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UNITED STATES
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 30, 1999 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 (972) 980-9917
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.10 par value
Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
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 7,
1999 was $1,564,286,335.
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 7, 1999
Common Stock, $0.10 par value 65,820,477 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders
for the fiscal year ended June 30, 1999 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 24, 1999, for its annual meeting of shareholders on
November 4, 1999, 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, development and
franchising of the Chili's Grill & Bar ("Chili's"),
Romano's Macaroni Grill ("Macaroni Grill"), On The Border
Mexican Grill & Cantina ("On The Border"), Cozymel's
Coastal Mexican Grill ("Cozymel's"), Maggiano's Little
Italy ("Maggiano's"), and Corner Bakery Cafe ("Corner
Bakery") restaurant concepts. In addition, the Company is
involved in the operation and development of the Eatzi's
Market and Bakery ("Eatzi's"), Big Bowl ("Big Bowl"), and
Wildfire ("Wildfire") 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 Macaroni Grill, On The
Border, Cozymel's, Maggiano's, and Corner Bakery in
November 1989, May 1994, July 1995, August 1995, and
August 1995, respectively.
Core Restaurant Concepts
Chili's Grill & Bar
Chili's is a full-service Southwestern-themed
restaurant, featuring a casual atmosphere and a varied
menu of chicken, beef and seafood entrees, steaks,
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,
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, high quality food at modest prices. Entree
selections range in menu price from $4.99 to $12.99, with
the average revenue per meal, including alcoholic
beverages, approximating $10.10 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 30, 1999, food and
non-alcoholic beverage sales constituted approximately
86.5% of the concept's total restaurant revenues, with
alcoholic beverage sales accounting for the remaining
13.5%.
Romano's Macaroni Grill
Macaroni Grill is a casual, country-style Italian
restaurant which specializes in family-style recipes and
features seafood, meat, chicken, pasta, salads, pizza,
appetizers and desserts with a full-service bar in most
restaurants. Exhibition cooking, pizza ovens and
rotisseries provide an enthusiastic and exciting
environment in the restaurants. Macaroni Grill
restaurants also feature white linen-clothed tables,
fireplaces, sous stations 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 $5.29 to
$16.99 with certain specialty items priced on a daily
basis. The average revenue per meal, including alcoholic
beverages, is approximately $13.70 per person. During the
year ended June 30, 1999, food and non-alcoholic beverage
sales constituted approximately 85.9% of the concept's
total restaurant revenues, with alcoholic beverage sales
accounting for the remaining 14.1%.
On The Border Mexican Grill & Cantina
On The Border restaurants are full-service, casual
Mexican theme restaurants featuring mesquite-grilled
specialties and traditional Tex-Mex entrees and appetizers
served in generous portions at modest prices. On The
Border restaurants feature an outdoor patio, a full-
service bar, 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 $5.55 to
$12.99, with the average revenue per meal, including
alcoholic beverages, approximating $11.93 per person.
During the year ended June 30, 1999, food and non-
alcoholic beverage sales constituted approximately 78.7%
of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 21.3%.
Cozymel's Coastal Mexican Grill
Cozymel's restaurants are casual, upscale authentic
coastal Mexican theme restaurants featuring fish, chicken,
beef and pork entrees, appetizers, desserts and a full-
service bar featuring a wide variety of signature
margaritas and specialty frozen beverages. Cozymel's
restaurants offer a "tropical, not typical" Mexican
atmosphere, which includes an outdoor patio, intended to
evoke memories of Mexican sunsets, warm beaches, and
festive celebrations.
Entree selections range in menu price from $5.99 to
$15.49 with the average revenue per meal, including
alcoholic beverages, approximating $13.99 per person.
During the year ended June 30, 1999, food and non-
alcoholic beverage sales constituted approximately 75.9%
of the concept's total restaurant revenues, with alcoholic
beverages accounting for the remaining 24.1%.
Maggiano's Little Italy
Maggiano's restaurants are classic re-creations of a
New York City pre-war "Little Italy" dinner house. Each
of the Maggiano's restaurants is a casual, full-service
Italian restaurant with a full lunch and dinner menu, a
family-style menu, and extensive banquet facilities,
offering southern Italian appetizers, homemade bread,
large portions of pasta, chicken, seafood, veal and steak,
and a full range of alcoholic beverages. Entree
selections range in menu price from $6.95 to $29.95, with
the average revenue per meal, including alcoholic
beverages, approximating $24.22 per person. During the
year ended June 30, 1999, food and non-alcoholic beverage
sales constituted approximately 78.8% of the concept's
total restaurant revenues, with alcoholic beverage sales
accounting for the remaining 21.2%.
Corner Bakery Cafe
The Corner Bakery is designed as a retail bakery in the
traditional, Old World bread bakery style. The Corner
Bakery offers handmade products - muffins, brownies,
cookies and specialty items, as well as hearth-baked
loaves, rolls and baguettes, all of which are created
fresh daily by artisan bakers. The breads offered by the
Corner Bakery include baguettes, crusty country boules,
and specialty breads such as raisin-pecan, Kalamata olive
ciabatta, chocolate sour-cherry, cranberry-orange, multi-
grain harvest, and ryes. In addition, the Corner Bakery
also offers pizza, sandwiches, soups and salads.
While retaining an atmosphere of a working Old World
bakery, the Corner Bakery exemplifies casual elegance,
with most bakeries having both indoor and outdoor seating.
In addition to breads, breakfast and dessert sweets,
featured in the restaurants are chef-prepared fresh
salads, soups, sandwiches and pizzas. New savory foods,
breads and sweets are created seasonally to take advantage
of the highest quality ingredients available. The Corner
Bakery's catering group offers a wide range of gift
baskets, trays and lunch boxes for any scale from large
corporate events to a small, personal brunch. Prices for
menu items range from $1.00 to $7.95 with the average
revenue per meal, including alcoholic beverages,
approximating $7.94 per person. During the year ended
June 30, 1999, food and non-alcoholic beverage sales
constituted over 99% of the concept's total restaurant
revenues. Catering sales constituted approximately 10.1%
of such food and non-alcoholic beverage sales.
Jointly-Developed Restaurant Concepts
Eatzi's Market and Bakery
Eatzi's is a home meal replacement retail store which
offers customers almost everything in the meal spectrum,
from fresh produce and raw meats and seafood to high-
quality, chef-prepared meals-to-go. Eatzi's also provides
a tremendous variety of "made from scratch" breads and
pastries along with dry groceries, deli meats and cheeses,
made-to-order salads and sandwiches, and fresh cut
flowers. Large selections of non-alcoholic beverages,
wine, and "create your own six-pack" beer are available to
complete the meal.
Eatzi's features an abundance of fresh, high-quality
meals, openly presented in distinctive areas, replicating
an energetic European marketplace with an exhibition
kitchen and bakery. The circular chef's display case is
the focal point of the store designed to channel customer
traffic around to other departments. There is limited
indoor and outdoor seating since the emphasis is on take-
out purchases. The chefs are professionally dressed in
white chef's coats and hats with black and white
houndstooth pants. Retail service personnel wear black
pants, white, banded collar shirts and green aprons.
Emphasis is placed on restaurant-quality cuisine,
prepared fresh daily by highly skilled and culinary-
trained chefs using Eatzi's unique recipes. Certain
designated menu items are rotated periodically to provide
variety and to augment the core menu. Corporate chefs are
constantly developing and testing new recipes to ensure
high-quality and ample variety in addition to keeping
ahead of the customer's changing taste profiles.
Individual meal selections range in price from $3.99 to
$10.99 with the average revenue per purchase, including
alcoholic beverages, approximating $15.47. During the
year ended June 30, 1999, food and non-alcoholic beverage
sales constituted 95.4% of the concept's total revenues,
with alcoholic beverages accounting for the remaining
4.6%. Catering sales constituted approximately 15.4% of
such food and non-alcoholic beverage sales.
Big Bowl
Big Bowl features contemporary Asian cuisine prepared
with fresh ingredients in a casual, vibrant atmosphere.
Big Bowl is distinguished by its authentic, full-flavored
menu that features five kinds of fresh noodles, chicken
pot stickers and dumplings, hand-rolled summer rolls,
seasonal stir-fry dishes featuring local produce, wok-
seared fish, and signature beverages, such as "homemade"
fresh ginger ale and tropical cocktails. Big Bowl's focus
on quality means garlic, ginger and lemon grass are
chopped daily, lemon juice is hand squeezed, and peanut
sauce is prepared with home-roasted peanuts. Big Bowl's
flavorful broths, curry pastes, dip sauces and condiments
are made from scratch. Big Bowl's interactive stir-fry
bar allows the guests to help themselves to a "Farmers'
Market" array of vegetables to be wok-cooked with their
own choice of sauces and meats with noodles or rice.
While honoring its Asian culinary tradition, Big Bowl
strives to deliver fine quality at great value, assisted
by a service team carefully trained to guide guests
through this new culinary experience. Entree selections
range in menu price from $6.95 to $12.95, with the average
revenue per meal, including alcoholic beverages,
approximating $13.46 per person. During the year ended
June 30, 1999, food and non-alcoholic beverage sales
constituted approximately 87.0% of the concept's total
restaurant revenues, with alcoholic beverage sales
accounting for the remaining 13.0%.
Wildfire
Wildfire restaurants are authentic 1940's style steak
houses featuring an open kitchen consisting of a hardwood
burning oven and rotisserie. Each of the Wildfire
restaurants is a casual, full-service restaurant offering
broiled steaks, chops, fresh seafood, barbecued ribs,
pizza, spit-roasted chicken, salads to share, and a full
line of cocktails with a complete wine list to complement
the menu. Entree selections range from $12.95 to $26.95,
with the average revenue per meal, including alcoholic
beverages, approximating $24.92 per person. During the
year ended June 30, 1999, food and non-alcoholic beverage
sales constituted approximately 77.4% of the concept's
total restaurant revenues, with alcoholic beverages
accounting for the remaining 22.6%.
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 not only
on major metropolitan areas in the United States but also
on smaller market areas and nontraditional locations (such
as airports, kiosks and food courts) 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 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 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 twenty-four restaurants,
including five in fiscal 1999, which were performing
below the Company's standards primarily due to declining
trading-area demographics. The Company operates pursuant
to a strategic plan targeted to support the Company's long-
term growth objectives, with a focus on continued
development of those restaurant concepts that have the
greatest return potential for the Company and its
shareholders.
The following table illustrates the system-wide
restaurants opened in fiscal 1999 and the planned openings
in fiscal 2000:
Fiscal 1999 Fiscal 2000
Openings Projected Openings
Chili's:
Company-Operated 27 35
Franchise 32 40
Macaroni Grill:
Company-Operated 17 20
Franchise 1 2
On The Border:
Company-Operated 18 20
Franchise 8 8
Cozymel's 1 0
Maggiano's 3 2
Corner Bakery 22 8
Eatzi's 3 0
Big Bowl 2 2
Wildfire 2 0
TOTAL 136 137
The Company anticipates that some of the fiscal 2000
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 may either lease or own the land (paying for any
owned land from its own funds) and either lease or own the
building, furniture, fixtures and equipment (paying for
any owned items from its own funds).
The following table illustrates the approximate average
capital investment for a typical unit in the Company's
primary restaurant concepts:
Chili's Macaroni Grill On The Border Cozymel's Maggiano's Corner Bakery
Land $ 650,000 $1,000,000 $ 800,000 $1,000,000 $3,000,000 $ 800,000
Building 1,070,000 1,300,000 1,300,000 1,500,000 3,300,000 650,000
Furniture &
Equipment 450,000 600,000 625,000 700,000 1,200,000 325,000
Other 60,000 100,000 90,000 100,000 130,000 50,000
TOTAL $2,230,000 $3,000,000 $2,815,000 $3,300,000 $7,630,000 $1,825,000
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 30, 1999,
thirty-two Chili's, one Macaroni Grill, and eight On The
Border franchised restaurants were opened.
The Company has entered into international franchise
agreements which will bring Chili's to Guatamala and Saudi
Arabia and Macaroni Grill to Mexico in the 2000 fiscal
year. In fiscal 1999, the first Chili's restaurants
opened in Austria (July 1998), Venezuela (December 1998),
Lebanon (January 1999), and Bahrain (May 1999), and the
first Macaroni Grill restaurant opened in Great Britain
(March 1999).
The Company intends to selectively pursue international
expansion and is currently contemplating development in
other countries. A typical franchise development agreement
provides for payment of area development and initial
franchise fees in addition to subsequent royalty and
advertising fees based on the gross sales of each
restaurant. Future 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.
The Company has previously entered into agreements for
research and development activities related to the testing
of new restaurant concepts and has a significant equity
interest in such ventures. The Company currently owns an
18% interest in the legal entity owning the five Eatzi's
stores currently operating in Dallas and Houston, Texas,
Atlanta, Georgia, New York City, New York, and Rockville,
Maryland. In addition, the Company holds a 50% interest
in the legal entity owning the four Big Bowl restaurants
located in Chicago and Lincolnshire, Illinois and Edina,
Minnesota and a 13% interest in the legal entity owning
the three Wildfire restaurants located in Chicago and
Lincolnshire, Illinois.
At June 30, 1999, thirty-nine total joint venture or
franchise development agreements existed. The Company
anticipates that an additional forty franchised Chili's,
two franchised Macaroni Grill, and eight franchised On The
Border restaurants will be opened during fiscal 2000. In
addition, the Company anticipates that two Big Bowl
restaurants will be opened during fiscal 2000.
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. Each concept is
directed by a president and one or more concept vice
presidents and senior vice presidents.
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
two 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.
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 and 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. The training program 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 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.
Employees
At June 30, 1999, the Company employed approximately
62,300 persons, of whom approximately 900 were corporate
personnel, 3,600 were restaurant area directors, managers
or trainees and 57,800 were employed in non-management
restaurant positions. The executive officers of the
Company have an average of approximately 20 years of
experience in the restaurant industry.
The Company considers its employee relations to be good
and believes that its employee turnover rate is
commensurate with 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.
Trademarks
The Company has registered, among other marks, "Big
Bowl", "Brinker International", "Chili's", "Chili's Too",
"Chili's Bar & Bites", "Chili's Southwest Grill & Bar",
"Corner Bakery", "Cozymel's", "Cozymel's Coastal Mexican
Grill", "Eatzi's", "Eatzi's Market & Bakery", "Romano's
Macaroni Grill", "Macaroni Grill", "Maggiano's Little
Italy", "On The Border", "On The Border Mexican Cafe", and
"Wildfire" as trademarks with the United States Patent and
Trademark Office.
Risk Factors/Forward-Looking Statements
The Company wishes to caution readers that the
following important factors, among others, could cause the
actual results of the Company to differ materially from
those indicated by forward-looking statements made in this
report and from time to time in news releases, reports,
proxy statements, registration statements and other
written communications, as well as oral forward-looking
statements made from time to time by representatives of
the Company. Such forward-looking statements involve
risks and uncertainties, include matters such as future
economic performance, restaurant openings, operating
margins, the availability of acceptable real estate
locations for new restaurants, the sufficiency of the
Company's cash balances and cash generated from operating
and financing activities for the Company's future
liquidity and capital resource needs, and other matters,
and are generally accompanied by words such as "believes,"
"anticipates," "estimates," "predicts," "expects" and
similar expressions that convey the uncertainty of future
events or outcomes.
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. In addition, factors such as inflation,
increased food, labor and benefits costs, and difficulty
in attracting hourly employees may adversely affect the
restaurant industry in general and the Company's
restaurants in particular.
Seasonality. The Company's sales volumes fluctuate
seasonally, and are generally higher in the summer months
and lower in the winter months.
Governmental Regulations. 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 occurring in the future.
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. Although the Company
expects increases in payroll expenses as a result of
federal and state mandated increases in the minimum wage,
such increases are not expected to be material. However,
the Company is uncertain of the repercussion, if any, on
other expenses as vendors are impacted by higher minimum
wage standards.
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 or by reviewing, then implementing, alternative
products or processes.
Year 2000. The Year 2000 will have a broad impact on
the business environment in which the Company operates due
to the possibility that many computerized systems across
all industries will be unable to process information
containing dates beginning in the Year 2000. The Company
has established an enterprise-wide program to prepare its
computer systems and applications for the Year 2000 and is
utilizing both internal and external resources to
identify, correct and test the systems for Year 2000
compliance. The Company's domestic reprogramming and
testing efforts have been substantially completed. The
Company expects that all mission-critical systems will be
Year 2000 ready prior to October 31, 1999.
The nature of the Company's business is such that the
business risks associated with the Year 2000 can be
reduced by assessing the vendors supplying the Company's
restaurants with food and related products and also
assessing the Company's franchise and joint venture
business partners to ensure that they are aware of the
Year 2000 business risks and are appropriately addressing
them.
Because third party failures could have a material
impact on the Company's ability to conduct business,
questionnaires have been sent to substantially all of the
Company's critical vendors to obtain reasonable assurance
that plans are being developed to address the Year 2000
issue. The returned questionnaires have been assessed by
the Company, categorized based upon readiness for the Year
2000 issues, and prioritized in order of significance to
the business of the Company. The Company has established
contingency plans (including continued efforts to evaluate
Year 2000 readiness of existing vendors or identification
of alternative vendors) responding to those high risk,
critical vendors which have not provided the Company with
satisfactory evidence of their readiness to handle Year
2000 issues. Furthermore, the Company will continue to
monitor all critical vendors to ensure their Year 2000
readiness.
Based upon questionnaires returned by the Company's
franchise business partners and direct communications with
the Company's joint venture business partners, the Company
has assessed the Year 2000 readiness of these business
partners and has implemented an action plan involving
direct communication and the sharing of information
associated with the Year 2000 issue.
The Company has completed the inventory and assessment
phases of its evaluation of all information technology and
non-information technology equipment. Based upon results
of the assessment, all mission-critical equipment that is
not Year 2000 ready will be fixed or upgraded by October
31, 1999.
The enterprise-wide program, including testing and
remediation of all of the Company's systems and
applications, the cost of external consultants, the
purchase of software and hardware, and the compensation of
internal employees working on Year 2000 projects, is
expected to cost approximately $3.5 to $4.0 million
(except for fringe benefits of internal employees, which
are not separately tracked) from inception in calendar
year 1997 through completion in fiscal 2000. Of these
costs, approximately $750,000 was incurred during fiscal
1998, and approximately $1.6 million was incurred during
fiscal 1999. The remaining costs will be incurred in
fiscal 2000. All estimated costs have been budgeted and
are expected to be funded by the Company's available cash.
The Company anticipates timely completion of the
internal Year 2000 readiness efforts and does not believe
the costs related to the Year 2000 readiness project will
be material to its financial position or results of
operations. However, if unanticipated problems arise from
systems or equipment, there could be material adverse
effects on the Company's consolidated financial position,
results of operations and cash flows. As part of the Year
2000 readiness efforts, the Company has developed
contingency plans which will need to be activated in the
event of internal systems failures, but may be modified as
additional information becomes available. Although the
questionnaires and other communications received by the
Company from its significant vendors have not disclosed
any material Year 2000 issues, there is no assurance that
these vendors will be Year 2000 ready on a timely basis.
Unanticipated failures or significant delays in furnishing
products or services by significant vendors could have a
material adverse effect on the Company's consolidated
financial position, results of operations and cash flows.
Where predictable, the Company is assessing and attempting
to mitigate its risks with respect to the failure of its
significant vendors to be Year 2000 ready as part of its
ongoing contingency planning.
Despite the Company's diligent preparation, some of
the Company's internal systems or equipment may fail to
operate properly, and some of its significant vendors may
fail to perform effectively or may fail to timely or
completely deliver products. In those circumstances, the
Company expects to be able to conduct necessary business
operations and to obtain necessary products from
alternative vendors, and business operations would
generally continue; however, there would be some
disruption which could have a material adverse effect on
the Company's consolidated financial position, results of
operations and cash flows. Similarly, if the Company's
franchise and joint venture business partners sustain
disruptions in their business operations or there are any
unanticipated general public infrastructure failures,
there could be a material adverse effect on the Company's
consolidated financial position, results of operations and
cash flows. The Company has no basis upon which to
reasonably analyze the direct or indirect effects on its
guests from Year 2000 issues or experiences.
Other Risk Factors. Other risk factors that could
cause the Company's actual results to differ materially
from those indicated in the forward-looking statements
include, without limitation, changes in economic
conditions, consumer perceptions of food safety, changes
in consumer tastes, governmental monetary policies,
changes in demographic trends, availability of employees,
and weather and other acts of God.
Item 2. PROPERTIES.
Restaurant Locations
At June 30, 1999, the Company's system of company-
operated, joint venture and franchised units included 933
restaurants located in forty-seven states, Washington,
D.C., Australia, Austria, Bahrain, Canada, Egypt, France,
Great Britain, Indonesia, Kuwait, Lebanon, Malaysia,
Mexico, Peru, Philippines, Puerto Rico, South Korea,
United Arab Emirates, and Venezuela. The Company's
portfolio of restaurants is illustrated below:
Chili's:
Company-Operated 439
Franchise 187
Macaroni Grill:
Company-Operated 128
Franchise 3
On The Border:
Company-Operated 68
Franchise 23
Cozymel's 13
Maggiano's 10
Corner Bakery 49
Eatzi's 6
Big Bowl 4
Wildfire 3
TOTAL 933
The 626 Chili's restaurants include domestic locations
in forty-seven states and the District of Columbia and
foreign locations in eighteen countries. The 131 Macaroni
Grill restaurants include domestic locations in thirty-five
states and foreign locations in Canada and Great Britain.
The On The Border, Cozymel's, Maggiano's, Corner Bakery,
Big Bowl and Wildfire restaurants, and Eatzi's markets, are
located exclusively within the United States in twenty-
seven, eight, six (and the District of Columbia), seven
(and the District of Columbia), two, one, and four states,
respectively. Subsequent to the end of the fiscal year,
the Chili's restaurant located in France was closed.
Restaurant Property Information
The following table illustrates the approximate average
dining capacity for each current prototypical unit in
primary restaurant concepts:
Chili's Macaroni Grill On The Border Cozymel's Maggiano's
Square Feet 5,532-5,984 6,180-7,638 6,505-7,039 8,939 18,516-23,913
Dining Seats 162-254 228-268 218-262 382 609-788
Dining Tables 49-53 49-60 54-62 84 140-168
Corner Bakery's size and dining capacity varies based
upon whether it is an in-line or kiosk location. For a
Corner Bakery located in a kiosk, the square footage is 170
square feet, the number of dining seats is forty, and the
number of dining tables is fifteen. For in-line Corner
Bakery locations, the square footage ranges from 1,971 to
5,347, the number of dining seats ranges from 88 to 143,
and the number of dining tables ranges from thirty to
fifty.
Certain of the Company's restaurants are leased for an
initial term of five to thirty years, with renewal terms of
one to thirty years. The leases typically provide for a
fixed rental plus percentage rentals based on sales volume.
At June 30, 1999, the Company owned the land and/or
building for 468 of the 707 Company-operated restaurants.
The Company considers that its properties are suitable,
adequate, well-maintained and sufficient for the operations
contemplated.
Other Properties
The Company leases warehouse space totalling
approximately 39,150 square feet in Dallas, Texas, which it
uses 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. This office building was expanded in May 1997 by the
addition of a 2,470 square foot facility used for menu
development activities. In January 1996, the Company
purchased an additional office complex containing three
buildings and approximately 198,000 square feet for the
expansion of its corporate headquarters. Approximately
69,410 square feet of this complex is currently utilized by
the Company, with the remaining 128,590 square feet under
lease, listed for lease to third party tenants, or reserved
for future expansion of the Company headquarters. In
November 1997, the Company sold the office complex and is
leasing it back under a twenty year operating lease. The
Company also leases office space in California, Florida,
Georgia, Illinois, New Jersey and Texas for use as regional
operation or real estate/construction offices. The size of
these office leases range from 1,000 square feet to 3,600
square feet. The Company owns or leases warehouse space in
California, Georgia, Illinois, Maryland and Texas for use
as commissaries for the preparation of bread and other food
products for its Corner Bakery stores. The size of these
commissaries range from 11,383 square feet to 20,000 square
feet.
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 30, 1999:
First Quarter 20.44 17.50
Second Quarter 26.63 16.00
Third Quarter 30.31 24.38
Fourth Quarter 29.63 23.56
Fiscal year ended June 24, 1998:
First Quarter 17.50 13.81
Second Quarter 17.81 13.94
Third Quarter 21.63 15.06
Fourth Quarter 24.31 18.56
As of September 7, 1999, there were 1,397 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.
During the three-year period ending on September 7,
1999, the Company issued no securities which were not
registered under the Securities Act of 1933, as amended.
Item 6. SELECTED FINANCIAL DATA.
"Selected Financial Data" on page 29 of the Company's
1999 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 30 through 37
of the Company's 1999 Annual Report to Shareholders is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS.
"Quantitative and Qualitative Disclosures About Market
Risk" contained within "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
on pages 36 through 37 of the Company's 1999 Annual Report
to Shareholders is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14(a)(1).
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.
"Directors and Executive Officers" on pages 4 through 9
and "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 15 of the Company's Proxy Statement
dated September 24, 1999 for the annual meeting of
shareholders on November 4, 1999, are incorporated herein
by reference.
Item 11. EXECUTIVE COMPENSATION INFORMATION.
"Executive Compensation" on pages 9 through 11 and
"Report of the Compensation Committee" on pages 11 through
14 of the Company's Proxy Statement dated September 24,
1999, for the annual meeting of shareholders on November
4, 1999, are 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 24, 1999, for the annual meeting of shareholders
on November 4, 1999, are incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
"Certain Transactions" on pages 15 through 16 of the
Company's Proxy Statement dated September 24, 1999, for
the annual meeting of shareholders on November 4, 1999, is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements
attached hereto on page 19 for a listing of all financial
statements incorporated herein from the Company's 1999
Annual Report to Shareholders.
(a) (2) Financial Statement Schedules.
None.
(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 fiscal quarter ended June 30, 1999.
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:________________________________
Russell G. Owens, Executive Vice
President and Chief Financial and
Strategic Officer
Dated: September 24, 1999
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 24, 1999.
Name Title
___________________ Vice Chairman of the Board and Chief
Ronald A. McDougall Executive Officer
(Principal Executive Officer)
__________________ Executive Vice President, and Chief
Russell G. Owens Financial and Strategic Officer
(Principal Financial and Accounting
Officer)
__________________ Chairman of the Board
Norman E. Brinker
_________________ Director
Donald J. Carty
_________________ Director
Dan W. Cook, III
__________________ Director
Marvin J. Girouard
__________________ Director
J.M. Haggar, Jr.
___________________ Director
Frederick S. Humphries
___________________ Director
Ronald Kirk
___________________ Director
Jeffrey A. Marcus
____________________ Director
James E. Oesterreicher
_____________________ Director
Roger T. Staubach
INDEX TO FINANCIAL STATEMENTS
The following is a listing of the financial statements which are
incorporated herein by reference. The financial statements of
the Company included in the Company's 1999 Annual Report to
Shareholders are incorporated herein by reference in Item 8.
1999 Annual
Report Pages
Consolidated Balance Sheets - 38-39
June 30, 1999 and June 24, 1998
Consolidated Statements of Income - 40
Years Ended June 30, 1999, June 24, 1998
and June 25, 1997
Consolidated Statements of Shareholders' 41
Equity - Years Ended June 30, 1999,
June 24, 1998 and June 25, 1997
Consolidated Statements of Cash Flows - 42
Years Ended June 30, 1999, June 24, 1998
and June 25, 1997
Notes to Consolidated Financial Statements 43-56
Independent Auditors' Report 57
All schedules are omitted as the required information is
inapplicable or the information is presented in the
financial statements or related notes.
INDEX TO EXHIBITS
Exhibit
3(a) Certificate of Incorporation of the registrant, as
amended. (1)
3(b) Bylaws of the registrant. (1)
10(a) Registrant's 1983 Incentive Stock Option Plan. (2)
10(b) Registrant's 1991 Stock Option Plan for Non-Employee
Directors and Consultants. (3)
10(c) Registrant's 1992 Incentive Stock Option Plan. (3)
10(d) Registrant's Stock Option and Incentive Plan. (4)
13 1999 Annual Report to Shareholders. (5)
21 Subsidiaries of the registrant. (4)
23 Independent Auditors' Consent. (4)
27 Financial Data Schedule. (6)
99 Proxy Statement of registrant dated September 24, 1999. (5)
(1) Filed as an exhibit to annual report on Form 10-K for
year ended June 28, 1995 and incorporated herein by
reference.
(2) Filed as an exhibit to annual report on Form 10-K for
year ended June 26, 1996 and incorporated herein by
reference.
(3) Filed as an exhibit to annual report on Form 10-K for
year ended June 25, 1997 and incorporated herein by
reference.
(4) Filed herewith.
(5) Portions filed herewith, to the extent indicated herein.
(6) Filed with EDGAR version.