. 33-52705 on Form S-4 and No. 33-67318, No. 33-55181
and No. 33-53965 on Form S-3 of Brinker International, Inc. and subsidiaries
of our reports dated July 29, 1994, relating to the consolidated balance
sheets of Brinker International, Inc. and subsidiaries as of June 29, 1994
and June 30, 1993, and the related consolidated statements of income,
shareholders' equity, and cash flows and related schedules for each of the
years in the three-year period ended June 29, 1994, which reports
appear or are incorporated by reference in the June 29, 1994 annual report on
Form 10-K of Brinker International, Inc. and subsidiaries.
KPMG Peat Marwick LLP
Dallas, Texas
September 27, 1994
EXHIBIT 27
FINANCIAL DATA SCHEDULE
[Filed With EDGAR Version]
EXHIBIT 99
PROXY STATEMENT OF REGISTRANT
DATED SEPTEMBER 29, 1994
DIRECTORS AND EXECUTIVE OFFICERS
A brief description of each person nominated to become a director of the
Company is provided below. All nominees are currently serving as directors of
the Company, each having been elected at the last annual meeting of the
Company's shareholders held on November 4, 1993, except James E. Oesterreicher
and Frederick S. Humphries, both of whom were appointed to the Board of
Directors on May 3, 1994.
Norman E. Brinker, 63, has been Chairman of the Board of Directors and
Chief Executive Officer of the Company since September 1983, except for the
period from January 27, 1993 to May 4, 1993. During this time period,
Mr. Brinker was incapacitated due to an injury, and until his recovery the
positions of Chairman and CEO were held by Ronald A. McDougall. Mr. Brinker
is a member of the Executive and Nominating Committees of the Company.
Mr. Brinker was the founder of S & A Restaurant Corp. (which was acquired by
The Pillsbury Company in June 1976), the developer and operator of Steak and
Ale Restaurants and Bennigan's Taverns, having served as its President from
February 1966 through May 1977 and as its Chairman of the Board of Directors
and Chief Executive Officer from May 1977 through July 1983. From June 1982
through July 1983, Mr. Brinker served as Chairman of the Board of Directors
and Chief Executive Officer of Burger King Corporation, while simultaneously
occupying the position of President of The Pillsbury Company Restaurant Group.
Mr. Brinker currently serves as a member of the Board of Directors of Haggar
Apparel Company.
F. Lane Cardwell, Jr., 42, was elected Executive Vice President -
Strategic Development in June 1992, having formerly held the position of
Senior Vice President - Strategic Development since December 1990.
Mr. Cardwell joined the Company as Vice President - Strategic Development in
August 1988, having been previously employed by S & A Restaurant Corp. from
November 1978 to August 1988, during which time he served as Vice President -
Strategic Planning and Senior Vice President - Strategic Planning.
Mr. Cardwell has served as a member of the Board of Directors of the Company
since September 1991 and is a member of the Executive Committee of the
Company.
Creed L. Ford, III, 41, joined the Company's predecessor in September
1976 as an Assistant Manager and was promoted to the position of Restaurant
General Manager in March 1977. In September 1978, Mr. Ford became Director of
Operations of the Company. He was elected Vice President - Operations of the
Company in October 1983, Senior Vice President - Operations in November 1984,
and Executive Vice President - Operations in April 1986. Mr. Ford has served
as a member of the Board of Directors of the Company since April 1985 and is a
member of the Executive Committee of the Company.
Ronald A. McDougall, 52, was elected President and Chief Operating
Officer of the Company in April 1986 having formerly held the office of
Executive Vice President - Marketing and Strategic Development of the Company
since September 1983. During the period January 27, 1993 to May 4, 1993,
Mr. McDougall served as Chairman and CEO. Mr. McDougall is a member of the
Executive and Nominating Committees of the Company. From March 1974 through
June 1982, Mr. McDougall was employed by S & A Restaurant Corp. in several
management positions, including Senior Vice President of Marketing and
Strategic Development and a director. During the last six months of 1982, he
was Executive Vice President of 1330 Corporation, a publishing firm. From
January 1983 to July 1983, he held the position of Vice President - Marketing
of Burger King Corporation. Mr. McDougall has served as a member of the Board
of Directors of the Company since September 1983.
Debra L. Smithart, 40, joined the Company as Assistant Controller in
June 1985. In February 1986 she was promoted to the position of Controller
and served in this capacity until December 1988 when she was elected Vice
President -Controller. In March 1991, Ms. Smithart was promoted to Vice
President - Finance and held this position until September 1991 when she was
promoted to Executive Vice President - Chief Financial Officer. Prior to
joining the Company, Ms. Smithart worked in various financial/accounting
capacities in the public accounting, oil & gas, real estate, and manufacturing
industries. Ms. Smithart has served as a member of the Board of Directors of
the Company since September 1991 and is a member of the Executive and
Nominating Committees of the Company.
Roger F. Thomson, 45, joined the Company as Senior Vice President,
General Counsel and Secretary in April 1993 and was promoted to Executive Vice
President, General Counsel and Secretary in March 1994. From 1988 until April
1993, Mr. Thomson served as Senior Vice President, General Counsel and
Secretary for Burger King Corporation. Prior to 1988, Mr. Thomson spent ten
years at S & A Restaurant Corp. where he was Executive Vice President, General
Counsel and Secretary. Mr. Thomson has served as a member of the Board of
Directors of the Company since September 1993.
Jack W. Evans, 72, is currently President of Jack Evans Investments,
Inc. Mr. Evans is a member of the Nominating Committee and Compensation
Committee of the Company and has served as a member of the Company's Board of
Directors since September 1983. He served as Chairman, Chief Executive
Officer and President of Cullum Companies, Inc., a retail food and drugstore
chain from 1977 to 1990. He served as Mayor of the City of Dallas from May
1981 to May 1983. He is also a director of Texas Utilities Corporation,
Randall's-Tom Thumb, First Bank, and Morning Star Group.
Rae F. Evans, 46, is currently Vice President, National Affairs of
Hallmark Cards, Inc. and has held such position since February 1982.
Ms. Evans is a member of the Nominating Committee and Audit Committee of the
Company and has served as a member of the Board of Directors of the Company
since January 1990. She is a member of the Business-Government Relations
Council and is a past president of the organization. She is a member of the
Executive Committee of the National Women's Economic Alliance, the Washington
Federal City Council, National Women's Forum and the Catalyst Board of
Advisors. Additionally, she is the founder of Women at the Top, a speakers
bureau of Washington women and is an active guest speaker on government issues
in Washington. Ms. Evans was recently appointed to the Board of Directors of
Haggar Apparel Company.
J. M. Haggar, Jr., 69, was elected as Chairman of the Board of Directors
of Haggar Apparel Company, a clothing manufacturer, in April 1991. He
previously held the positions of President and Chief Executive Officer of
Haggar Apparel Company from 1971 and 1985, respectively. He is also a
director of ENSERCH Corporation. Mr. Haggar is a member of the Audit
Committee of the Company and has served as a member of the Company's Board of
Directors since April 1985.
J. Ira Harris, 56, is a Senior Partner with Lazard Freres & Co., an
investment banking firm, having held such position since joining the firm in
January 1988. Mr. Harris has served as a member of the Board of Directors of
the Company since September 1993 and is a member of the Compensation Committee
of the Company. He was previously a General Partner of Salomon Brothers and
served as a member of its Executive Committee from 1978 to 1983. He also
served as a Director of Phibro-Salomon. Mr. Harris serves as a Director for
various entities including Manpower, Inc. and Caremark International, Inc. He
is also Trustee of Northwestern University.
Frederick S. Humphries, 58, is the President of Florida A&M University
in Tallahassee, Florida having held this position since 1985. Prior to
joining Florida A&M University, Dr. Humphries was President of Tennessee State
University in Nashville for over 11 years. Dr. Humphries serves as Chairman
of the State Board of Education Advisory Committee on the Education of Blacks
in Florida and is Chairman of the Board of Regents, Five-Year Working Group
for Agriculture, State University System of Florida in addition to being
involved in various civic and community activities. He is also a member of
the Board of Directors of Barnett Bank and Wal-Mart, Inc.
Ray L. Hunt, 51, is currently Chief Executive Officer and Chairman of
the Board of Directors of Hunt Oil Company, having held such positions since
1975. He is also President and Chairman of the Board of Directors of Hunt
Consolidated, Inc. and RRH Corporation. Mr. Hunt serves as a director of
Dresser Industries, Inc. Mr. Hunt has served as a member of the Board of
Directors of the Company since December 1983 and is a member of the
Compensation Committee and the Nominating Committee of the Company.
James E. Oesterreicher, 53, is the President of JCPenney Stores and
Catalog, having been elected to this position in 1992. Mr. Oesterreicher has
been with J.C. Penney Company, Inc. since 1964 where he started as a
management trainee. He serves as a Director for various entities, including
Presbyterian Hospital of Plano, Circle Ten Council, Boy Scouts of America, and
National 4-H Council. He also serves as an advisory board member for the
Center for Retailing, Education and Research at the University of Florida.
William F. Regas, 65, co-founded, in 1982, Grady's, Inc. ("Grady's"), a
Tennessee corporation and a wholly-owned subsidiary of the Company, and served
as its Chairman of the Board from 1982 to 1989. Mr. Regas is currently Co-
Chairman of Grady's Board of Directors. Mr. Regas has been active in the
National Restaurant Association, having served as its President from 1980 to
1981. Mr. Regas has served as Chairman of the Board of Directors of Regas
Brothers, Inc. since 1952, and is also a general partner of Regas Real Estate
Company. He serves as a member of the Audit Committee of the Company and has
served on the Company's Board of Directors since October 1989.
Roger T. Staubach, 52, has been Chairman of the Board and Chief
Executive Officer of The Staubach Company, a national real estate company
specializing in tenant representation, since 1982. He has served as a member
of the Board of Directors of the Company since May 1993 and is a member of the
Executive, Nominating and Compensation Committees of the Company.
Mr. Staubach is a 1965 graduate of the U.S. Naval Academy and served four
years in the Navy as an officer. In 1968, he joined the Dallas Cowboys
professional football team as quarterback and was elected to the National
Football League Hall of Fame in 1985. He currently serves on the Board of
Directors of Halliburton Company, Gibson Greetings, Inc., First USA, Inc.,
Life Partners Group and Columbus Realty Trust and is active in numerous civic,
charity and professional organizations.
Executive Officers of the Company
The following persons are executive officers of the Company who do not
serve on the Company's Board of Directors:
Douglas H. Brooks, 41, joined the Company as an Assistant Manager in
February 1978 and was promoted to General Manager in April 1978. In March
1979, Mr. Brooks was promoted to Area Supervisor and in May 1982 to Regional
Director. He was again promoted in March 1987 to Senior Vice President-
Central Region Operations and to the position of Concept Head and Senior Vice
President-Chili's Operations in June 1992. Mr. Brooks was promoted to his
current position of Senior Vice President and Chili's Concept President in
June 1994. Prior to joining the Company, Mr. Brooks helped manage the first
two Luther's Barbecue units.
Richard L. Federico, 40, joined the Company as Director of Operations
for Grady's in February 1989. Upon the Company's acquisition of Romano's
Macaroni Grill in November 1989, Mr. Federico became the Concept Head of this
new restaurant group. He was promoted to Vice President-Romano's Macaroni
Grill Operations in December 1990 and in June 1992 was promoted to Concept
Head and Senior Vice President-Macaroni Grill Operations. In February 1994,
Mr. Federico assumed responsibility for the operations of Spageddies Italian
Kitchen and was promoted to his current position as Senior Vice President and
Italian Concept President in June 1994. Prior to joining the Company,
Mr. Federico worked in various management capacities with S&A Restaurant Corp.
and Houston's Restaurants and was a co-founder of Grady's Goodtimes,
predecessor to Grady's American Grill.
John C. Miller, 39, joined the Company as Vice President-Special
Concepts in September 1987. In October 1988, he was elected Vice President-
Joint Venture/Franchise and served in this capacity until August 1993 when he
was promoted to Senior Vice President-New Concept Development. In May 1994,
Mr. Miller assumed responsibility for the operations of On The Border Cafes
and was promoted to his current position as Senior Vice President-Mexican
Concepts in September 1994. Mr. Miller worked in various capacities with the
Taco Bueno Division of Unigate Restaurants prior to joining the Company.
Arthur J. DeAngelis, 40, has worked with the Company through one of its
franchise groups as a manager and later as an area director since 1984. In
1991, Mr. DeAngelis joined the Company under the Grady's American Grill
concept and in June 1991 was promoted to Vice President-Operations.
Mr. DeAngelis was promoted to his recent position of Senior Vice President-
Grady's American Grill Concept Head in June 1994. Mr. DeAngelis began his
restaurant career with S&A Restaurant Corp. in 1976 prior to joining the
Company.
Committees of the Board of Directors
The Board of Directors of the Company has established an Executive
Committee, Audit Committee, Compensation Committee and Nominating Committee.
The Executive Committee (along with Ms. Smithart, comprised of Messrs.
Brinker, McDougall, Ford, Cardwell and Staubach) has authority to act for the
Board on most matters during the intervals between Board meetings.
All of the members of the Audit and Compensation Committees are
directors independent of management who are not and never have been officers
or employees of the Company. The Audit Committee is currently comprised of
Ms. Evans and Messrs. Haggar and Regas and the Committee met once during the
fiscal year. Included among the functions performed by the Audit Committee
are: the review with independent auditors of the scope of the audit and the
results of the annual audit by the independent auditors; consideration and
recommendation to the Board of the selection of the independent auditors for
the next year; the review with management and the independent auditors of the
annual financial statements of the Company; and the review of the scope and
adequacy of internal audit activities.
The Compensation Committee is currently comprised of Messrs. Evans,
Hunt, Harris and Staubach and it met three (3) times during the fiscal year.
Functions performed by the Compensation Committee include: ensuring the
effectiveness of senior management and management continuity, ensuring the
reasonableness and appropriateness of senior management compensation
arrangements and levels, the adoption, amendment and administration of stock-
based incentive plans (subject to shareholder approval where required),
management of the various stock option plans of the Company, approval of the
total number of available shares to be used each year in stock-based plans,
approval of the adoption and amendment of significant compensation plans and
approval of all compensation actions for officers, particularly at and above
the level of executive vice president. The specific nature of the Committee's
responsibilities as it relates to executive officers are set forth below under
"Report of the Compensation Committee."
The purpose of the Nominating Committee, created in September 1993, is
to recommend to the Board of Directors potential non-employee members to be
added as new or replacement members to the Board of Directors. The Nominating
Committee met once during the fiscal year and is composed of Messrs. Brinker,
Evans, Hunt, McDougall and Staubach and Ms. Smithart and Ms. Evans.
For purposes of determining whether non-employee directors will be
nominated for reelection to the Board of Directors, the non-employee directors
have been divided into four classes. Each non-employee director will continue
to be subject to reelection by the shareholders of the Company each year.
However, after a non-employee director has served on the Board of Directors
for four years, such director shall be deemed to have been advised by the
Nominating Committee that he or she will not stand for reelection at the
subsequent annual meeting of shareholders and shall be considered a "Retiring
Director". Notwithstanding this policy, the Nominating Committee may
determine that it is appropriate to renominate any or all of the Retiring
Directors after first considering the appropriateness of nominating new
candidates for election to the Board of Directors. The four classes of non-
employee directors are as follows: Messrs. Hunt and Regas comprise Class 2
and will be considered Retiring Directors as of the annual meeting of
shareholders following the end of the 1995 fiscal year. Mr. Haggar comprises
Class 3 and will be considered a Retiring Director as of the annual meeting of
shareholders following the end of the 1996 fiscal year. Messrs. Harris and
Staubach comprise Class 4 and will be considered Retiring Directors as of the
annual meeting of shareholders following the end of the 1997 fiscal year.
Messrs. Evans, Humphries, and Oesterreicher and Ms. Evans comprise Class 1 and
will be considered Retiring Directors as of the annual meeting of shareholders
following the end of the 1998 fiscal year.
Directors Compensation
Directors who are not employees of the Company receive $1,000 for each
meeting of the Board of Directors attended and $1,000 for each meeting of any
committee of the Board of Directors attended (unless such committee meeting is
held in conjunction with a meeting of the Board of Directors, in which event
compensation for attending the committee meeting will be $750). The Company
also reimburses directors for costs incurred by them in attending meetings of
the Board.
Directors who are not employees of the Company receive grants of stock
options under the Company's 1991 Stock Option Plan for Non-Employee Directors
and Consultants. Each such director receives 2,000 stock options annually.
If the shareholders of the Company approve the amendment described under
"Amendment of Stock Option Plans-1991 Stock Option Plan for Non-Employee
Directors and Consultants", new directors who are not employees of the Company
will have the option at the beginning of each Director term to receive as
additional compensation for serving on the Board of Directors either cash
consideration of $30,000 per year during the term such non-employee serves as
a director or a one-time grant of 12,000 stock options under the Company's
1991 Stock Option Plan for Non-Employee Directors and Consultants. If the
director is appointed to the Board of Directors at any time other than at an
annual meeting of shareholders, such director will make such election at the
meeting of the Board of Directors held contemporaneous with the next annual
meeting of shareholders and the director will receive a prorated portion of
the annual cash compensation for the period from the date of election or
appointment to the Board of Directors until the meeting of the Board of
Directors held contemporaneous with the next annual meeting of shareholders.
If the director elects to receive cash, the first payment will be made at such
Board of Directors meeting and the following payments will be made on the date
of each annual meeting of shareholders thereafter. If the director elects to
receive stock options, they will be granted as of the 60th day following such
meeting (or if the 60th day is not a business day, on the first business day
thereafter). The stock options will be granted at the fair market value on
the date of grant. One-third of the options will vest on each of the second,
third and fourth anniversaries of the date of grant.
Current directors who are not employees of the Company are also eligible
for additional compensation under this compensation program. Commencing with
the meeting of the Board of Directors to be held November 3, 1994, each of the
current non-employee directors will have the one-time option to receive as
additional compensation for serving on the Board of Directors either $30,000
cash consideration per year during the term such non-employee serves as
director or a one-time grant of stock options. The number of stock options
received and the vesting period for such options will be prorated as set forth
below. The election of a current director to accept the additional
compensation in cash or in stock options will be made at such Board of
Directors meeting. If the director elects to receive cash, the first payment
will be made at such Board of Directors meeting and the following payments
will be made on the date of each annual meeting of shareholders thereafter.
If a current director elects to receive stock options, they will be granted as
of January 3, 1995. The stock options will be granted at the fair market
value on the date of grant.
For purposes of applying this new compensation program to the current
non-employee directors of the Company, if any of Messrs. Evans, Humphries, and
Oesterreicher or Ms. Evans elect to receive stock options, such director will
be granted 12,000 options on January 3, 1995, and one-third of the options
will be fully vested on each of January 3, 1997, 1998, and 1999. If either
Messrs. Harris or Staubach elect to receive stock options, such director will
be granted 9,000 stock options on January 3, 1995, and one-third of the
options will be fully vested on each of January 3, 1996, 1997, and 1998. If
Mr. Haggar elects to receive stock options, he will be granted 6,000 stock
options on January 3, 1995, and one-half of the options will be fully vested
on each of January 3, 1996 and 1997. If either of Messrs. Hunt or Regas elect
to receive stock options, he will be granted 3,000 stock options on January 3,
1995, and the options will be fully vested on January 3, 1996.
If a Retiring Director is renominated to serve on the Board of Directors
for an additional four-year period, such Retiring Director will be treated as
a new director for purposes of determining compensation during such additional
four-year period.
During the year ended June 29, 1994, the Board of Directors held six
meetings; all incumbent directors were present at all of the meetings with the
exception of Mr. Hunt who was unable to attend two meetings.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth the annual
compensation for the Company's five highest compensated executive officers,
including the Chief Executive Officer, whose salary and bonus exceeded
$100,000.00 in fiscal 1994.
Long-Term Stock
Name and Profit Incentive Total Options
Principal Position Year Salary Sharing Other(1) Payouts Compensation Awarded(2)
Norman E. Brinker 1994 $659,135 $706,592 $26,439 $93,940 $1,486,106 202,500
Chairman of the 1993 $573,708 $753,887 $10,933 $93,940 $1,432,468 225,000
Board and Chief 1992 $523,792 $360,308 $ 0 $75,164 $ 959,264 168,750
Executive Officer
Ronald A. McDougall 1994 $529,327 $567,439 $22,547 $93,940 $1,213,253 202,500
President and Chief 1993 $444,538 $585,842 $ 5,972 $93,940 $1,130,292 225,000
Operating Officer 1992 $406,115 $283,009 $ 500 $75,164 $ 764,788 135,000
Creed L. Ford, III 1994 $343,942 $275,154 $ 7,305 $68,889 $ 695,290 56,250
Executive Vice 1993 $306,692 $309,847 $ 6,082 $68,889 $ 691,510 67,500
President -- 1992 $290,146 $169,406 $ 500 $50,109 $ 510,161 67,500
Operations
Debra L. Smithart 1994 $232,500 $186,000 $ 5,471 $50,101 $ 474,072 56,250
Executive Vice 1993 $183,309 $186,640 $ 500 $31,313 $ 401,762 67,500
President -- Chief 1992 $134,208 $ 30,935 $ 500 $25,055 $ 190,698 45,000
Financial Officer
Douglas H. Brooks 1994 $232,884 $135,772 $12,582 $43,839 $ 425,077 45,000
Senior Vice 1993 $206,231 $174,199 $ 2,746 $43,839 $ 427,015 38,250
President-Chili's 1992 $184,280 $ 75,598 $ 500 $37,582 $ 297,960 38,250
Grill & Bar
Operations
(1) Other compensation represents Company match on deferred compensation, club memberships and dues,
tax preparation services and relocation benefits.
(2) Stock options awarded have been restated to reflect the March 1994 stock split effected in the
form of a 50% stock dividend.
Option Grants During 1994 Fiscal Year
The following table contains certain information concerning the grant of
stock options to the executive officers named in the above compensation table
during the Company's last fiscal year:
% of Total Realizable Value of Assumed
Options Granted Annual Rates of Stock Price
Options to Employees Exercise or Expiration Appreciation for Option Term
Name Granted in Fiscal Year Base Price Date 5% 10%
Norman E. Brinker 15,000 $26.833 02/04/2004 $ 253,127 $ 641,473
187,500 $20.375 06/28/2004 $2,402,574 $6,088,594
202,500 13.75% $2,655,701 $6,730,067
Ronald A. McDougall 15,000 $26.833 02/04/2004 $ 253,127 $ 641,473
187,500 $20.375 06/28/2004 $2,402,574 $6,088,594
202,500 13.75% $2,655,701 $6,730,067
Creed L. Ford, III 11,250 $26.833 02/04/2004 $ 189,845 $ 481,105
45,000 $20.375 06/28/2004 $ 576,618 $1,461,263
56,250 3.82% $ 766,463 $1,942,368
Debra L. Smithart 11,250 $26.833 02/04/2004 $ 189,845 $ 481,105
45,000 $20.375 06/28/2004 $ 576,618 $1,461,263
56,250 3.82% $ 766,463 $1,942,368
Douglas H. Brooks 7,500 $26.833 02/04/2004 $ 126,563 $ 320,737
37,500 $20.375 06/28/2004 $ 480,515 $1,217,719
45,000 3.06% $ 607,078 $1,538,456
Stock Option Exercises and Fiscal Year-End Value Table
The following table shows stock option exercises by the named officers
during the last fiscal year, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options at fiscal year-
end. Also reported are the values for "in-the-money" options which represent
the position spread between the exercise price of any such existing options
and the $21.00 fiscal year-end price of the Company's Common Stock.
Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options at
On Value Options at Fiscal Year End Fiscal Year End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Norman E. Brinker 0 $ 0 421,875 511,875 $ 4,364,635 $1,036,060
Ronald A. McDougall 150,938 3,312,804 195,000 495,000 1,724,191 927,301
Creed L. Ford, III 225,000 5,806,595 738,144 157,500 11,420,035 358,167
Debra L. Smithart 9,000 191,731 48,938 146,250 442,278 285,661
Douglas H. Brooks 35,972 990,919 337,953 102,375 5,228,379 210,462
Long-Term Executive Profit Sharing Plan and Awards
Executives of the Company participate in the Long-Term Executive Profit
Sharing Plan. See "Report of the Compensation Committee -- Long-Term
Incentives" for more information regarding this plan. The following table
represents awards granted in the last fiscal year under the Long-Term
Executive Profit Sharing Plan.
Number of Estimated Future Payouts
Name Units Awarded Under Non-Stock Based Plans
(Dollars)
Threshold Target Maximum
Norman E. Brinker 900 $60,000 $90,000 *
Ronald A. McDougall 900 $60,000 $90,000 *
Creed L. Ford, III 600 $40,000 $60,000 *
Debra L. Smithart 600 $40,000 $60,000 *
Douglas H. Brooks 400 $26,667 $40,000 *
* There is no maximum future payout under the Long-Term Executive Profit
Sharing Plan.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as to the number of
shares of Common Stock of the Company beneficially owned by the principal
shareholders of the Company.
Beneficial Ownership
Number of
Name and Address Shares Percent
Provident Investment Counsel 4,577,115 (1) 6.39%
300 North Lake Avenue
Pasadena, California 91101
IDS Financial Corporation 4,137,950 (2) 5.78%
IDS Tower 10
Minneapolis, Minnesota 55440
(1) As of September 8, 1994. Based on information contained in
Schedule 13G dated as of December 31, 1993, as supplemented by subsequent
communication.
(2) As of August 31, 1994. Based on information contained in
Schedule 13G dated as of December 31, 1993, as supplemented by subsequent
communication.
SECURITY OWNERSHIP OF MANAGEMENT
AND ELECTION OF DIRECTORS
Fifteen (15) directors are to be elected at the meeting. Each nominee
will be elected to hold office until the next annual meeting of the
shareholders or until his or her successor is elected and qualified. Proxy
holders will not be able to vote the proxies held by them for more than 15
persons. To be elected a director, each nominee must receive a plurality of
all of the votes cast at the meeting for the election of directors. Should
any nominee become unable or unwilling to accept nomination or election, the
proxy holders may vote the proxies for the election, in his or her stead, of
any other person the Board of Directors may recommend. All nominees have
expressed their intention to serve the entire term for which election is
sought. The following table sets forth certain information concerning
security ownership of management and the persons nominated for election as
directors of the Company:
Number of Shares
of Common Stock
Beneficially Owned as Percent of
Name as of September 9, 1994(1) Class
Norman E. Brinker 1,562,134 (2) 2.18%
Douglas H. Brooks 337,975 *
F. Lane Cardwell, Jr. 79,772 *
Creed L. Ford, III 755,354 1.06%
Ronald A. McDougall 195,022 *
Debra L. Smithart 50,460 *
Roger F. Thomson 1,000 *
Jack W. Evans, Sr. 71,717 *
Rae F. Evans 1,585 *
J.M. Haggar, Jr. 130,645 *
J. Ira Harris 2,000 (3) *
Frederick S. Humphries -0- -0-
Ray L. Hunt 33,750 *
James E. Oesterreicher -0- -0-
William F. Regas 109,287 (4) *
Roger T. Staubach 1,500 *
All executive officers
and directors as a
group (19 persons) 3,528,510 4.93%
* Less than one percent (1%)
(1) Includes shares of Common Stock which may be acquired by exercise
of exercisable options granted under the Company's 1983 Incentive Stock Option
Plan, the 1984 Non-Qualified Stock Option Plan, the 1992 Incentive Stock
Option Plan and the 1991 Stock Option Plan for Non-Employee Directors and
Consultants, as applicable.
(2) Includes 20,250 shares of Common Stock held of record by a family
trust of which Mr. Brinker is trustee.
(3) Includes 2,000 shares of Common Stock held of record by a trust of
which Mr. Harris is trustee.
(4) Includes 4,658 shares of Common Stock held of record by a family
trust of which Mr. Regas is trustee.
The Company has established a guideline that all senior officers of the
Company own stock in the Company, believing that it is important to further
encourage and support an ownership mentality among the senior officers that
will continue to align their personal financial interests with the long-term
interests of the Company's shareholders. Pursuant to the guideline, the
minimum amount of Company Common Stock that a senior officer will be required
to own will be determined by such officer's position within the Company as
well as annual compensation. The guideline requires that each Senior Vice
President own an amount of Common Stock equal in value to such officer's base
salary, each Executive Vice President own an amount of Common Stock equal in
value to twice such officer's base salary, the President own an amount of
Common Stock equal in value to three times his base salary, and the Chief
Executive Officer own an amount of Common Stock equal in value to four times
his base salary. The guideline also encourages all other officers of the
Company to similarly acquire Common Stock in the Company. It is expected that
phase-in of the guideline will begin by the end of 1994, for those senior
officers who do not currently meet the minimum stock ownership levels as
established by the guideline.