UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2007 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition year from to
Commission File No. 1-10275
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
BRINKER INTERNATIONAL
401(K) SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Brinker International
6820 LBJ Freeway
Dallas, Texas 75240
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2 |
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Financial Statements: |
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Statements of Net Assets Available for Benefits as of December 31, 2007 and 2006 |
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Exhibit 23 Consent of Independent Registered Public Accounting Firm |
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* All other schedules required by Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable.
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of the
Brinker International 401(k) Savings Plan:
We have audited the accompanying statement of net assets available for benefits of the Brinker International 401(k) Savings Plan as of December 31, 2007 and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Brinker International 401(k) Savings Plan as of and for the year ended December 31, 2006, were audited by other auditors whose report dated June 26, 2007, expressed an unqualified opinion on these statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plans internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Brinker International 401(k) Savings Plan as of December 31, 2007, and the changes in its net assets available for benefits for the year then ended in conformity with U.S. generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plans management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Whitley Penn LLP
Dallas, Texas
July 11, 2008
1
Consent of Independent Registered Public Accounting Firm
The Plan Committee
Brinker International 401(k) Savings Plan:
We consent to the
incorporation by reference in the registration statement (No. 333-125289)
on Form S-8 of Brinker International of our report dated June 26,
2007 with respect to the statements of net assets available for benefits of the
Brinker International 401(k)
Savings Plan as of December 31, 2006 and 2005, the related statements of
changes in net assets available for benefits for the years then ended, and the
supplemental schedule of Schedule H, line 4i schedule of assets (held at end
of year) as of December 31, 2006, which report appears in the
December 31, 2006 annual report on Form 11-K of the Brinker
International 401(k) Savings Plan.
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/s/ KPMG LLP |
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Dallas, Texas |
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July 10, 2008 |
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2
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2007 and 2006
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2007 |
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2006 |
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Investments - at fair value (Note 3): |
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Money market |
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$ |
5,858,161 |
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$ |
5,158,457 |
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Mutual funds |
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87,577,640 |
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65,701,783 |
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Brinker International common stock fund |
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9,476,222 |
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14,155,657 |
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Participant loans |
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4,673,201 |
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3,665,339 |
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107,585,224 |
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88,681,236 |
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Receivables: |
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Participants contributions |
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255,340 |
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263,432 |
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Employer contributions |
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734,372 |
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238,134 |
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989,712 |
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501,566 |
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Net assets available for benefits |
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$ |
108,574,936 |
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$ |
89,182,802 |
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See accompanying notes to financial statements.
3
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2007 and 2006
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2007 |
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2006 |
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Additions: |
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Contributions: |
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Participants |
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$ |
17,030,379 |
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$ |
14,747,910 |
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Rollovers |
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931,297 |
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936,165 |
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Employer |
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9,049,215 |
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7,323,705 |
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27,010,891 |
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23,007,780 |
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Investment income: |
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Net (depreciation)/appreciation in fair value of investments |
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(1,677,777 |
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4,684,659 |
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Interest and dividends |
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6,695,428 |
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4,498,976 |
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5,017,651 |
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9,183,635 |
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Total additions |
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32,028,542 |
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32,191,415 |
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Deductions: |
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Benefits paid to participants |
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12,636,408 |
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9,575,047 |
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Net increase |
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19,392,134 |
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22,616,368 |
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Net assets available for benefits at beginning of year |
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89,182,802 |
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66,566,434 |
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Net assets available for benefits at end of year |
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$ |
108,574,936 |
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$ |
89,182,802 |
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See accompanying notes to financial statements.
4
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
December 31, 2007 and 2006
1. DESCRIPTION OF THE PLAN
The following description of the Brinker International (Company or Brinker) 401(k) Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan Document for a more complete description of the Plans provisions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
General
The Company adopted the Plan effective January 1, 1993. The Plan is a qualified defined contribution retirement plan covering eligible employees as defined below. Effective January 1, 2006 the plan was amended and restated. The primary changes to the plan affected participant eligibility, contributions and vesting rules. Leased employees, non-US citizens, and union employees without specific contract provisions are not eligible to participate in the Plan.
The investments of the Plan are maintained in a trust (the Trust) by Fidelity Management Trust Company (the Trustee) and the recordkeeping functions are performed by Fidelity Investments Institutional Operations Company Incorporated (the Recordkeeper).
Contributions
From January 1, 2006 through March 31, 2006, an employee could become a participant immediately following the date the employee completed one year of eligible service (at least 1,000 hours) and attained the age of twenty-one. Effective April 1, 2006, an employee may become a participant on the first of the month following attainment of the eligibility criteria. Contributions are subject to Internal Revenue Service (IRS) limitations on total annual contributions, as well as plan limitations which stipulate that up to 50% of eligible base compensation including tips and 100% of eligible bonuses, as defined in the Plan, may be contributed to various investment funds on a tax-deferred basis.
The Company matches in cash at a rate of 100% of the first 3% of pay and 50% of the next 2% of pay for a participants compensation, as defined in the Plan, up to the maximum deferrable amount allowed by the Internal Revenue Code (IRC).
Eligible participants age 50 or older by the end of a calendar year are permitted to make catch-up contributions to the Plan up to the deferral amount allowed by the IRC.
5
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Notes to Financial Statements
Contributions Contd
Active hourly-tipped participants may elect to make voluntary after-tax contributions for each pay period under the Plan. The employee contributions may be made only from the participants compensation representing tip income that is not paid through the Companys payroll and may contribute up to 100% of such tip income. An active participant may not make contributions for any period in which such person is not accruing hours of service with the Company.
Participants Accounts
Participant and Company matching contributions are invested in accordance with participants elections in the following funds:
Fund Options |
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Primarily invests in: |
Fidelity Retirement Money Market Portfolio |
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Money market funds |
PIMCO Total Return Fund |
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Intermediate-term mortgage, corporate, government and foreign bonds |
American Beacon Large Cap Value Fund |
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Equities of large-cap domestic companies |
Fidelity Contrafund |
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Equities of domestic and foreign companies |
American Funds EuroPacific Growth Fund |
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Equities of foreign companies |
Neuberger Berman Genesis Fund |
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Equities of small and mid-cap companies |
Buffalo Small Cap Fund |
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Equities of small-cap domestic companies |
Spartan U.S. Equity Index Fund |
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Equities of companies included in the S&P 500 Index |
Fidelity Freedom Funds |
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Fidelity equity, fixed-income and short-term mutual funds |
The Boston Company Small Cap Value Fund |
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Equities of small-cap domestic companies |
Brinker Common Stock Fund |
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Brinker common stock and short-term investments |
Participants accounts are adjusted with the proportionate share of gains or losses generated by their elected investment funds.
6
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Notes to Financial Statements
Vesting
Participants are immediately vested in both employee and employer matching contributions and the earnings thereon. Prior to 2006, participants were immediately vested in their contributions and the earnings thereon. Vesting in the Companys matching contributions was graduated at 25% annually, beginning at the end of the second year of eligible service, up to 100% after five full years of eligible service. Participants who separated from service prior to full vesting of their rights forfeited their share of the Companys contributions to the extent that vesting had not occurred. On termination of service due to death, disability, or retirement, participants became 100% vested in their matching contributions.
Forfeited Accounts
Forfeitures used to reduce Company contributions totaled zero and $5,182 for the years ended December 31, 2007 and 2006, respectively. Forfeited nonvested accounts totaled $57 and $55 as of December 31, 2007 and 2006, respectively. The majority of the remaining forfeiture balance relates to unvested dollars contributed by Company prior to 2006.
Payment of Benefits
Distributions under the Plan are made upon a participants death, disability, retirement, or termination of employment. Benefit payments are made in the form of a single lump sum payment or a direct rollover into an Individual Retirement Account or another qualified plan.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum amount equal to the lesser of $50,000 or 50% of their vested account balance. A participant may have up to two loans outstanding at a time, however the total outstanding balance of all loans may not exceed the lesser of $50,000 or 50% of the participants vested account balance. Loan terms range from six months to 5 years or up to 15 years for the purchase of a primary residence. Maturities range from 2008 through 2022 as of December 31, 2007. The loans are secured by the participants account and bear interest at a rate of 1% above the prime lending rate which is determined at the end of the month prior to the month in which the loan request is made. Interest rates on outstanding loans ranged from 5.0% to 10.5% during both 2007 and 2006. Principal and interest payments are made through bi-weekly payroll deductions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements are prepared under the accrual method of accounting.
7
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Notes to Financial Statements
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Administrative Expenses
The Company pays all administrative expenses related to the Plan.
Investment Valuation and Income Recognition
The Plans investments are stated at fair value using quoted market prices. Participant loans are valued at the outstanding principal balance plus accrued interest which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Income from investments is recorded as earned on an accrual basis.
Payment of Benefits
Benefits are recorded when paid.
Contributions
Participant and employer contributions are accrued in the period that payroll deductions are made from plan participants in accordance with salary deferral agreements and as such, become obligations of the Company and assets of the plan.
New Accounting Pronouncement
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. SFAS No. 157 establishes a single definition of fair value and a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements; however, it does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157, which amends SFAS No. 157 by delaying the adoption of SFAS No. 157 for our nonfinancial assets and nonfinancial liabilities, except those items recognized or disclosed at fair value on an annual or more frequently recurring basis, until January 1, 2009. The adoption by the Plan of SFAS No. 157, as amended, is not expected to have a material impact on the reported net assets or changes in net assets.
8
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Notes to Financial Statements
3. INVESTMENTS
Individual investments that represent 5% or more of the Plans net assets available for benefits as of December 31, 2007 and 2006 were as follows:
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2007 |
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2006 |
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Investments at fair value: |
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Fidelity Contrafund |
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$ |
20,334,937 |
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$ |
15,189,613 |
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American Funds EuroPacific Growth Fund |
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17,674,944 |
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13,311,366 |
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Neuberger Berman Genesis Fund |
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11,828,855 |
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9,456,452 |
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Brinker Common Stock Fund |
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9,476,222 |
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14,155,657 |
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Spartan U.S. Equity Index Fund |
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8,064,764 |
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7,376,349 |
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American Beacon Large Cap Value Fund |
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7,862,887 |
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6,562,029 |
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Fidelity Retirement Money Market Portfolio |
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5,858,161 |
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5,158,457 |
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PIMCO Total Return Fund |
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5,424,909 |
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* |
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* Less than 5% of the Plans net assets in the applicable year.
Appreciation/(Depreciation) (including gains and losses on investments bought and sold, as well as held during the years) on investments was as follows:
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2007 |
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2006 |
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Mutual funds |
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$ |
3,202,395 |
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$ |
2,420,368 |
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Brinker common stock fund |
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(4,880,172 |
) |
2,264,291 |
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$ |
(1,677,777) |
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$ |
4,684,659 |
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4. RELATED-PARTY TRANSACTIONS
Certain Plan investments consist of common stock of the Company and mutual funds managed by the Trustee. Transactions involving these investments qualify as party-in-interest transactions. All of these party-in-interest transactions are exempt from the prohibited transaction rules.
5. PLAN TERMINATION
Although it has no present intention to do so, the Company may terminate the Plan at any time subject to the provisions of ERISA.
6. VOLUNTARY CORRECTION PROGRAM
The Company received approval of its application with the Internal Revenue Service to avail the Plan of the Voluntary Correction Program (VCP) within the Employee Plans Compliance Resolution System of the fact that certain individuals were not notified of their eligibility to participate in the plan in a timely manner. The financial statements reflect a receivable from the Company for the resolution of the compliance matter with the IRS under the VCP. The Company believes that the matters identified for remediation would not cause the Plan to be disqualified by the IRS; therefore, no provision for income taxes has been included in the Plans financial statements.
9
BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Notes to Financial Statements
7. INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by a letter dated March 22, 2001, that the Plan and related trust are designed in accordance with applicable sections of the IRC. Although the Plan has been amended since receiving the determination letter, the Plan Administrator believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. Therefore, the Plan Administrator believes the Plan is qualified and the related Trust is tax-exempt as of the financial statement date. The Plan Sponsor identified certain operational failures with respect to the Plan and is correcting these failures under the Employee Plans Compliance Resolution System (EPCRS) correction program.
8. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the statement of net assets available for benefits.
10
EIN: 75-2354902 |
Schedule I |
PLAN # 001 |
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BRINKER INTERNATIONAL
401(k) SAVINGS PLAN
Schedule H, line 4i Schedule of Assets (Held at End of Year)
December 31, 2007
(a) |
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(b) |
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(c) |
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(d) |
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Money market: |
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* |
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Fidelity Retirement Money Market Portfolio |
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5,858,161 shares |
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5,858,161 |
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Mutual funds: |
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* |
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Fidelity Contrafund |
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278,142 shares |
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20,334,937 |
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American Funds EuroPacific Growth Fund |
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352,371 shares |
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17,674,944 |
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Neuberger Berman Genesis Fund |
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240,034 shares |
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11,828,855 |
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* |
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Spartan U.S. Equity Index Fund |
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155,390 shares |
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8,064,764 |
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American Beacon Fund Large Cap Value Fund |
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351,179 shares |
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7,862,887 |
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PIMCO Total Return Fund |
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507,475 shares |
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5,424,909 |
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Buffalo Small Cap Fund |
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136,199 shares |
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3,291,933 |
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The Boston Company Small Cap Value Fund |
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127,701 shares |
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2,806,860 |
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* |
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Fidelity Freedom 2040 Fund |
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218,262 shares |
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2,123,688 |
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* |
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Fidelity Freedom 2035 Fund |
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150,552 shares |
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2,059,557 |
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* |
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Fidelity Freedom 2030 Fund |
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110,255 shares |
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1,821,418 |
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* |
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Fidelity Freedom 2025 Fund |
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130,178 shares |
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1,715,741 |
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* |
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Fidelity Freedom 2020 Fund |
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75,368 shares |
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1,191,568 |
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* |
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Fidelity Freedom 2015 Fund |
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33,421 shares |
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416,757 |
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* |
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Fidelity Freedom 2010 Fund |
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21,716 shares |
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321,830 |
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* |
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Fidelity Freedom 2045 Fund |
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21,371 shares |
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242,558 |
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* |
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Fidelity Freedom 2050 Fund |
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15,871 shares |
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181,404 |
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* |
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Fidelity Freedom Income Fund |
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11,482 shares |
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131,468 |
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* |
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Fidelity Freedom 2005 Fund |
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6,918 shares |
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81,562 |
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87,577,640 |
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* |
Brinker Common Stock Fund (Cost Basis $9,405,977) |
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487,871 shares |
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9,476,222 |
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* |
Participant Loans (Cost Basis $0) |
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Interest rates from 5.0% to 10.5% and maturity dates from 2008 through 2022. |
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4,673,201 |
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Total |
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$ |
107,585,224 |
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*Party-in-interest
Cost column not required participant directed
See accompanying report of independent registered public accounting firm
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
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BRINKER INTERNATIONAL, INC. |
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401(K) SAVINGS PLAN AND TRUST |
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Date: July 14, 2008 |
By: |
/s/ John Hosea |
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John Hosea |
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Plan Administrator |
12