FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 28, 1994
Commission File Number 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)
(214) 980-9917
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of common stock of registrant outstanding at September 28,
1994: 71,667,245.
</PAGE>
BRINKER INTERNATIONAL, INC.
INDEX
Part I Financial Information
Condensed Consolidated Balance Sheets -
September 28, 1994 and June 29, 1994 3-4
Condensed Consolidated Statements of Income -
Thirteen week periods ended September 28, 1994
and September 29, 1993 5
Condensed Consolidated Statements of Cash Flows -
Thirteen week periods ended September 28, 1994
and September 29, 1993 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II Other Information 11
</PAGE>
<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<CAPTION>
SEPTEMBER 28, 1994 JUNE 29, 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 1,060 $ 3,743
Accounts Receivable 16,967 12,651
Assets Held for Sale and Leaseback 347 ---
Inventories 8,681 8,213
Prepaid Expenses 18,028 17,601
Deferred Income Taxes 4,246 4,655
Total Current Assets 49,329 46,863
Property and Equipment, at Cost:
Land $ 113,442 $ 106,040
Buildings and Leasehold Improvements 304,149 286,437
Furniture and Equipment 185,847 172,403
Construction-in-Progress 28,227 31,300
631,665 596,180
Less Accumulated Depreciation 172,450 161,946
Net Property and Equipment 459,215 434,234
Other Assets:
Preopening Costs $ 8,027 $ 7,927
Marketable Securities 44,459 45,239
Notes Receivable 986 2,231
Other 26,127 21,941
Total Other Assets 79,599 77,338
Total Assets $ 588,143 $ 558,435
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
</PAGE>
<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)
<CAPTION>
SEPTEMBER 28, 1994 JUNE 29, 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term Debt $ 11,150 $ ---
Current Installments of Long-term Debt 309 501
Accounts Payable 44,357 45,340
Accrued Liabilities 55,057 55,901
Total Current Liabilities 110,873 101,742
Long-term Debt, Less Current Installments 3,813 4,404
Senior Subordinated Convertible Debentures 1,200 1,200
Deferred Income Taxes 13,112 12,143
Other Liabilities 20,392 21,569
Commitments and Contingencies
Shareholders' Equity:
Preferred Stock-1,000,000 Authorized Shares;
$1.00 Par Value; No Shares Issued --- ---
Common Stock-100,000,000 Authorized Shares;
$.10 Par Value; 71,667,245 and 71,405,017
Shares Issued and Outstanding at
September 28, 1994 and June 29, 1994,
Respectively 7,167 7,141
Additional Paid-In Capital 186,994 183,299
Unrealized Loss on Marketable Securities (1,334) (441)
Retained Earnings 245,926 227,378
Total Shareholders' Equity 438,753 417,377
Total Liabilities and
Shareholders' Equity $ 588,143 $ 558,435
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
</PAGE>
<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Thirteen Week Periods Ended
September 28, 1994 September 29, 1993
<S> <C> <C> <C> <C>
Revenues $ 247,072 $ 207,253
Costs and Expenses:
Cost of Sales 66,276 57,398
Restaurant Expenses 126,847 105,711
Depreciation and Amortization 13,786 11,531
General and Administrative 12,224 10,897
Interest Expense --- 116
Other, Net (817) (1,416)
Total Costs and Expenses 218,316 184,237
Income Before Provision for
Income Taxes 28,756 23,016
Provision for Income Taxes 10,208 8,099
Net Income $ 18,548 $ 14,917
Primary and Fully Diluted Net
Income Per Share $ 0.25 $ 0.20
Primary Weighted Average Shares
Outstanding 74,799 74,523
Fully Diluted Weighted Average
Shares Outstanding 74,936 74,742
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
</PAGE>
<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Thirteen Week Periods Ended
September 28, 1994 September 29, 1993
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 18,548 $ 14,917
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation of Property and Equipment 11,263 9,568
Amortization of Preopening Costs 2,523 1,963
Changes in Assets and Liabilities:
Increase in Accounts Receivable (4,316) (2,329)
Increase in Inventories (468) (798)
Increase in Prepaid Expenses (427) (883)
Increase in Other Assets (5,564) (4,497)
(Decrease) Increase in Accounts Payable (983) 5,651
(Decrease) Increase in Accrued Liabilities (844) 1,123
Increase in Deferred Income Taxes 1,378 1,074
(Decrease) Increase in Other Liabilities (1,177) 436
Net Cash Provided by Operating Activities 19,933 26,225
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Property and Equipment (36,244) (31,176)
(Increase) Decrease in Assets Held for
Sale and Leaseback (347) 734
Purchases of Marketable Securities (4,411) (19,660)
Proceeds from Sales of Marketable Securities 4,298 17,802
Net Cash Used in Investing Activities (36,704) (32,300)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of Short-term Debt 11,150 4,750
(Payments) Borrowings of Long-term Debt (783) 28
Proceeds from Issuances of Common Stock 3,721 608
Net Cash Provided by Financing Activities 14,088 5,386
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,683) (689)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,743 12,477
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,060 $ 11,788
CASH PAID DURING THE PERIOD:
Interest, Net of Amounts Capitalized $ --- $ 116
Income Taxes 1,839 330
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
</PAGE>
BRINKER INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of Brinker
International, Inc. ("Company") as of September 28, 1994 and June 29,
1994 and for the thirteen week periods ended September 28, 1994 and the
September 29, 1993 have been prepared by the Company, pursuant to the
rules and regulations of the Securities and Exchange Commission. The
Company owns and operates five primary restaurant concepts under the
names of 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").
The information furnished herein reflects all adjustments (consisting of
normal recurring accruals and adjustments) which are, in the opinion of
management, necessary to fairly state the operating results for the
respective periods. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant
to such rules and regulations. The notes to the condensed consolidated
financial statements should be read in conjunction with the notes to the
consolidated financial statements contained in the June 29, 1994
Form 10-K. Company management believes that the disclosures are
sufficient for interim financial reporting purposes.
2. 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 period
increased by common equivalent shares (stock options) determined using
the treasury stock method.
3. Business Combination
Effective August 3, 1994, the Company acquired four Chili's restaurants
located in Florida and Georgia from a franchisee in exchange for 505,930
shares of Company common stock. The acquisition of one of the
restaurants was accounted for as a purchase. The acquisition of the
remaining three restaurants was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements have been
restated to include the accounts and operations of the three acquired
restaurants for the periods presented.
</PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations For The Thirteen Week Periods Ended September 28, 1994
and September 29, 1993
The following table sets forth expenses as a percentage of total revenues for
revenue and expense items included in the Condensed Consolidated Statements of
Income.
<TABLE>
<CAPTION>
Thirteen Week Periods Ended
September 28, 1994 September 29, 1993
<S> <C> <C>
Revenues 100.0% 100.0%
Costs and Expenses:
Cost of Sales 26.8% 27.7%
Restaurant Expenses 51.3% 51.0%
Depreciation and Amortization 5.6% 5.6%
General and Administrative 4.9% 5.3%
Interest Expense 0.0% 0.0%
Other, Net (0.2)% (0.7)%
Total Costs and Expenses 88.4% 88.9%
Income Before Provision for
Income Taxes 11.6% 11.1%
Provision for Income Taxes 4.1% 3.9%
Net Income 7.5% 7.2%
</TABLE>
The following table shows restaurant openings during the first quarter and
total restaurants open at the end of the first quarter.
<TABLE>
<CAPTION>
First Quarter Openings
Fiscal Fiscal Total Open At End of First Quarter
1995 1994 Fiscal 1995 Fiscal 1994
<S> <C> <C> <C> <C>
Chili's:
Company-owned 16 16 296 263
Franchised 8 1 86 71
Total 24 17 382 334
Macaroni Grill:
Company-owned 4 4 38 26
Franchised -- -- 1 --
Total 4 4 39 26
Grady's 1 4 35 28
Spageddies -- 1 6 4
On The Border:
Company-owned -- -- 14 11
Franchised -- 2 6 7
Total -- 2 20 18
R&D Concepts:
Company-owned -- -- 1 1
Joint Venture -- -- 1 --
Total -- -- 2 1
Grand Total 29 28 484 411
</TABLE>
</PAGE>
REVENUES
Revenues for the first quarter of fiscal 1995 increased to $247.1 million,
19.2% over the $207.3 million generated for the same quarter of fiscal 1994.
The increase is primarily attributable to the 61 Company-operated restaurants
opened or acquired since September 29, 1993. In addition, reported comparable
store sales increased 0.7% as Chili's, Macaroni Grill, and Grady's generated
comparable store sales increases (decreases) of 1.0%, 1.9%, and (2.5)%,
respectively. Strong new store sales volumes experienced last year,
particularly with respect to Grady's and Macaroni Grill, resulted in more
difficult comparable store sales comparisons this quarter. Although the
Florida market has been hurt by a decline in tourism, positive comparable
store sales gains in Texas and California have offset the comparatively soft
sales in Florida.
COSTS AND EXPENSES (as a percent of Revenues)
Cost of sales decreased from 27.7% in fiscal 1994 to 26.8% in fiscal 1995. As
a result of increased purchasing leverage, favorable commodity prices were
experienced in meat, poultry, produce, and dairy. These prices were
responsible for about 50% of the favorable variance. Other favorable factors
include shifts in product mix to lower food cost items and menu reformulation,
such as the addition of the Guiltless Grill menu items at Chili's. These
positive variances were somewhat offset by unfavorable prices for non-
alcoholic beverages and seafood.
Restaurant expenses increased from 51% in fiscal 1994 to 51.3% in fiscal 1995.
Management costs increased due to staffing and training costs associated with
second and third quarter expansion. At the restaurant level, hourly costs
increased due to overtime incurred to cover temporary spot shortages
experienced when school commenced in August and September. These cost
increases were partially offset by decreases in rent expense resulting from an
increase in the percentage of owned versus leased restaurants and reductions
in claim costs across all lines of insurance as a result of aggressive safety
programs in place at the restaurant level.
Depreciation and amortization was flat compared to the prior year first
quarter. Construction costs for new restaurants, remodel costs, and capital
expenditures at the corporate level, including investments in new computer
hardware and software, were offset by increased restaurant revenues and a
declining depreciable asset base for older units.
General and administrative expenses declined in the first quarter of fiscal
1995 compared to fiscal 1994 due to the Company's ongoing focus on controlling
corporate overhead and efficiencies realized from increased investments in
computer hardware and software. The dollar increase in general and
administrative expenses is due to additional staff and support as the Company
accelerates expansion of its restaurant concepts, including international
franchising.
Other, net, decreased compared to the first quarter of fiscal 1994. The
decrease is primarily the result of $500,000 in net realized gains on sales of
marketable securities recognized in the first quarter of fiscal 1994 as
investments were called by companies that were refinancing. Interest and
dividend income, however, remained flat.
INCOME BEFORE PROVISION FOR INCOME TAXES
As a result of the relationships between revenues and costs and expenses,
income before provision for income taxes has increased 24.9% over the first
quarter of fiscal 1994.
</PAGE>
INCOME TAXES
The Company's effective income tax rate increased to 35.5% in the first
quarter of fiscal 1995 compared to 35.2% in the first quarter of fiscal 1994.
The Company's effective income tax rate continues to rise as a result of
incremental earnings taxed at higher effective rates and additional state
income tax liabilities resulting from continued expansion, particularly
relating to growth in California and Florida.
NET INCOME AND NET INCOME PER SHARE
Net income and net income per share rose 24.3% and 25%, respectively, compared
to the first quarter of fiscal 1994. The increases exceed the increase in
revenues as the Company continues to control costs and expenses while
maintaining the expansion of the restaurant concepts. The 0.4% increase in
primary weighted average shares outstanding is primarily the result of common
stock options exercised.
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 raising menu prices.
LIQUIDITY AND CAPITAL RESOURCES
The working capital deficit increased from $54.9 million at June 29, 1994 to
$61.5 million at September 28, 1994, due primarily to the Company's capital
expenditures as discussed below. Net cash provided by operating activities
decreased from $26.3 million in the first quarter of fiscal 1994 to $19.9
million in the first quarter of fiscal 1995 due to the timing of operational
receipts and payments, which offset cash generated from the increased number
of restaurants in operation, strong operating results from existing units, and
the effective containment of costs.
Long-term debt outstanding at September 28, 1994 consisted of obligations
under capital leases. At September 28, 1994, the Company had available funds
from lines of credit totalling $28.9 million.
Capital expenditures were $36.2 million for the first quarter of fiscal 1995,
as compared to $31.2 million in the first quarter of fiscal 1994. Purchases
of land for future restaurant sites, new restaurants under construction,
purchases of new and replacement restaurant furniture and equipment, and the
ongoing remodeling program for existing units were responsible for the
increased expenditures. The Company estimates that its capital expenditures
during the second quarter of fiscal 1995 will be approximately $48 million.
These capital expenditures will be funded from internal operations, income
earned from investments, build-to-suit lease agreements with landlords, and
drawdowns on the Company's available lines of credit.
The Clinton administration is likely to continue 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 additional 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.
</PAGE>
PART II. OTHER INFORMATION
No items applicable to the first quarter of fiscal 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRINKER INTERNATIONAL, INC.
Date: November 8, 1994 By: /Ronald A. McDougall
Ronald A. McDougall, President and Chief
Operating Officer
(Duly Authorized Signatory)
Date: November 8, 1994 By: /Debra L. Smithart
Debra L. Smithart, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
