Brinker International Inc.: Annual report which provides a comprehensive overview of the company for the past year

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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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 26, 2019

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.)

3000 OLYMPUS BLVD, DALLAS, TEXAS

75019

(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

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $0.10 par value

EAT

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x

No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

o

Emerging growth company

o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter: $1,649.4 million.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class

Outstanding at August 12, 2019

Common Stock, $0.10 par value

37.5 million shares

DOCUMENTS INCORPORATED BY REFERENCE

We have incorporated portions of our Annual Report to Shareholders for the fiscal year ended June 26, 2019 into Part II hereof, to the extent indicated herein. We have also incorporated by reference portions of our Proxy Statement for our annual meeting of shareholders expected to be held on November 20, 2019 into Part III hereof, to the extent indicated herein.

BRINKER INTERNATIONAL, INC.

TABLE OF CONTENTS

Page

PART I

Item 1. Business

3

Item 1A. Risk Factors

9

Item 1B. Unresolved Staff Comments

18

Item 2. Properties

18

Item 3. Legal Proceedings

19

Item 4. Mine Safety Disclosures

19

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

20

Item 6. Selected Financial Data

21

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

21

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

21

Item 8. Financial Statements and Supplementary Data

21

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

21

Item 9A. Controls and Procedures

22

Item 9B. Other Information

22

PART III

Item 10. Directors, Executive Officers and Corporate Governance

22

Item 11. Executive Compensation

22

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

23

Item 13. Certain Relationships and Related Transactions, and Director Independence

23

Item 14. Principal Accountant Fees and Services

23

PART IV

Item 15. Exhibits and Financial Statement Schedules

23

Signatures

26

Table of Contents

INTRODUCTION

Forward-Looking Statements

Information and statements contained in this Form 10-K, in our other filings with the SEC or in our written and verbal communications that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are generally accompanied by words like "believes," "anticipates," "estimates," "predicts," "expects," "plans," "intends," "projects," "continues" and other similar expressions that convey uncertainty about future events or outcomes. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which could cause actual results to differ materially from our historical results or from those projected in forward-looking statements. Such risks and uncertainties include, among other things, the impact of competition, changes in consumer preferences, consumer perception of food safety, reduced disposable income, unfavorable publicity, increased minimum wages, governmental regulations, the impact of mergers, acquisitions, divestitures and other strategic transactions, the Company's ability to meet its business strategy plan, loss of key management personnel, failure to hire and retain high-quality restaurant management, the impact of social media, failure to protect the security of data of our guests and team members, product availability, regional business and economic conditions, litigation, franchisee success, inflation, changes in the retail industry, technology failures, failure to protect our intellectual property, outsourcing, impairment of goodwill or assets, failure to maintain effective internal control over financial reporting, actions of activist shareholders, adverse weather conditions, terrorist acts, health epidemics or pandemics, and tax reform, as well as the risks and uncertainties described in Item 1A - Risk Factors and uncertainties that generally apply to all businesses. We wish to caution you against placing undue reliance on forward-looking statements because of these risks and uncertainties. Except as required by law, we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. We further caution that it is not possible to identify all risk and uncertainties, and you should not consider the identified factors as a complete list of all risks and uncertainties.

PART I

ITEM 1. BUSINESS

General

References to "Brinker," the "Company," "we," "us," and "our" in this Form 10-K refer to Brinker International, Inc. and its subsidiaries and any predecessor companies of Brinker International, Inc.

We own, develop, operate and franchise the Chili's ® Grill & Bar ("Chili's") and Maggiano's Little Italy ® ("Maggiano's") restaurant brands. 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, which was organized in August 1977. We completed the acquisition of Maggiano's in August 1995.

Restaurant Brands

Chili's Grill & Bar

Chili's, a recognized leader in the bar & grill category of casual dining, has been operating restaurants for over 40 years. Chili's enjoys a global presence with locations in the United States, 29 countries and two territories outside of the United States. Whether domestic or international, Company-owned or franchised, Chili's is dedicated to delivering fresh, high-quality food with a unique point of view, as well as dining experiences that make people feel special. Historically, Chili's menu has featured bold, kicked-up American favorites. Chili's has built a reputation for gourmet burgers, sizzling fajitas, baby back ribs and hand-shaken margaritas. We have refocused on and reinvested in these core equities, and we plan to continue to innovate our food offerings within these core menu platforms. We believe our focused menu, our "Chilihead" culture, our focus on standards and our reputation for hospitality will allow Chili's to differentiate our food and service from other restaurants.

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We also believe that guests are evolving not only their standards of food quality but also their expectations of convenience. Chili's To Go menu is available online, by calling the restaurant, or through our mobile app. In the summer of 2017, we began offering curbside service at all our Company-owned restaurants for orders placed through our website or mobile app. Curbside service has now been expanded and is available at most franchise restaurants. In fiscal 2018, we relaunched our My Chili's Rewards program and began offering free chips and salsa or a soft drink to members at every visit (guests must visit every 60 days to receive the offer). In fiscal 2019, we focused on our systems and standards for consistency across operations. In the fourth quarter of fiscal 2019, we partnered with DoorDash to make delivery of Chili's another convenience option for guests from most company-owned Chili's restaurants.

During the fiscal year ended June 26, 2019, at our Company-owned restaurants, entrée selections ranged in menu price from $8.00 to $19.49. The average revenue per meal, including alcoholic beverages, was approximately $15.47 per person. Also during fiscal 2019, food and non-alcoholic beverage sales constituted approximately 86.5% of Chili's total restaurant revenues, with alcoholic beverage sales accounting for the remaining 13.5%. Our average annual net sales volume per Company-owned Chili's restaurant during fiscal 2019 was $2.9 million.

Maggiano's Little Italy

Maggiano's is a full-service, national, polished casual restaurant brand offering Italian-American cuisine. With a passion for making people feel special, the brand is known for catering to special occasions and large parties. Each Maggiano's location is uniquely designed and features open dining rooms with fresh flowers, rich woods, warm carpets and soft lighting. Most locations feature designated banquet facilities and all offer catering for large parties at homes or local businesses. Our full carryout menu is also available for pick up or delivered through a third party service. Each Maggiano's has an executive chef preparing authentic recipes from scratch ingredients. Dishes are served in abundant portions both à la carte and family style. We offer a full range of lunch and dinner options, complimented by a premium wine list and handcrafted cocktails. On Saturdays and Sundays, all Maggiano's restaurants offer a brunch menu alongside our lunch menu.

During the fiscal year ended June 26, 2019, entrée selections ranged in menu price from $12.30 to $47.99. The average revenue per meal, including alcoholic beverages, was approximately $28.66 per person. Also during fiscal 2019, food and non-alcoholic beverage sales constituted approximately 85.1% of Maggiano's total restaurant revenues, with alcoholic beverage sales accounting for the remaining 14.9%. Sales from events at our banquet facilities made up 17.8% of Maggiano's total restaurant revenues for the year. Our average annual sales volume per Maggiano's restaurant during fiscal 2019 was $8.3 million.

Business Strategy

This information is set forth in the section "Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" within Exhibit 13to this document. We incorporate that information in this document by reference.

Company Development

During fiscal 2019, we continued the expansion of our restaurant brands domestically through a select number of new Company-owned restaurants in strategically desirable markets. We concentrate on the development of certain identified markets that are most likely to improve our competitive position and achieve the desired level of marketing potential, profitability and return on invested capital. Our domestic expansion efforts focus not only on major metropolitan areas in the United States but also on smaller market areas and non- traditional locations (such as airports and universities) that can adequately support our restaurant brands. For smaller market areas, we have developed a new smaller prototype building for both brands that allows us to expand into these markets and serve our guests while maintaining a focus on profitability and return on invested capital.

The restaurant site selection process is critical, and we devote significant effort to the investigation of new locations utilizing a variety of sophisticated analytical techniques. Our process evaluates a variety of factors, including:

  • trade area demographics, such as target population density and household income levels;
  • physical site characteristics, such as visibility, accessibility and traffic volume;
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  • relative proximity to activity centers, such as shopping centers, hotel and entertainment complexes and office buildings; and
  • supply and demand trends, such as proposed infrastructure improvements, new developments and existing and potential competition.
Members of each brand's executive team inspect, review and approve each restaurant site prior to its lease or acquisition for that brand.

The specific rate at which we are able to open new restaurants is determined, in part, by our success in locating satisfactory sites, negotiating acceptable lease or purchase terms, securing appropriate local governmental permits and approvals, and by our capacity to supervise construction and recruit and train management and hourly team members.

The following table illustrates the Company-owned restaurants opened in fiscal 2019 and the projected openings in fiscal 2020:

Fiscal 2019

Fiscal 2020

Full Year Projected

Fiscal Year Openings

Openings

New Openings

Company-owned restaurants

Chili's domestic

4

9-11

Chili's international

-

-

Maggiano's

-

-

Total company-owned

4

9-11

Relocation Openings

Chili's domestic company-owned relocations

5

0-2

We periodically re-evaluateCompany-owned restaurant sites to monitor that attributes have not deteriorated below our minimum standards. In the event site deterioration occurs, each brand makes a concerted effort to improve the restaurant's performance by providing physical, operating and marketing enhancements unique to each restaurant's situation. In some cases the brand considers relocation to a proximate, more desirable site, or evaluates closing the restaurant if the brand's measurement criteria, such as return on investment and area demographic trends, do not support relocation. During fiscal 2019, we relocated five Company-owned restaurants, and closed an additional three Company-owned restaurants that were generally performing below our standards or were near or at the expiration of their lease terms. In fiscal 2020, we plan to relocate up to two Company-owned Chili's restaurants. Our strategic plan is targeted to support our long-term growth objectives, with a focus on continued development of those restaurant locations that have the greatest return potential for the Company and our shareholders.

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Disclaimer

Brinker International Inc. published this content on 22 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 August 2019 20:49:04 UTC