Brinker International, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended June 26, 2013. This is an annual filing, not a standalone Q4 report. Brinker owns, operates, develops and franchises Chili’s Grill & Bar and Maggiano’s Little Italy.
Business context and operating results
- At year-end, the system had 1,591 restaurants: 822 domestic and 11 international company-owned Chili’s, 714 franchised Chili’s, and 44 company-owned Maggiano’s.
- Fiscal 2013 included 38 restaurant openings, including 33 international franchise or joint-venture Chili’s openings; Brinker closed three company-owned restaurants. It also acquired 11 Chili’s in Alberta from a franchisee and one domestic Chili’s from a franchisee.
- Average annual sales volume per restaurant was reported as $3.0 million for Chili’s and $8.81 million for Maggiano’s. Average revenue per meal, including beverages, was $13.99 and $26.72, respectively.
Financial metrics and capital
The supplied filing text refers readers to the incorporated 2013 Annual Report to Shareholders for the income statement, balance sheet, cash flow statement and management’s discussion. It does not provide clear values here for revenue, profit, cash flow, margins, cash, total debt or liquidity ratios.
- In May 2013, Brinker issued $250 million of 2.600% notes due 2018 and $300 million of 3.875% notes due 2023. Proceeds were intended for general corporate purposes, including redeeming 5.75% notes due 2014, reducing revolver borrowings and share repurchases.
- Fourth-quarter repurchases under the public program totaled approximately 3.515 million shares at an average $40.24 per share. The remaining authorization at June 26 was approximately $332.6 million. The board later increased authorization by $200 million on August 22, 2013.
- Brinker declared quarterly dividends of $0.20 per share, or $0.80 per share in total for fiscal 2013.
Changes, outlook and management commentary
- Management described the casual-dining environment as challenging, citing tepid economic growth and cautious consumers. It said Maggiano’s sales trends and traffic continued to improve; Chili’s initiatives included menu updates, kitchen equipment, restaurant remodels and operating software.
- Fiscal 2014 projected openings were 11–12 company-owned and 4–6 franchised domestic Chili’s, 2–3 Maggiano’s, and 2 company-owned plus 31–35 franchised international Chili’s, for 50–58 total.
- Management expected continued investment in remodels, equipment and systems, and emphasized profitable sales growth, operating efficiency, international development, dividends and share repurchases. The excerpt gives no quantified earnings or sales guidance.
Risks, contingencies and unusual items
- Key risks include weak consumer spending, competition and discounting, food, labor, benefits and energy inflation, supply disruptions, regulation, staffing, franchisee performance, international exposure, litigation, information-system failures and potential asset or goodwill impairments.
- A California class-action case concerning meal periods and rest breaks was remanded for further proceedings after a 2012 state supreme court decision. Brinker said the possible loss, if any, could not then be reasonably estimated. Management stated other pending or threatened matters were not expected to materially adversely affect consolidated results or financial condition.
- Management reported disclosure controls were effective and no material fourth-quarter changes to internal control over financial reporting.
Important facts for investors to verify
- Consult the incorporated Annual Report exhibits for full-year and comparative revenue, earnings, margins, cash flows, balance-sheet liquidity, debt and cash-flow details; those values are not clear in the supplied text.
- Review the notes’ maturities, repayment and revolver activity, covenants, and the actual use of the 2013 debt proceeds.
- Track comparable sales and traffic, restaurant-level profitability, remodel returns, and whether planned openings and franchise growth are achieved.
- Monitor the California litigation and potential exposure, as well as commodity, labor and consumer-spending risks.
- Assess the effect of share repurchases and dividends on leverage, liquidity and per-share results.