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 March 29, 1995
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 March 29, 1995:
71,941,441.
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<PAGE>
BRINKER INTERNATIONAL, INC.
INDEX
Part I Financial Information
Condensed Consolidated Balance Sheets -
March 29, 1995 and June 29, 1994 3-4
Condensed Consolidated Statements of Income -
Thirteen week periods and Thirty-Nine week periods
ended March 29, 1995 and March 30, 1994 5
Condensed Consolidated Statements of Cash Flows -
Thirty-Nine week periods ended March 29, 1995
and March 30, 1994 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Part II Other Information 12
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<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<CAPTION>
MARCH 29, 1995 JUNE 29, 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 1,147 $ 3,743
Accounts Receivable 14,291 12,651
Assets Held for Sale and Leaseback 26 ---
Inventories 9,610 8,213
Prepaid Expenses 20,718 17,601
Deferred Income Taxes 4,602 4,655
Total Current Assets 50,394 46,863
Property and Equipment, at Cost:
Land $ 132,943 $ 106,040
Buildings and Leasehold Improvements 343,385 286,437
Furniture and Equipment 205,993 172,403
Construction-in-Progress 34,977 31,300
717,298 596,180
Less Accumulated Depreciation 192,018 161,946
Net Property and Equipment 525,280 434,234
Other Assets:
Preopening Costs $ 7,948 $ 7,927
Marketable Securities 31,006 45,239
Notes Receivable 964 2,231
Other 26,054 21,941
Total Other Assets 65,972 77,338
Total Assets $ 641,646 $ 558,435
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)
<CAPTION>
MARCH 29, 1995 JUNE 29, 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term Debt $ 30,700 $ ---
Current Installments of Long-term Debt 309 501
Accounts Payable 34,206 45,340
Accrued Liabilities 63,248 55,901
Total Current Liabilities 128,463 101,742
Long-term Debt, Less Current Installments 3,248 4,404
Senior Subordinated Convertible Debentures 1,200 1,200
Deferred Income Taxes 14,835 12,143
Other Liabilities 19,997 21,569
Commitments and Contingencies
Shareholders' Equity:
Preferred Stock-1,000,000 Authorized Shares;
$1.00 Par Value; No Shares Issued --- ---
Common Stock-250,000,000 Authorized Shares;
$.10 Par Value; 71,941,441 and 71,405,452
Shares Issued and Outstanding at
March 29, 1995 and June 29, 1994,
Respectively 7,194 7,141
Additional Paid-In Capital 188,548 183,299
Unrealized Loss on Marketable
Securities (2,077) (441)
Retained Earnings 280,238 227,378
Total Shareholders' Equity 473,903 417,377
Total Liabilities and
Shareholders' Equity $ 641,646 $ 558,435
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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<PAGE>
<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
13 Week Periods Ended 39 Week Periods Ended
Mar. 29, 1995 Mar. 30, 1994 Mar. 29, 1995 Mar. 30, 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 268,487 $ 226,440 $ 762,167 $ 647,774
Costs and Expenses:
Cost of Sales 71,640 61,674 205,013 177,907
Restaurant Expenses 141,726 115,283 397,048 330,761
Depreciation and
Amortization 15,061 13,394 43,010 37,837
General & Administrative 12,993 11,262 37,855 33,847
Interest Expense --- 111 --- 354
Merger Expenses --- 601 --- 835
Lawsuit Settlement --- --- --- 2,248
Other, Net (655) (982) (1,963) (4,453)
Total Costs and
Expenses 240,765 201,343 680,963 579,336
Income Before Provision
for Income Taxes 27,722 25,097 81,204 68,438
Provision for Income
Taxes 9,481 8,951 28,344 24,186
Net Income $ 18,241 $ 16,146 $ 52,860 $ 44,252
Primary Net Income
Per Share $ 0.25 $ 0.21 $ 0.71 $ 0.59
Fully Diluted Net
Income Per Share $ 0.25 $ 0.21 $ 0.71 $ 0.59
Primary Weighted Average
Shares Outstanding 74,110 75,199 74,414 74,921
Fully Diluted Weighted
Average Shares
Outstanding 74,110 75,199 74,460 75,049
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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<TABLE>
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Thirty-Nine Week Periods Ended
March 29, 1995 March 30, 1994
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 52,860 $ 44,252
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation of Property and Equipment 35,680 30,774
Amortization of Preopening Costs 7,330 7,063
Gain on Sale of Land --- (1,000)
Changes in Assets and Liabilities:
Increase in Accounts Receivable (1,640) (10,046)
Increase in Inventories (1,397) (982)
Increase in Prepaid Expenses (3,117) (2,153)
Increase in Other Assets (10,197) (9,871)
(Decrease) Increase in Accounts Payable (11,134) 11,342
Increase in Accrued Liabilities 7,347 13,286
Increase in Deferred Income Taxes 3,825 2,580
(Decrease) Increase in Other Liabilities (1,572) 2,061
Net Cash Provided by Operating Activities 77,985 87,306
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Property and Equipment (126,726) (88,026)
Proceeds from Sale of Land --- 4,180
Payment for Purchase of Franchisee Restaurants --- (8,165)
(Increase) Decrease in Assets Held for
Sale and Leaseback (26) 1,108
Purchases of Marketable Securities (9,345) (44,842)
Proceeds from Sales of Marketable Securities 20,862 33,259
Net Cash Used in Investing Activities (115,235) (102,486)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of Short-term Debt 30,700 5,000
(Payments) Borrowings of Long-term Debt (1,348) 6
Proceeds from Issuances of Common Stock 5,302 2,457
Net Cash Provided by Financing Activities 34,654 7,463
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,596) (7,717)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,743 12,477
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,147 $ 4,760
CASH PAID DURING THE PERIOD:
Interest, Net of Amounts Capitalized $ --- $ 354
Income Taxes $ 35,887 $ 15,461
See Accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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<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 March 29, 1995 and June 29, 1994
and for the thirteen week periods and thirty-nine week periods ended
March 29, 1995 and March 30, 1994 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 10K. 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 these three
restaurants for all periods presented. The four acquired restaurants'
results of operations on a pro forma basis are not presented separately
as such results are not material.
</PAGE>
<PAGE>
4. Shareholders' Equity
On November 3, 1994, the shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation which increased
the number of authorized shares of common stock from 100,000,000 to
250,000,000.
5. Subsequent Event
On April 12, 1995, the Company raised $100,000,000 through the issuance
of senior notes bearing interest at an annual rate of 7.8%. Interest is
payable semi-annually and the Company is required to prepay 14.3% of the
original principal balance annually on April 12th beginning in 1999
through 2004 with the remaining unpaid balance due on April 12, 2005.
These proceeds will be utilized to fund future expansion of the
restaurant concepts.
</PAGE>
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<TABLE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For The Thirteen Week Periods and Thirty-Nine Week Periods Ended
March 29, 1995 and March 30, 1994
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.
<CAPTION>
13 Week Periods Ended 39 Week Periods Ended
Mar. 29, 1995 Mar. 30, 1994 Mar. 29, 1995 Mar. 30, 1994
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Cost of Sales 26.7% 27.2% 26.9% 27.5%
Restaurant Expenses 52.8% 50.9% 52.1% 51.1%
Depreciation and
Amortization 5.6% 5.9% 5.6% 5.8%
General & Administrative 4.8% 5.0% 5.0% 5.2%
Interest Expense ---% 0.0% --- 0.1%
Merger Expenses ---% 0.3% --- 0.1%
Lawsuit Settlement ---% ---% --- 0.3%
Other, Net (0.2)% (0.4)% (0.3)% (0.7)%
Total Costs & Expenses 89.7% 88.9% 89.3% 89.4%
Income Before Provision
for Income Taxes 10.3% 11.1% 10.7% 10.6%
Provision for Income Taxes 3.5% 4.0% 3.8% 3.8%
Net Income 6.8% 7.1% 6.9% 6.8%
</TABLE>
</PAGE>
<PAGE>
The following table shows restaurant openings during the third quarter and
year-to-date as well as total restaurants open at the end of the third
quarter.
<TABLE>
<CAPTION>
Total Open at End
3rd Quarter Openings Year-to-Date Openings of Third Quarter
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Chili's:
Company-owned 10 8 32 30 312 279
Franchised 7 5 24 11 102 76
Total 17 13 56 41 414 355
Macaroni Grill:
Company-owned 4 3 15 9 49 31
Franchised -- 1 -- 1 1 1
Total 4 4 15 10 50 32
Grady's 2 2 8 7 41 31
Spageddies:
Company-owned 1 -- 4 1 10 4
Franchised 2 -- 3 -- 3 --
Total 3 -- 7 1 13 4
On The Border:
Company-owned 1 -- 2 3 16 14
Franchised -- -- -- 2 5 7
Total 1 -- 2 5 21 21
R&D Concepts:
Company-owned -- -- -- -- 1 1
Joint Venture 2 1 2 1 3 1
Total 2 1 2 1 4 2
Grand Total 29 20 90 65 543 445
</TABLE>
</PAGE>
<PAGE>
REVENUES
Revenues for the third quarter of fiscal 1995 increased to $268.5 million,
18.6% over the $226.4 million generated for the same quarter of fiscal 1994.
Revenues for the thirty-nine week period ended March 29, 1995 rose 17.7% to
$762.2 million from $647.8 million generated from the same period of fiscal
1994. The increase is primarily attributable to the 71 Company-operated
restaurants opened or acquired since March 30, 1994. Reported comparable store
sales for third quarter and year-to-date of fiscal 1995 changed (0.6%) and
(0.1%), respectively, compared to the respective prior year periods. On a
concept basis, Chili's, Macaroni Grill, and Grady's experienced comparable
store sales changes of (0.8%), 1.8%, and (1.2%), respectively, for the third
quarter of fiscal 1995, and (0.2%), 2.0%, and (1.2%), respectively, on a year-
to-date basis.
COSTS AND EXPENSES (as a percent of Revenues)
Cost of sales decreased for both the third quarter and year-to-date of fiscal
1995. Due to increased purchasing leverage, favorable commodity prices were
experienced in meat, poultry, and dairy on both a third quarter and year-to-
date basis. These positive variances were somewhat offset by unfavorable
prices for lettuce in the latter part of the third quarter due to weather
conditions in California and unfavorable prices for beverages, both alcoholic
and non-alcoholic, and seafood on both a third quarter and year-to-date basis.
Restaurant expenses increased on both a comparative third quarter and year-to-
date basis, primarily resulting from increases in labor, both management and
hourly, restaurant supplies, and advertising costs. The increase in
management labor is due to staffing and training costs associated with future
expansion. At the restaurant level, hourly wages are up due to increased
overtime and training costs resulting from higher turnover, and restaurant
supplies are up primarily as a result of new menu items. Advertising has
increased due to increased television time and local marketing efforts. These
cost increases were partially offset by decreases in fixed costs as a result
of the expanding sales base.
Depreciation and amortization decreased for both the third quarter and year-
to-date of fiscal 1995. A decrease in per-unit depreciation and amortization
due to a declining depreciable asset base for older units and higher average
sales volumes in newer restaurants offset increases related to rising
construction costs, remodel costs, and capital expenditures at the corporate
level, such as investments in new computer hardware and software.
General and administrative expenses declined in the third quarter and year-to-
date of fiscal 1995 compared to the respective fiscal 1994 periods 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.
</PAGE>
<PAGE>
Merger expenses and lawsuit settlement recognized in fiscal 1994 are
nonrecurring costs associated with On The Border. Merger expenses are
consulting and legal fees incurred in the initial phases of negotiating On The
Border's acquisition. Lawsuit settlement is an injury claim settlement
arising from an airplane accident in March 1993 involving several former On
The Border officers.
Other, net, decreased compared to the third quarter and year-to-date of fiscal
1994. The decrease is primarily the result of a gain of approximately $1
million generated from the sale of land in the second quarter of fiscal 1994,
a decrease in net realized gains on sales of marketable securities due to
significant gains recognized in the first quarter of fiscal 1994, and a
decrease in interest and dividend income compared to fiscal 1994 as a result
of a decrease in the investment portfolio balance.
INCOME BEFORE PROVISION FOR INCOME TAXES
As a result of the relationships between revenues and costs and expenses,
income before provision for income taxes increased 10.5% and 18.7%,
respectively, over the third quarter and year-to-date results of fiscal 1994.
INCOME TAXES
The Company's effective income tax rate was 34.2% and 34.9% for the third
quarter and year-to-date of fiscal 1995, respectively, compared to 35.7% and
35.3% for the same periods of fiscal 1994. The fiscal 1995 effective income
tax rate has decreased as a result of lower state income tax liabilities and
an increase in Federal FICA tax credits.
NET INCOME AND NET INCOME PER SHARE
Net income and primary net income per share rose 13.0% and 19.0%,
respectively, compared to the third quarter of fiscal 1994. Year-to-date net
income and primary net income per share increased 19.5% and 20.3%,
respectively, compared to fiscal 1994. In the third quarter, the increase in
net income was less than the increase in revenues due to a rise in labor and
advertising costs which did not generate sufficient additional revenues. The
year-to-date increase, however, exceeded the increase in revenues as the
Company, overall, continues to control costs and expenses while maintaining
the expansion of its restaurant concepts. Primary weighted average shares
outstanding for the third quarter and year-to-date decreased 1.4% and 0.7%,
respectively, compared to the respective prior year periods. Although the
number of outstanding shares has increased as a result of common stock options
exercised, dilutive common stock equivalents were down in fiscal 1995 as a
result of a decline in the Company's stock price.
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 market
conditions, recovers increased costs by raising menu prices.
</PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The working capital deficit increased from $54.9 million at June 29, 1994 to
$78.1 million at March 29, 1995, due primarily to the Company's capital
expenditures as discussed below. Net cash provided by operating activities
decreased to $78.0 million for the nine months ended March 29, 1995 from $87.3
million during the same period in fiscal 1994 due to 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 March 29, 1995 consisted of obligations under
capital leases. At March 29, 1995, the Company had drawn $30.7 million from
its lines of credit to fund short-term operational needs, leaving $19.3
million in available funds from lines of credit.
Capital expenditures were $126.7 million for the nine months ended March 29,
1995 as compared to $96.2 million last fiscal year. 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 were responsible for the increased expenditures. The Company
estimates that its capital expenditures during the fourth quarter will
approximate $46 million. These capital expenditures will be funded from
internal operations, income earned from existing investments, build-to-suit
lease agreements with landlords, and proceeds generated from the $100 million
debt transaction which closed on April 12, 1995.
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 to it under the lines of
credit and strong internal cash generating capabilities to adequately manage
the expansion of business.
PART II. OTHER INFORMATION
Item 6: EXHIBITS
Exhibit 27 Financial Data Schedule. Filed with EDGAR version.
</PAGE>
<PAGE>
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: May 10, 1995 By:/Ronald A. McDougall
Ronald A. McDougall, President and Chief
Operating Officer
(Duly Authorized Signatory)
Date: May 10, 1995 By:/Debra L. Smithart
Debra L. Smithart, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S THIRD QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1995
<PERIOD-START> DEC-29-1994
<PERIOD-END> MAR-29-1995
<CASH> 1,147
<SECURITIES> 31,006
<RECEIVABLES> 14,291
<ALLOWANCES> (343)
<INVENTORY> 9,610
<CURRENT-ASSETS> 50,394
<PP&E> 717,298
<DEPRECIATION> 192,018
<TOTAL-ASSETS> 641,649
<CURRENT-LIABILITIES> 128,463
<BONDS> 31,900
<COMMON> 7,194
0
0
<OTHER-SE> 466,709
<TOTAL-LIABILITY-AND-EQUITY> 641,649
<SALES> 761,779
<TOTAL-REVENUES> 762,167
<CGS> 205,013
<TOTAL-COSTS> 477,913
<OTHER-EXPENSES> (1,963)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 81,204
<INCOME-TAX> 28,344
<INCOME-CONTINUING> 52,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
