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EAT 2014.09.24 10Q1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
____________________________________________________________________ 
FORM 10-Q
____________________________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 24, 2014
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
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
6820 LBJ FREEWAY, DALLAS, TEXAS
 
75240
(Address of principal executive offices)
 
(Zip Code)
(972) 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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
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 October 27, 2014
Common Stock, $0.10 par value
63,555,675 shares


Table of Contents

BRINKER INTERNATIONAL, INC.
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2
Table of Contents

PART I. FINANCIAL INFORMATION
Item 1.    FINANCIAL STATEMENTS
BRINKER INTERNATIONAL, INC.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
 
September 24,
2014
 
June 25,
2014
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
63,691

 
$
57,685

Accounts receivable
38,452

 
47,850

Inventories
24,161

 
23,643

Prepaid expenses and other
61,963

 
65,506

Deferred income taxes
12,840

 
16,170

Total current assets
201,107

 
210,854

Property and Equipment, at Cost:
 
 
 
Land
148,053

 
149,184

Buildings and leasehold improvements
1,503,590

 
1,483,894

Furniture and equipment
598,526

 
593,344

Construction-in-progress
24,817

 
32,844

 
2,274,986

 
2,259,266

Less accumulated depreciation and amortization
(1,224,510
)
 
(1,202,812
)
Net property and equipment
1,050,476

 
1,056,454

Other Assets:
 
 
 
Goodwill
133,194

 
133,434

Deferred income taxes
32,202

 
30,090

Intangibles, net
18,349

 
18,841

Other
40,883

 
40,931

Total other assets
224,628

 
223,296

Total assets
$
1,476,211

 
$
1,490,604

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Current installments of long-term debt
$
27,959

 
$
27,884

Accounts payable
90,137

 
102,931

Accrued liabilities
321,697

 
328,017

Income taxes payable
1,104

 
7,278

Total current liabilities
440,897

 
466,110

Long-term debt, less current installments
865,272

 
832,302

Other liabilities
131,861

 
129,098

Commitments and Contingencies (Note 8)

 

Shareholders’ Equity:
 
 
 
Common stock—250,000,000 authorized shares; $0.10 par value; 176,246,649 shares issued and 64,203,210 shares outstanding at September 24, 2014, and 176,246,649 shares issued and 64,558,909 shares outstanding at June 25, 2014
17,625

 
17,625

Additional paid-in capital
477,274

 
484,320

Accumulated other comprehensive loss
(1,747
)
 
(940
)
Retained earnings
2,320,687

 
2,306,532

 
2,813,839

 
2,807,537

Less treasury stock, at cost (112,043,439 shares at September 24, 2014 and 111,687,740 shares at June 25, 2014)
(2,775,658
)
 
(2,744,443
)
Total shareholders’ equity
38,181

 
63,094

Total liabilities and shareholders’ equity
$
1,476,211

 
$
1,490,604

See accompanying notes to consolidated financial statements.

3
Table of Contents

BRINKER INTERNATIONAL, INC.
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
  
Thirteen Week Periods Ended
 
September 24,
2014
 
September 25,
2013
Revenues:
 
 
 
Company sales
$
686,864

 
$
664,502

Franchise and other revenues
24,154

 
20,158

Total revenues
711,018

 
684,660

Operating costs and expenses:
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
Cost of sales
184,785

 
180,658

Restaurant labor
227,276

 
218,716

Restaurant expenses
175,538

 
167,690

Company restaurant expenses
587,599

 
567,064

Depreciation and amortization
35,542

 
33,156

General and administrative
32,634

 
34,421

Other gains and charges
933

 
1,006

Total operating costs and expenses
656,708

 
635,647

Operating income
54,310

 
49,013

Interest expense
6,999

 
7,013

Other, net
(503
)
 
(582
)
Income before provision for income taxes
47,814

 
42,582

Provision for income taxes
15,076

 
13,370

Net income
$
32,738

 
$
29,212

 
 
 
 
Basic net income per share
$
0.51

 
$
0.44

 
 
 
 
Diluted net income per share
$
0.49

 
$
0.42

 
 
 
 
Basic weighted average shares outstanding
64,668

 
66,693

 
 
 
 
Diluted weighted average shares outstanding
66,263

 
68,802

 
 
 
 
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustment
$
(807
)
 
$
65

Other comprehensive income (loss)
(807
)
 
65

Comprehensive income
$
31,931

 
$
29,277

 
 
 
 
Dividends per share
$
0.28

 
$
0.24


See accompanying notes to consolidated financial statements.

4
Table of Contents

BRINKER INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Thirteen Week Periods Ended
 
September 24,
2014
 
September 25,
2013
Cash Flows from Operating Activities:
 
 
 
Net income
$
32,738

 
$
29,212

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
35,542

 
33,156

Stock-based compensation
3,788

 
5,000

Deferred income taxes
1,218

 
1,862

Restructure charges and other impairments
933

 
640

Net loss on disposal of assets
714

 
1,199

Gain on equity investments
(108
)
 
(122
)
Other
219

 
165

Changes in assets and liabilities:
 
 
 
Accounts receivable
8,324

 
8,429

Inventories
(518
)
 
531

Prepaid expenses and other
4,315

 
1,404

Intangibles and other assets
(932
)
 
(727
)
Accounts payable
(4,322
)
 
(4,469
)
Accrued liabilities
(9,305
)
 
(19,765
)
Current income taxes
(5,113
)
 
(1,494
)
Other liabilities
3,405

 
395

Net cash provided by operating activities
70,898

 
55,416

Cash Flows from Investing Activities:
 
 
 
Payments for property and equipment
(40,183
)
 
(29,844
)
Proceeds from sale of assets
1,216

 
0

Net cash used in investing activities
(38,967
)
 
(29,844
)
Cash Flows from Financing Activities:
 
 
 
Purchases of treasury stock
(53,316
)
 
(66,301
)
Borrowings on revolving credit facility
40,000

 
60,000

Payments of dividends
(17,198
)
 
(15,281
)
Excess tax benefits from stock-based compensation
9,376

 
13,924

Payments on long-term debt
(6,669
)
 
(6,630
)
Proceeds from issuances of treasury stock
1,882

 
4,953

Payments on revolving credit facility
0

 
(20,000
)
Net cash used in financing activities
(25,925
)
 
(29,335
)
Net change in cash and cash equivalents
6,006

 
(3,763
)
Cash and cash equivalents at beginning of period
57,685

 
59,367

Cash and cash equivalents at end of period
$
63,691

 
$
55,604


See accompanying notes to consolidated financial statements.

5
Table of Contents

BRINKER INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
References to “Brinker,” the "Company,” “we,” “us” and “our” in this Form 10-Q are references to Brinker International, Inc. and its subsidiaries and any predecessor companies of Brinker International, Inc.
Our consolidated financial statements as of September 24, 2014 and June 25, 2014 and for the thirteen week periods ended September 24, 2014 and September 25, 2013 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We are principally engaged in the ownership, operation, development, and franchising of the Chili’s Grill & Bar (“Chili’s”) and Maggiano’s Little Italy (“Maggiano’s”) restaurant brands. At September 24, 2014, we owned, operated or franchised 1,622 restaurants in the United States and 29 countries and two territories outside of the United States.
We discovered an immaterial error related to the classification of certain revenues and expenses in the consolidated statements of comprehensive income in the previously issued financial statements for the year ended June 25, 2014 primarily related to Maggiano’s delivery services.  The amounts had previously been reported net instead of gross. The error did not impact net income as previously reported or any prior amounts reported on the consolidated balance sheets, statements of cash flows or statements of shareholders' equity.  We corrected the error by adjusting the previously reported consolidated statement of comprehensive income for the thirteen week period ended September 25, 2013, which resulted in a $0.7 million increase in franchise and other revenues and restaurant expenses.
The foreign currency translation adjustment included in comprehensive income on the consolidated statements of comprehensive income represents the unrealized impact of translating the financial statements of the Canadian restaurants from Canadian dollars, the functional currency, to U.S. dollars. This amount is not included in net income and would only be realized upon disposition of the business. The accumulated other comprehensive loss is presented on the consolidated balance sheets.
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting period. Actual results could differ from those estimates.
The information furnished herein reflects all adjustments (consisting only of normal recurring accruals and adjustments) which are, in our opinion, necessary to fairly state the interim operating results for the respective periods. However, these operating results are not necessarily indicative of the results expected for the full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to SEC rules and regulations. The notes to the consolidated financial statements (unaudited) should be read in conjunction with the notes to the consolidated financial statements contained in the June 25, 2014 Form 10-K. We believe the disclosures are sufficient for interim financial reporting purposes.










6
Table of Contents


2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and restricted share awards determined using the treasury stock method. We had approximately 450,000 stock options and restricted share awards outstanding at September 24, 2014 and 333,000 stock options and restricted share awards outstanding at September 25, 2013 that were not included in the dilutive earnings per share calculation because the effect would have been anti-dilutive.
Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):
 
September 24, 2014
 
September 25, 2013
Basic weighted average shares outstanding
64,668

 
66,693

Dilutive stock options
653

 
932

Dilutive restricted shares
942

 
1,177

 
1,595

 
2,109

Diluted weighted average shares outstanding
66,263

 
68,802

3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):

 
September 24,
2014
 
June 25,
2014
3.88% notes
$
299,744

 
$
299,736

2.60% notes
249,873

 
249,864

Term loan
181,250

 
187,500

Revolving credit facility
120,000

 
80,000

Capital lease obligations
42,364

 
43,086

 
893,231

 
860,186

Less current installments
(27,959
)
 
(27,884
)
 
$
865,272

 
$
832,302

During the first three months of fiscal 2015, $40 million was drawn from the revolving credit facility primarily to fund share repurchases, leaving $130 million of credit available under the revolving credit facility as of September 24, 2014.
The term loan and revolving credit facility bear interest of LIBOR plus an applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 2.50%. Based on our current credit rating, we are paying interest at a rate of LIBOR plus 1.63%. One month LIBOR at September 24, 2014 was approximately 0.15%. Our debt agreements contain various financial covenants that, among other things, require the maintenance of certain leverage and fixed charge coverage ratios. We are currently in compliance with all financial covenants.

7
Table of Contents

4. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consist of the following (in thousands):
 
 
September 24,
2014
 
June 25,
2014
Gift cards
$
98,939

 
$
104,378

Payroll
64,037

 
77,585

Litigation reserves
39,500

 
39,500

Sales tax
18,515

 
19,622

Insurance
22,019

 
20,652

Property tax
18,114

 
14,209

Dividends
18,150

 
15,625

Other
42,423

 
36,446

 
$
321,697

 
$
328,017

Other liabilities consist of the following (in thousands):
 
 
September 24, 2014
 
June 25,
2014
Straight-line rent
$
58,301

 
$
57,462

Insurance
37,247

 
36,352

Landlord contributions
24,748

 
23,404

Unrecognized tax benefits
5,347

 
5,247

Other
6,218

 
6,633

 
$
131,861

 
$
129,098


5. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value, as follows:
•
Level 1 – inputs are quoted prices in active markets for identical assets or liabilities.
•
Level 2 – inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities.
•
Level 3 – inputs are unobservable and reflect our own assumptions.

(a)
Non-Financial Assets Measured on a Non-Recurring Basis

We review the carrying amount of property and equipment and liquor licenses in the second and fourth quarters or when events or circumstances indicate that the carrying amount may not be recoverable. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value. No impairment charges were recorded in the first quarters of fiscal 2015 and fiscal 2014.
 

8
Table of Contents

(b)
Other Financial Instruments
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying amounts because of the short maturity of these items. The fair values of the 2.60% notes and 3.88% notes are based on quoted market prices and are considered Level 2 fair value measurements. At September 24, 2014, the 2.60% notes had a carrying value of $249.9 million and a fair value of $250.0 million and the 3.88% notes had a carrying value of $299.7 million and a fair value of $291.6 million. At June 25, 2014, the 2.60% notes had a carrying value of $249.9 million and a fair value of $250.4 million and the 3.88% notes had a carrying value of $299.7 million and a fair value of $290.2 million. The carrying amount of debt outstanding pursuant to the term loan and revolving credit facility approximates fair value as interest rates on these instruments approximate current market rates (Level 2).
6. SHAREHOLDERS’ EQUITY
In August 2014, our Board of Directors authorized a $350.0 million increase to our existing share repurchase program. We repurchased approximately 1.1 million shares of our common stock for $53.3 million during the first quarter of fiscal 2015 including 871,000 shares purchased under the share repurchase program. As of September 24, 2014, approximately $613.0 million was available under our share repurchase authorizations. Our stock repurchase plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings, and planned investment and financing needs. Repurchased common stock is reflected as a reduction of shareholders’ equity.
During the first quarter of fiscal 2015, we granted approximately 219,000 stock options with a weighted average exercise price of $49.04 and a weighted average fair value of $11.61, and approximately 220,000 restricted share awards with a weighted average fair value of $48.90. Additionally, during the first quarter of fiscal 2015, approximately 81,000 stock options were exercised resulting in cash proceeds of approximately $1.9 million. We received an excess tax benefit from stock-based compensation of approximately $9.4 million during the first quarter primarily as a result of the normally scheduled vesting and distribution of restricted stock grants and performance shares. The excess tax benefit from stock-based compensation represents the additional income tax benefit received resulting from the increase in the fair value of awards from the time of grant to the exercise date.
During the first quarter of fiscal 2015, we paid dividends of $17.2 million to common stock shareholders, compared to $15.3 million in the first quarter of the prior year. Additionally, our Board of Directors approved a 17 percent increase in the quarterly dividend from $0.24 to $0.28 per share effective with the dividend declared in August 2014 of $18.2 million, which was paid during the second quarter on September 25, 2014. The dividend accrual was included in accrued liabilities on our consolidated balance sheet as of September 24, 2014.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest in the first quarter of fiscal 2015 and 2014 are as follows (in thousands):
 
 
September 24,
2014
 
September 25,
2013
Income taxes, net of refunds
$
8,758

 
$
(1,729
)
Interest, net of amounts capitalized
1,774

 
1,808

 
Non-cash investing and financing activities for the first quarter of fiscal 2015 and 2014 are as follows (in thousands):
 
 
September 24,
2014
 
September 25,
2013
Retirement of fully depreciated assets
$
12,376

 
$
9,514

Accrued dividends
18,150

 
16,047

 



9
Table of Contents

8. CONTINGENCIES
In connection with the sale of restaurants to franchisees and brand divestitures, we have, in certain cases, guaranteed lease payments. As of September 24, 2014 and June 25, 2014, we have outstanding lease guarantees or are secondarily liable for $115.6 million and $116.5 million, respectively. These amounts represent the maximum potential liability of future payments under the guarantees. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2015 through fiscal 2024. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of September 24, 2014, as the likelihood of default by the buyers on the assignment agreements was deemed to be less than probable.
We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of September 24, 2014, we had $32.1 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable annually.
The aggregate litigation reserves of approximately $39.5 million at September 24, 2014 are based on the terms set forth in the applicable agreements and our reasonable expectations regarding future events. Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events and the ultimate resolution of litigated claims may differ from our current analysis. Accordingly, we review the adequacy of accruals and disclosures pertaining to litigated matters each quarter in consultation with legal counsel and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements.
In August 2004, certain current and former hourly restaurant team members filed a putative class action lawsuit against us in California Superior Court alleging violations of California labor laws with respect to meal periods and rest breaks, styled as Hohnbaum, et al. v. Brinker Restaurant Corp., et al. The lawsuit sought penalties and attorney’s fees and was certified as a class action by the trial court in July 2006. In July 2008, the California Court of Appeal decertified the class action on all claims with prejudice. In October 2008, the California Supreme Court granted a writ to review the decision of the Court of Appeal and oral arguments were heard by the California Supreme Court on November 8, 2011. On April 12, 2012, the California Supreme Court issued an opinion affirming in part, reversing in part, and remanding in part for further proceedings. The California Supreme Court’s opinion resolved many of the legal standards for meal periods and rest breaks in our California restaurants. On September 26, 2013, the trial court granted plaintiffs’ motion to certify a meal period subclass and denied our motion to decertify the rest period subclass.
On April 8, 2014, the parties participated in mediation where preliminary settlement discussions began, but a settlement was not achieved and significant issues remained outstanding.  On August 6, 2014, the parties reached a preliminary settlement agreement, which remains subject to court approval, to resolve all claims in exchange for a settlement payment not to exceed $56.5 million.  We established a reserve of approximately $39.0 million related to this pending class action litigation, but the actual amount of any settlement payment could vary from our reserve and will be subject to many factors including approval by the court, claims process, and other matters typically associated with the potential settlement of complex class action litigation.
We are engaged in various other legal proceedings and have certain unresolved claims pending. Reserves have been established based on our best estimates of our potential liability in certain of these matters. Based upon consultation with legal counsel, Management is of the opinion that there are no matters pending or threatened which are likely to have a material adverse effect, individually or in the aggregate, on our consolidated financial condition or results of operations.
9. SUBSEQUENT EVENTS
In October 2014, an additional $43 million was borrowed from the revolver for general corporate purposes, including share repurchases. Subsequent to the end of the quarter, we repurchased approximately 810,000 shares for $42.0 million.
On October 30, 2014, our Board of Directors declared a quarterly dividend of $0.28 per share to be paid on December 26, 2014 to shareholders of record as of December 5, 2014.


10
Table of Contents

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth selected operating data as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying consolidated statements of comprehensive income:
 
 
Thirteen Week Periods Ended
 
September 24,
2014
 
September 25,
2013
Revenues:
 
 
 
Company sales
96.6
 %
 
97.1
 %
Franchise and other revenues
3.4
 %
 
2.9
 %
Total revenues
100.0
 %
 
100.0
 %
Operating costs and expenses:
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
Cost of sales (1)
26.9
 %
 
27.2
 %
Restaurant labor (1)
33.1
 %
 
32.9
 %
Restaurant expenses (1)
25.5
 %
 
25.2
 %
Company restaurant expenses (1)
85.5
 %
 
85.3
 %
Depreciation and amortization
5.0
 %
 
4.8
 %
General and administrative
4.6
 %
 
5.0
 %
Other gains and charges
0.1
 %
 
0.1
 %
Total operating costs and expenses
92.4
 %
 
92.8
 %
Operating income
7.6
 %
 
7.2
 %
Interest expense
1.0
 %
 
1.1
 %
Other, net
(0.1
)%
 
(0.1
)%
Income before provision for income taxes
6.7
 %
 
6.2
 %
Provision for income taxes
2.1
 %
 
1.9
 %
Net income
4.6
 %
 
4.3
 %

(1) 
As a percentage of company sales.

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The following table details the number of restaurant openings during the first quarter, total restaurants open at the end of the first quarter, and total projected openings in fiscal 2015:
 
 
First Quarter Openings
 
Total Open at End Of First Quarter
 
Projected
Openings
 
Fiscal 2015
 
Fiscal 2014
 
Fiscal 2015
 
Fiscal 2014
 
Fiscal 2015
Company-owned restaurants:
 
 
 
 
 
 
 
 
 
Chili's domestic
1
 
3
 
824
 
824
 
8-10
Chili's international
0
 
0
 
14
 
11
 
1
Maggiano's
2
 
0
 
48
 
44
 
3
Total company-owned
3
 
3
 
886
 
879
 
12-14
Franchise restaurants:
 
 
 
 
 
 
 
 
 
Chili's domestic
3
 
1
 
439
 
443
 
5
Chili's international
6
 
5
 
297
 
274
 
34-38
Total franchise
9
 
6
 
736
 
717
 
39-43
Total restaurants:
 
 
 
 
 
 
 
 
 
Chili's domestic
4
 
4
 
1,263
 
1,267
 
13-15
Chili's international
6
 
5
 
311
 
285
 
35-39
Maggiano's
2
 
0
 
48
 
44
 
3
Grand total
12
 
9
 
1,622
 
1,596
 
51-57
At September 24, 2014, we owned the land and buildings for 189 of the 886 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled approximately $142.2 million and $120.8 million, respectively.


12
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GENERAL
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Brinker International, Inc., our operations, and our current operating environment. For an understanding of the significant factors that influenced our performance during the quarters ended September 24, 2014 and September 25, 2013, the MD&A should be read in conjunction with the consolidated financial statements and related notes included in this quarterly report.
OVERVIEW
We are principally engaged in the ownership, operation, development, and franchising of the Chili’s Grill & Bar (“Chili’s”) and Maggiano’s Little Italy (“Maggiano’s”) restaurant brands. At September 24, 2014, we owned, operated, or franchised 1,622 restaurants.
We are committed to strategies and initiatives that are centered on long-term sales and profit growth, enhancing the guest experience and team member engagement. These strategies are intended to differentiate our brands from the competition, reduce the costs associated with managing our restaurants and establish a strong presence for our brands in key markets around the world.
Key economic indicators such as total employment, spending levels and consumer confidence continued to improve steadily this quarter and have resulted in slight improvements for the industry; however, sales and traffic have been a challenge for the industry over the last five years. More recently, historically low interest rates have diverted consumer discretionary spending to bigger ticket items and housing. U.S. economic growth subsequent to the recession has been steady; however, wage growth has been slow. This slow recovery has challenged the restaurant industry and consumers since 2009 and as a result, our strategies and initiatives have been developed to provide a solid foundation for earnings growth going forward and are appropriate for all operating conditions.
Our current initiatives are designed to drive profitable sales and traffic growth and improve the customer experience in our restaurants. Our investments in kitchen equipment, operations software and reimages have helped us improve operational efficiency and enhance the relevance of the Chili’s brand. Upgraded kitchen equipment has enabled us to provide a higher quality product at a faster pace, enhancing both profitability and guest satisfaction. We believe the usability and efficiency of the equipment will result in substantial labor savings over time. Also, the flexibility of our equipment allows for the development of new menu categories that we believe will provide opportunities for sales and customer traffic growth.
All company-owned Chili's and Maggiano's restaurants are now operating with an integrated point of sale and back office software system that was designed to improve the efficiency of our restaurant operations and reporting capabilities. Timely and more detailed reporting in our restaurants has improved inventory and labor management while reducing software maintenance costs. Additionally, our management team will have more timely visibility into operating performance and trends which will enhance decision making and improve profitability.
We have also differentiated the Chili’s brand by leveraging technology initiatives to engage our guests and drive traffic. All company-owned Chili’s restaurants are now outfitted with tabletop devices which gives us the largest network of tabletop devices in the country. Our Ziosk branded tabletop device is a multi-functional device which provides entertainment, ordering, guest survey and pay at the table capabilities. We plan to build on this momentum by launching a Chili’s loyalty program later this fiscal year which will utilize our existing tabletop technology and provide us an opportunity to interact with our guests on a more personal basis. We are also investing in additional upgrades to our on-line ordering and mobile platforms.
We have reimaged approximately 90 percent of our company-owned Chili's restaurants and plan to complete the initiative by the end of fiscal 2015. The reimage design is intended to revitalize Chili's in a way which enhances the relevance of the brand and raises customer expectations regarding the quality of the experience. The design is contemporary while staying true to the Chili's brand heritage. We believe that these updates will positively impact the customer perception of the restaurant in both the dining room and bar areas and provide a long-term positive impact to traffic and sales. In addition to our reimage initiative, we intend to grow our brands by opening restaurants in strategically desirable markets. We anticipate opening eight to ten company-owned Chili’s restaurants in fiscal 2015.
We continually evaluate our menu at Chili's to improve quality, freshness and value by introducing new items and improving existing favorites. This quarter, we added Top Shelf Enchiladas to the successful Fresh Mex platform that was introduced last year. This platform includes Fresh Mex Bowls, Mix and Match Fajitas and Tableside Guacamole. Our burger menu was also updated with a new line of Craft Burgers, featuring fresh potato buns and house made garlic pickles. We continually seek opportunities to reinforce value and create interest for the brand with new and varied offerings to further enhance sales and drive incremental traffic. We are committed to offering a compelling everyday menu that provides items our customers prefer

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at a solid value.
Improvements at Chili's will have the most significant impact on the business; however, our results will also benefit through additional contributions from Maggiano's and our global business. Maggiano's continues to deliver sales growth and plans to open three restaurants this fiscal year based on the new prototype, which excludes banquet space. This new prototype will allow the brand to enter new markets for which the existing model was not suited. Maggiano's offers a compelling menu with the new Lighter Take options which feature lighter, full portion versions of classic Italian dishes with one third less calories. On the House Classic Pasta, Marco's Meal and the new Stuffed Pasta entrees continue to exceed our guests' expectations regarding traditional Italian fare. We will continue to strengthen the brand’s business model with kitchen efficiency and inventory controls that we believe will continue to enhance profitability.
Global expansion allows further diversification which will enable us to build strength in a variety of markets and economic conditions. This expansion will come through franchise relationships, acquisitions, joint venture arrangements and equity investments, taking advantage of demographic and eating trends which we believe will accelerate in the international market over the next decade. We opened one new company-owned Chili's restaurant in Canada in fiscal 2014 and are excited about the potential growth for the brand in Canada. We plan to open 35 to 39 new international Chili's restaurants this year, including one company-owned location in Canada in fiscal 2015. Our growing franchise operations both domestically and internationally enable us to improve margins as royalty payments impact the bottom line.
The casual dining industry is a competitive business which is sensitive to changes in economic conditions, trends in lifestyles and fluctuating costs. Our priority remains increasing profitable growth over time in all operating environments. We have designed both operational and financial strategies to achieve this goal and in our opinion, improve shareholder value. Success with our initiatives to improve sales trends and operational effectiveness will enhance the profitability of our restaurants and strengthen our competitive position. The effective execution of our financial strategies, including repurchasing shares of our common stock, payment of quarterly dividends, disciplined use of capital and efficient management of operating expenses, will further enhance our profitability and return value to our shareholders. We remain confident in the financial health of our company, the long-term prospects of the industry, as well as our ability to perform effectively in a competitive marketplace and a variety of economic environments.
REVENUES
Total revenues for the first quarter of fiscal 2015 increased to $711.0 million, a 3.8% increase from the $684.7 million generated for the same quarter of fiscal 2014 driven by a 3.4% increase in company sales attributable to positive comparable restaurant sales and higher capacity (see table below).
 
 
Thirteen Week Period Ended September 24, 2014
 
Comparable
Sales
 
Price
Increase
 
Mix
Shift
 
Traffic
 
Capacity
Company-owned
2.4
 %
 
1.7
%
 
0.4
 %
 
0.3
%
 
0.8
%
Chili’s (1)
2.6
 %
 
1.8
%
 
0.7
 %
 
0.1
%
 
0.5
%
Maggiano’s
0.6
 %
 
1.5
%
 
(1.8
)%
 
0.9
%
 
7.0
%
Chili's Franchise (2)
1.0
 %
 
 
 
 
 
 
 
 
U.S.
1.7
 %
 
 
 
 
 
 
 
 
International
(0.5
)%
 
 
 
 
 
 
 
 
Chili's Domestic (3)
2.3
 %
 
 
 
 
 
 
 
 
System-wide (4)
1.9
 %
 
 
 
 
 
 
 
 
 

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Thirteen Week Period Ended September 25, 2013
 
Comparable
Sales
 
Price
Increase
 
Mix
Shift
 
Traffic
 
Capacity
Company-owned
(1.3
)%
 
0.9
%
 
1.1
%
 
(3.3
)%
 
1.5
%
Chili’s (1)
(1.6
)%
 
0.9
%
 
0.9
%
 
(3.4
)%
 
1.6
%
Maggiano’s
0.6
 %
 
0.6
%
 
2.1
%
 
(2.1
)%
 
0.0
%
Chili's Franchise (2)
(1.0
)%
 
 
 
 
 
 
 
 
U.S.
(2.6
)%
 
 
 
 
 
 
 
 
International
2.7
 %
 
 
 
 
 
 
 
 
Chili's Domestic (3)
(1.9
)%
 
 
 
 
 
 
 
 
System-wide (4)
(1.2
)%
 
 
 
 
 
 
 
 
 
(1)
Chili's company-owned comparable restaurant sales do not include sales generated by the 12 Canadian restaurants. Acquired or newly opened restaurants are not included in this calculation until 18 months of operations are completed.
(2)
Revenues generated by franchisees are not included in revenues on the consolidated statements of comprehensive income; however, we generate royalty revenue and advertising fees based on franchise sales, where applicable. We believe including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.
(3)
Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States.
(4)
System-wide comparable restaurant sales are derived from sales generated by company-owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchise operated restaurants.
Chili’s company sales increased 3.2% to $600.1 million in the first quarter of fiscal 2015 from $581.6 million in the same quarter of fiscal 2014 primarily driven by increased comparable restaurant sales and restaurant capacity. Chili's company-owned restaurant capacity increased 0.5% for the first quarter of fiscal 2015 (as measured by average-weighted sales weeks) compared to the prior year quarter due to three net restaurant openings since the first quarter of fiscal 2014.
Maggiano’s company sales increased 4.7% to $86.8 million in the first quarter of fiscal 2015 from $82.9 million in the same quarter of fiscal 2014. The increases were primarily driven by increases in restaurant capacity, menu pricing and traffic, partially offset by unfavorable mix. Maggiano's capacity increased 7.0% for the first quarter of fiscal 2015 (as measured by average-weighted sales weeks) compared to the prior year quarter due to four restaurant openings since the first quarter of fiscal 2014.
Franchise and other revenues increased 19.8% to $24.2 million in the first quarter of fiscal 2015 compared to $20.2 million in the prior year primarily driven by the revenues associated with tabletop devices, royalty revenues related to Chili's new retail food products, and higher international royalty income due to international franchise restaurant openings. Our franchisees generated approximately $397 million in sales for the first quarter of fiscal 2015 compared to approximately $389 million in sales for the first quarter of fiscal 2014.
COSTS AND EXPENSES
Cost of sales, as a percent of company sales, decreased to 26.9% for the first quarter of fiscal 2015 from 27.2% for the prior year period. Cost of sales, as a percent of company sales, was favorably impacted by menu pricing, menu item changes, efficiency gains related to new fryer equipment, and improved waste control, partially offset by unfavorable pricing primarily related to burger meat, cheese and avocados which are market based, as well as unfavorable pricing related to seafood.
Restaurant labor, as a percent of company sales, increased to 33.1% for the first quarter of fiscal 2015 from 32.9% for the prior year period. The increase is primarily due to higher restaurant manager bonuses driven by improved operating performance, increased wages resulting from minimum wage increases, as well as higher payroll tax rates. Restaurant labor, as a percent of company sales, was positively impacted by decreased employee health insurance expenses resulting from favorable claims experience as compared to the prior year period coupled with leverage related to higher company sales.
Restaurant expenses, as a percent of company sales, increased to 25.5% for the first quarter of fiscal 2015 from 25.2% for the prior year period. The increase is primarily due to equipment charges associated with tabletop devices and higher credit card fees, partially offset by leverage related to higher company sales.
Depreciation and amortization expense increased $2.4 million for the first quarter of fiscal 2015 compared to the same period of the prior year primarily due to investments in the Chili's reimage program, fryer equipment and new restaurant openings, partially offset by an increase in fully depreciated assets.

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Table of Contents

General and administrative expenses decreased $1.8 million for the first quarter of fiscal 2015 as compared to the same period in the prior year primarily due to a special stock-based compensation grant in the prior year and lower professional fees related to litigation.
Other gains and charges in the first quarter of fiscal 2015 and fiscal 2014 consists primarily of charges associated with closed restaurants.
Interest expense remained flat for the first quarter of fiscal 2015 compared to the prior year.
INCOME TAXES
On a GAAP basis, the effective income tax rate increased to 31.5% for the first quarter of fiscal 2015 compared to 31.4% in the prior year. Excluding other gains and charges, the effective income tax rate increased to 31.7% in the first quarter of fiscal 2015 compared to 31.6% in the prior year. The increase in the quarterly effective tax rates was primarily due to increased earnings, partially offset by a net increase in Federal credits. For fiscal 2015, we estimate our effective tax rate will be approximately 31% based on current tax law and the assumption that Congress renews the work opportunity tax credit retroactive to January 2014. Our actual effective tax rate for fiscal 2015 may be different than our current estimate due to actual revenues, pre-tax income and tax credits achieved during the year.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash Flow from Operating Activities
During the first three months of fiscal 2015, net cash flow provided by operating activities was $70.9 million compared to $55.4 million in the prior year. The increase was driven by changes in working capital during the first three months of fiscal 2015 and an increase in earnings in the current year.
The working capital deficit decreased to $239.8 million at September 24, 2014 from $255.3 million at June 25, 2014 primarily due to the timing of operational payments, the payout of fiscal 2014 performance-based compensation and the normal seasonal decrease in gift card activity.
Cash Flow used in Investing Activities
 
 
Thirteen Week Periods Ended
 
September 24,
2014
 
September 25,
2013
Net cash used in investing activities (in thousands):
 
 
 
Payments for property and equipment
$
(40,183
)
 
$
(29,844
)
Proceeds from sale of assets
1,216

 
—

 
$
(38,967
)
 
$
(29,844
)
Net cash used in investing activities for the first three months of fiscal 2015 increased to approximately $39.0 million compared to $29.8 million in the prior year. Capital expenditures increased to approximately $40.2 million for the first three months of fiscal 2015 compared to $29.8 million for the prior year. New restaurant construction for both Chili's and Maggiano's as well as purchases for the ongoing Chili's reimage program increased in fiscal 2015 compared to the prior year. We estimate that our capital expenditures during fiscal 2015 will be approximately $130 million to $140 million and will be funded entirely by cash from operations.

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Cash Flow used in Financing Activities
 
 
Thirteen Week Periods Ended
 
September 24,
2014
 
September 25,
2013
Net cash used in financing activities (in thousands):
 
 
 
Purchases of treasury stock
$
(53,316
)
 
$
(66,301
)
Borrowings on revolving credit facility
40,000

 
60,000

Payments of dividends
(17,198
)
 
(15,281
)
Excess tax benefits from stock-based compensation
9,376

 
13,924

Payments on long-term debt
(6,669
)
 
(6,630
)
Proceeds from issuances of treasury stock
1,882

 
4,953

Payments on revolving credit facility
—

 
(20,000
)
 
$
(25,925
)
 
$
(29,335
)
Net cash used in financing activities for the first three months of fiscal 2015 decreased to $25.9 million from $29.3 million in the prior year primarily due to decreased spending on share repurchases, partially offset by a decrease in the excess tax benefit from stock-based compensation, a decrease in proceeds from issuances of treasury stock related to stock option exercises and an increase in payments of dividends.
We repurchased approximately 1.1 million shares of our common stock for $53.3 million in the first quarter. Subsequent to the end of the quarter, we repurchased approximately 810,000 shares for $42 million.
During the first three months of fiscal 2015, $40 million was drawn from the revolving credit facility primarily to fund share repurchases, leaving $130 million of credit available under the revolving credit facility as of September 24, 2014. In October 2014, an additional $43 million was borrowed from the revolving credit facility for general corporate purposes, including share repurchases.
The term loan and revolving credit facility bear interest of LIBOR plus an applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 2.50%. Based on our current credit rating, we are paying interest at a rate of LIBOR plus 1.63%. One month LIBOR at September 24, 2014 was approximately 0.15%. As of September 24, 2014, we were in compliance with all financial debt covenants.
As of September 24, 2014, our credit rating by both Standard and Poor’s (“S&P”) and Fitch Ratings ("Fitch") was BBB- (investment grade) with a stable outlook. Our corporate family rating by Moody’s was Ba1 (non-investment grade) and our senior unsecured rating was Ba2 (non-investment grade) with a stable outlook. Our goal is to retain our investment grade rating from S&P and Fitch and ultimately regain our investment grade rating from Moody’s.
We paid dividends of $17.2 million to common stock shareholders in the first three months of fiscal 2015 compared to $15.3 million in dividends paid in the same period of fiscal 2014. Additionally, our Board of Directors approved a 17 percent increase in the quarterly dividend from $0.24 to $0.28 per share effective with the dividend declared in August 2014 of $18.2 million, which was paid during the second quarter on September 25, 2014. On October 30, 2014, our Board of Directors declared a quarterly dividend of $0.28 per share to be paid on December 26, 2014 to shareholders of record as of December 5, 2014. We will continue to target a 40 percent dividend payout ratio to provide additional return to shareholders through dividend payments.
In August 2014, our Board of Directors authorized a $350.0 million increase to our existing share repurchase program. As of September 24, 2014, approximately $613.0 million was available under our share repurchase authorizations. Our stock repurchase plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. Repurchased common stock is reflected as a reduction of shareholders’ equity.
During the first three months of fiscal 2015, approximately 81,000 stock options were exercised resulting in cash proceeds of $1.9 million. We received an excess tax benefit from stock-based compensation of $9.4 million during the first quarter primarily as a result of the normally scheduled vesting and distribution of restricted stock grants and performance shares. The excess tax benefit from stock-based compensation represents the additional income tax benefit received resulting from the increase in the fair value of awards from the time of grant to the exercise date.


17
Table of Contents


Cash Flow Outlook
We believe that our various sources of capital, including future cash flow from operating activities and availability under our existing credit facility are adequate to finance operations and the repayment of current debt obligations for the foreseeable future. We are not aware of any other event or trend that would potentially affect our liquidity. In the event such a trend develops, we believe that there are sufficient funds available under our credit facility and from our internal cash generating capabilities to adequately manage our ongoing business. We have evaluated ways to monetize the value of our owned real estate and determined that the alternatives considered are more costly than other financing options currently available due to a combination of the income tax impact and higher effective borrowing rates.
RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of fiscal 2018. Early application is not permitted. This update permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.
In March 2013, the FASB issued ASU 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. This update requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in Subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 was effective for us during the quarter ended September 24, 2014. The adoption of this standard has not had an impact on our consolidated financial statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our quantitative and qualitative market risks since the prior reporting period.
Item 4. CONTROLS AND PROCEDURES
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting during our first quarter ended September 24, 2014, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
FORWARD-LOOKING STATEMENTS
We wish to caution you that our business and operations are subject to a number of risks and uncertainties. We have identified certain factors in Part I, Item IA “Risk Factors” in our Annual Report on Form 10-K for the year ended June 25, 2014 and below in Part II, Item 1A “Risk Factors” in this report on Form 10-Q, that could cause actual results to differ materially from our historical results and from those projected in forward-looking statements contained in this report, in our other filings with the SEC, in our news releases, written or electronic communications, and verbal statements by our representatives. We further caution that it is not possible to see all such factors, and you should not consider the identified factors as a complete list of all risks and uncertainties.

18
Table of Contents

You should be aware that forward-looking statements involve risks and uncertainties. These risks and uncertainties may cause our or our industry’s actual results, performance or achievements to be materially different from any future results, performances or achievements contained in or implied by these forward-looking statements. Forward-looking statements are generally accompanied by words like “believes,” “anticipates,” “estimates,” “predicts,” “expects,” and other similar expressions that convey uncertainty about future events or outcomes.
The risks related to our business include:
•
The effect of competition on our operations and financial results.
•
The impact of the global economic crisis on our business and financial results in fiscal 2015 and the material affect of a prolonged economic recovery on our future results.
•
The impact of the current weak economic recovery on our landlords or other tenants in retail centers in which we or our franchisees are located, which in turn could negatively affect our financial results.
•
The risk inflation may increase our operating expenses.
•
The effect of potential changes in governmental regulation on our ability to maintain our existing and future operations and to open new restaurants.
•
Increases in energy costs and the impact on our profitability.
•
Increased costs or reduced revenues from shortages or interruptions in the availability and delivery of food and other supplies.
•
Our ability to consummate successful mergers, acquisitions, divestitures and other strategic transactions that are important to our future growth and profitability.
•
The inability to meet our business strategy plan and the impact on our profitability in the future.
•
The success of our franchisees to our future growth.
•
The general decrease in sales volumes during winter months.
•
Unfavorable publicity relating to one or more of our restaurants in a particular brand that may taint public perception of the brand.
•
Litigation could have a material adverse impact on our business and our financial performance.
•
Dependence on information technology and any material failure in the operation or security of that technology or our ability to execute a comprehensive business continuity plan could impair our ability to efficiently operate our business.
•
Failure to protect the integrity and security of individually identifiable data of our guests and teammates could expose us to litigation and damage our reputation.
•
Outsourcing of certain business processes to third-party vendors that subject us to risk, including disruptions in business and increased costs.
•
Continuing disruptions in the global financial markets on the availability and cost of credit and consumer spending patterns.
•
Declines in the market price of our common stock or changes in other circumstances that may indicate an impairment of goodwill possibly adversely affecting our financial position and results of operations.
•
Changes to estimates related to our property and equipment, or operating results that are lower than our current estimates at certain restaurant locations, possibly causing us to incur impairment charges on certain long-lived assets.
•
Identification of material weakness in internal control may adversely affect our stock price.
•
Other risk factors may adversely affect our financial performance, including, pricing, consumer spending and consumer confidence, changes in economic conditions and financial and credit markets, credit availability, increased costs of food commodities, increased fuel costs and availability for our team members, customers and suppliers, increased health care costs, health epidemics or pandemics or the prospects of these events, consumer perceptions of food safety, changes in consumer tastes and behaviors, governmental monetary policies, changes in demographic trends, availability of employees, terrorist acts, energy shortages and rolling blackouts, and weather and other acts of God.

19
Table of Contents

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
Information regarding legal proceedings is incorporated by reference from Note 8 to our consolidated financial statements set forth in Part I of this report.
Item 1A. RISK FACTORS
There has been no material change in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended June 25, 2014.
The above risks and other risks described in this report and our other filings with the SEC could have a material impact on our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our operations. Therefore, the risks identified are not intended to be a complete discussion of all potential risks or uncertainties.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Shares repurchased during the first quarter of fiscal 2015 are as follows (in thousands, except share and per share amounts):
 
 
Total Number
of  Shares
Purchased (a)
 
Average
Price
Paid per
Share
 
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Program
 
Approximate
Dollar Value
that May Yet
be Purchased
Under the
Program (b)
June 26, 2014 through July 30, 2014
2,257

 
$
49.39

 
—

 
$
306,869

July 31, 2014 through August 27, 2014
431,896

 
$
47.87

 
235,000

 
$
645,502

August 28, 2014 through September 24, 2014
636,000

 
$
51.12

 
636,000

 
$
612,978

 
1,070,153

 
$
49.80

 
871,000

 
 

(a)
These amounts include shares purchased as part of our publicly announced programs and shares owned and tendered by team members to satisfy tax withholding obligations on the vesting of restricted share awards, which are not deducted from shares available to be purchased under publicly announced programs. Unless otherwise indicated, shares owned and tendered by team members to satisfy tax withholding obligations were purchased at the average of the high and low prices of the Company’s shares on the date of vesting. During the first quarter of fiscal 2015, 199,153 shares were tendered by team members at an average price of $47.32.
(b)
In August 2014, the Board of Directors authorized a $350.0 million increase to our existing share repurchase program.


20
Table of Contents

Item 6. EXHIBITS
 
3
Bylaws of Registrant
 
 
31(a)
Certification by Wyman T. Roberts, Chief Executive Officer and President and President of Chili’s Grill and Bar of the Registrant, pursuant to 17 CFR 240.13a – 14(a) or 17 CFR 240.15d – 14(a).
 
 
31(b)
Certification by Marie L. Perry, Senior Vice President, Treasurer, Controller and Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a – 14(a) or 17 CFR 240.15d – 14(a).
 
 
32(a)
Certification by Wyman T. Roberts, Chief Executive Officer and President and President of Chili’s Grill and Bar of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32(b)
Certification by Marie L. Perry, Senior Vice President, Treasurer, Controller and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.INS
XBRL Instance Document
 
 
101.SCH
XBRL Schema Document
 
 
101.CAL
XBRL Calculation Linkbase Document
 
 
101.DEF
XBRL Definition Linkbase Document
 
 
101.LAB
XBRL Label Linkbase Document
 
 
101.PRE
XBRL Presentation Linkbase


21
Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
 
BRINKER INTERNATIONAL, INC.
 
Date: November 3, 2014
By:
 
/s/ Wyman T. Roberts
 
 
 
Wyman T. Roberts,
 
 
 
Chief Executive Officer and
 
 
 
President and President of Chili’s Grill and Bar
 
 
 
(Principal Executive Officer)
 
Date: November 3, 2014
By:
 
/s/ Marie L. Perry
 
 
 
Marie L. Perry,
 
 
 
Senior Vice President, Treasurer,
 
 
 
Controller and Chief Financial Officer
 
 
 
(Principal Financial Officer)


22
EAT 2014.09.24 10Q1 EX-3

EXHIBIT 3
 
BYLAWS
OF
BRINKER INTERNATIONAL, INC.
(A DELAWARE CORPORATION)


 -- August 21, 2014 --





 








TABLE OF CONTENTS

ARTICLE I

OFFICES
Section 1.    Registered Office    1
Section 2.    Other Offices    1
ARTICLE II

MEETING OF SHAREHOLDERS
Section 1.    Place of Meetings    1
Section 2.    Annual Meetings    1
Section 3.    Notice of Annual Meetings    1
Section 4.    Special Meetings    1
Section 5.    Notice of Special Meetings    2
Section 6.    Adjournment    2
Section 7.    Quorum    2
Section 8.    Order of Business    2
Section 9.    Voting    6
Section 10.    List of Shareholders    6
Section 11.    Inspectors of Votes    7
Section 12.    Action Without a Meeting    7
ARTICLE III

BOARD OF DIRECTORS
Section 1.    Powers    8
Section 2.    Number, Qualification and Term of Office    8
Section 3.    Resignation    8
Section 4.    Removal of Directors    8
Section 5.    Vacancies    8
MEETINGS OF THE BOARD OF DIRECTORS
Section 6.    Place of Meetings    9
Section 7.    Annual Meetings    9
Section 8.    Regular Meetings    9
Section 9.    Special Meetings; Notice    9
Section 10.    Quorum and Manner of Acting    9
Section 11.    Remuneration    9

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COMMITTEES OF DIRECTORS
Section 12.    Executive Committee; How Constituted and Powers    10
Section 13.    Organization    10
Section 14.    Meetings    11
Section 15.    Quorum and Manner of Acting    11
Section 16.    Other Committees    11
Section 17.    Alternate Members of Committees    12
Section 18.    Minutes of Committees    12
GENERAL
Section 19.    Actions Without a Meeting    12
Section 20.    Presence at Meetings by Means or Communications Equipment    12
ARTICLE IV

NOTICES
Section 1.    Type of Notice    13
Section 2.    Waiver of Notice    13
ARTICLE V

OFFICERS
Section 1.    Elected and Appointed Officers    13
Section 2.    Time of Election or Appointment    13
Section 3.    Salaries of Elected Officers    13
Section 4.    Term    14
Section 5.    Chairman of the Board    14
Section 6.    Chief Executive Officer    14
Section 7.    President    14
Section 8.    Executive Vice Presidents    14
Section 9.    Senior Vice Presidents    15
Section 10.    Vice Presidents    15
Section 11.    Assistant Vice Presidents    15
Section 12.    Secretary    15
Section 13.    Assistant Secretaries    16
Section 14.    Treasurer    16
Section 15.    Assistant Treasurers    16

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ARTICLE VI

INDEMNIFICATION
Section 1.    Actions Other Than by or in the Right of the Corporation    17
Section 2.    Actions by or in the Right of the Corporation    17
Section 3.    Determination of Right to Indemnification    17
Section 4.    Right to Indemnification    18
Section 5.    Prepaid Expenses    18
Section 6.    Other Rights and Remedies    18
Section 7.    Insurance    18
Section 8.    Mergers    18
ARTICLE VII

CERTIFICATES OF STOCK
Section 1.    Right to Certificate    19
Section 2.    Facsimile Signatures    19
Section 3.    New Certificates    19
Section 4.    Transfers    20
Section 5.    Record Date    20
Section 6.    Registered Shareholders    20
ARTICLE VIII

GENERAL PROVISIONS
Section 1.    Dividends    20
Section 2.    Reserves    20
Section 3.    Annual Statement    21
Section 4.    Checks    21
Section 5.    Fiscal Year    21
Section 6.    Corporate Seal    21
ARTICLE IX

AMENDMENTS
Section 1.    Amendments    21




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ARTICLE I

OFFICES
Section 1.    Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2.    Other Offices. The Corporation may also have offices at such other place or places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II    

MEETING OF SHAREHOLDERS
Section 1.    Place of Meetings. All meetings of the shareholders for the election of directors shall be held in the City of Dallas, State of Texas, at such place within such city as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of shareholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2.    Annual Meetings. Annual meetings of shareholders, shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting at which meeting the shareholders shall elect the Board of Directors, including the first week of November of each fiscal year, and transact such other business as may be properly brought before the meeting in accordance with these Bylaws.
When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the shares entitled to vote on, and who voted for or against, the matter shall decide any matter brought before such meeting, other than the election of Directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote, and shall be the act of the shareholders, unless otherwise provided by the Certificate of Incorporation, these Bylaws or by resolution of the Board of Directors.
 
Unless otherwise provided in the Certificate of Incorporation or these Bylaws, directors of the Corporation in a contested election (i.e., where the number of nominees for director exceeds the number of directors to be elected) shall be elected by a plurality





of the votes cast by the holders of shares present and entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present.  However, in an uncontested election (i.e., where the number of nominees for director is the same as the number of directors to be elected), directors shall be elected by a majority of the votes cast by the holders of shares present and entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present.  In the event that a nominee for re-election as a director fails to receive the requisite majority vote at an annual or special meeting held for the purpose of electing directors where the election is uncontested such director must, promptly following certification of the shareholder vote, tender his or her resignation to the Board of Directors.  The Governance and Nominating Committee of the Board of Directors, or such other group of independent members of the Board of Directors as is determined by the entire Board of Directors (excluding the director who tendered the resignation) will evaluate any such resignation in light of the best interests of the Corporation and its shareholders and will make a recommendation to the entire Board of Directors as to whether to accept or reject the resignation, or whether other action should be taken.  In reaching its decision, the Board of Directors may consider any factors it deems relevant, including the director’s qualifications, the director’s past and expected future contributions to the Corporation, the overall composition of the Board of Directors and whether accepting the tendered resignation would cause the Corporation to fail to meet any applicable law, rule or regulation (including the listing requirements of any securities exchange).  The Board of Directors shall complete this process within 90 days after the certification of the shareholder vote and shall report its decision to the shareholders in the Corporation’s filing following such Board decision.

Section 3.    Notice of Annual Meetings. Written notice of the annual meeting, stating the place, date and hour of the meeting, and the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting shall be given to each shareholder of record entitled to vote at such meeting not less than ten or more than 60 days before the date of the meeting.
Section 4.    Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called at any time by order of the Board of Directors and shall be called by the Chairman of the Board, the President or the Secretary at the request in writing of a majority of the Board of Directors. Such requests shall state the purpose or purposes of the proposed special meeting. Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice.
Section 5.    Notice of Special Meetings. Written notice of a special meeting, stating the place, date and hour of the meeting, the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting, and the purpose or purposes for which the meeting is called shall be

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given to each shareholder of record entitled to vote at such meeting not less than ten nor more than 60 days before the date of the meeting.
Section 6.    Adjournment. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place and notice need not be given of any such adjourned meeting if the time, place and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 7.    Quorum. Except as otherwise provided by statute or the Certificate of Incorporation, the holders of stock having a majority of the voting power of the stock entitled to be voted thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the shareholders. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting, in accordance with Section 6 of this Article II, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.
Section 8.    Order of Business. The Chairman of the Board, or such other officer of the Corporation designated by a majority of the Board of Directors, will call meetings of the shareholders to order and will act as presiding officer thereof. Unless otherwise determined by the Board of Directors prior to the meeting, the presiding officer of the meeting of the shareholders will also determine the order of business and have the authority in his or her sole discretion to regulate the conduct of any such meeting, including without limitation by (i) imposing restrictions on the persons (other than shareholders of the Corporation or their duly appointed proxies) who may attend any such shareholders’ meeting, (ii) ascertaining whether any shareholder or his proxy may be excluded from any meeting of the shareholders based upon any determination by the presiding officer, in his or her sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and (iii) determining the circumstances in which any person may make a statement or ask questions at any meeting of the shareholders.
At an annual meeting of the shareholders, only such business will be conducted or considered as is properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise

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properly brought before the meeting by the presiding officer or by or at the direction of a majority of the Board of Directors, or (iii) otherwise properly requested to be brought before the meeting by a shareholder of the Corporation in accordance with the immediately succeeding sentence. For business to be properly requested by a shareholder to be brought before an annual meeting, the shareholder must (i) be a shareholder of record at the time of the giving of the notice of such annual meeting by or at the direction of the Board of Directors, (ii) be entitled to vote at such meeting, and (iii) have given timely written notice thereof to the Secretary in accordance with Article II, Section 8A of these Bylaws.
Nominations of persons for election as Directors of the Corporation may be made at an annual meeting of shareholders only by or at the direction of the Board of Directors. Any shareholder (i) who is a shareholder of record at the time of the giving of the notice of an annual meeting of the shareholders by or at the direction of the Board of Directors, (ii) who is entitled to vote for the election of directors at such meeting and (iii) who has given timely written notice thereof to the Secretary in accordance with Article II, Section 8A of these Bylaws, may recommend one or more persons to be considered as a potential nominee or nominees for election as a Director or Directors of the Corporation at an annual meeting of the shareholders. Only persons who are nominated in accordance with this Article II, Section 8 will be eligible for election at a meeting of shareholders as Directors of the Corporation.
At a special meeting of shareholders, only such business may be conducted or considered as is properly brought before the meeting. To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Chairman of the Board, the President, a Vice President or the Secretary or (ii) otherwise properly brought before the meeting by the presiding officer or by or at the direction of a majority of the Board of Directors.
The determination of whether any business sought to be brought before any annual or special meeting of the shareholders is properly brought before such meeting in accordance with this Article II, Section 8, and whether any nomination of a person for election as a Director of the Corporation at any annual meeting of the shareholders was properly made in accordance with this Article II, Section 8, will be made by the presiding officer of such meeting. If the presiding officer determines that any business is not properly brought before such meeting, or any nomination was not properly made, he or she will so declare to the meeting and any such business will not be conducted or considered and any such nomination will be disregarded.
Section 8A.    Advance Notice of Shareholder Proposals and Director Nominations.

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To be timely for purposes of Article II, Section 8 of these Bylaws, a shareholder’s notice must be addressed to the Secretary and delivered or mailed to and received at the principal executive offices of the Corporation not less than one hundred twenty (120) calendar days prior to the anniversary date of the date (as specified in the Corporation’s proxy materials for its immediately preceding annual meeting of shareholders) on which the Corporation first mailed its proxy materials for its immediately preceding annual meeting of shareholders; provided, however, that in the event the annual meeting is called for a date that is not within thirty (30) calendar days of the anniversary date of the date on which the immediately preceding annual meeting of shareholders was called, to be timely, notice by the shareholder must be so received not later than the close of business on the tenth (10th) calendar day following the day on which public announcement of the date of the annual meeting is first made. In no event will the public announcement of an adjournment of an annual meeting of shareholders commence a new time period for the giving of a shareholder’s notice as provided above.
In the case of a request by a shareholder for business to be brought before any annual meeting of shareholders, a shareholder’s notice to the Secretary must set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a description in reasonable detail of the business desired to brought before the annual meeting and the reasons for conducting such business at the annual meeting, including the text of the proposal to be presented and the text of any resolutions to be proposed for consideration by the shareholders (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of shares of the Corporation that are owned beneficially and of record by the shareholder proposing such business and by the beneficial owner, if any, on whose behalf the proposal is made, (iv) whether and the extent to which any hedging, derivative or other transaction or instrument is in place or has been entered into prior to the date of delivery or receipt of such stockholder’s notice, by or for the benefit of the stockholder or beneficial owner with respect to the Corporation or its subsidiaries or any of their respective securities, debt instruments or credit ratings, including any transaction or instrument the intent or effect of which is to give rise to gain or loss as a result of changes in a trading price or credit rating of the Corporation and (v) any material interest of such shareholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made in such business.
In the case of a recommendation by a shareholder of a person to be considered as a potential nominee for election as a director of the Corporation at any annual meeting of shareholders, a shareholder notice to the Secretary must set forth (i) the shareholder’s intent to nominate one or more persons to be a potential nominee or nominees for election as a director of the Corporation, the name of each such nominee proposed by the shareholder giving the notice, and the reason for making such nomination at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the

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shareholder proposing such nomination and the beneficial owner, if any, on whose behalf the nomination is proposed, (iii) the class and number of shares of the Corporation that are owned beneficially and of record by the shareholder proposing such nomination and by the beneficial owner, if any, on whose behalf the nomination is proposed, (iv) whether and the extent to which any hedging, derivative or other transaction or instrument is in place or has been entered into prior to the date of delivery or receipt of such stockholder’s notice, by or for the benefit of the stockholder or beneficial owner with respect to Corporation or its subsidiaries or any of their respective securities, debt instruments or credit ratings, including any transaction or instrument the intent or effect of which is to give rise to gain or loss as a result of changes in a trading price or credit rating of the Corporation, (v) any material interest of such shareholder proposing such nomination and the beneficial owner, if any, on whose behalf the proposal is made, (vi) a description of all arrangements or understandings between or among any of (A) the shareholder giving the notice, (B) each nominee, and (C) any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder giving the notice, (vii) such other information regarding each nominee proposed by the shareholder giving the notice as would be required to be included in a proxy statement filed in accordance with the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board, and (viii) the signed consent of each nominee proposed by the shareholder giving the notice to serve as a director of the Company if so elected. All recommendations will be presented to the Board of Directors, or the appropriate committee of the Board of Directors, for consideration.
The Corporation may also require any proposed nominee to furnish such other information, including completion of the Corporation’s directors questionnaire, as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation, or whether such proposed nominee would be considered “independent” as a director or as a member of the audit or any other committee of the Board of Directors under the various rules and standards applicable to the Corporation.
Notwithstanding the provisions of Sections 8 and 8A of this Article II, a shareholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in Sections 8 and 8A of this Article II. Nothing in Sections 8 and 8A of this Article II will be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation’s proxy statement in accordance with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
For purposes of this Article II, Section 8A, “public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or furnished to shareholders.

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Section 9.    Voting. Except as otherwise provided in the Certificate of Incorporation, each shareholder shall, at each meeting of the shareholders, be entitled to one vote in person or by proxy for each share of stock of the Corporation held by him and registered in his name on the books of the Corporation on the date fixed pursuant to the provisions of Section 5 of Article VII of these Bylaws as the record date for the determination of shareholders who shall be entitled to notice of and to vote at such meeting. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held directly or indirectly by the Corporation, shall not be entitled to vote. Any vote of stock of the Corporation may be given at any meeting of the shareholders by the shareholder entitled thereto, in person or by his proxy appointed by an instrument in writing subscribed by such shareholder or by his attorney thereunto duly authorized and delivered to the Secretary of the Corporation or to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date, unless said proxy shall provide for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. At all meetings of the shareholders, all matters, except where other provision is made by law, the Certificate of Incorporation or these Bylaws, shall be decided by the vote of a majority of the votes cast by the shareholders present in person or by proxy and entitled to vote thereat, a quorum being present. Unless demanded by a shareholder of the Corporation present in person or by proxy at any meeting of the shareholders and entitled to vote thereat, or so directed by the chairman of the meeting, the vote thereat on any question other than the election or removal of directors need not be by written ballot. Upon a demand of any such shareholder for a vote by written ballot on any question or at the direction of such chairman that a vote by written ballot be taken on any question, such vote shall be taken by written ballot. On a vote by written ballot, each ballot shall be signed by the shareholder voting, or by his proxy, if there be such a proxy, and shall state the number of shares voted.
Section 10.    List of Shareholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger, either directly or through another officer of the Corporation designated by him or through a transfer agent appointed by the Board of Directors, to prepare and make, at least ten days before every meeting of the shareholders, a complete list of the shareholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to said meeting, either at a

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place within the city where said meeting is to be held, which place shall be specified in the notice of said meeting, or, if not so specified, at the place where said meeting is to be held. The list shall also be produced and kept at the time and place of said meeting during the whole time thereof and may be inspected by any shareholder of record who shall be present thereat. The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, such list or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders.
Section 11.    Inspectors of Votes. In advance of any meeting of the shareholders, the Corporation shall appoint up to two Inspectors of Votes to act thereat. If no Inspector of Votes is able to act at a meeting of the shareholders, the chairman of the meeting shall appoint up to two Inspectors of Votes to act at the meeting. Each Inspector of Votes, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Such Inspectors of Votes shall take charge of the ballots, if any, at such meeting and after the balloting thereat on any question shall count the ballots cast thereon and shall make a report in writing to the secretary of such meeting of the results thereof. An Inspector of Votes need not be a shareholder of the Corporation, and any officer of the Corporation may be an Inspector of Votes on any question other than a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested.  
Section 12.    Action Without a Meeting. Any action required to be taken at any annual or special meeting of shareholders of the Corporation, or any action which may be taken at any annual or special meeting of shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes (determined as of the record date of such consent) that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereat were present and voted. The record date of a written consent shall be determined by the Board of Directors and shall be not later than 10 days after the date on which a shareholder gives notice to the Board of Directors of (i) the proposed action to be taken by consent and (ii) the date on which the first written consent to take such action has been executed. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those shareholders owning shares as of the record date who have not consented in writing.
ARTICLE III    

BOARD OF DIRECTORS
Section 1.    Powers. The business and affairs of the Corporation shall be managed by its Board of Directors, which shall have and may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, the Certificate

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of Incorporation or these Bylaws directed or required to be exercised or done by the shareholders.
Section 2.    Number, Qualification and Term of Office. The number of directors which shall constitute the whole Board of Directors shall not be less than one nor more than twelve. The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors. Directors need not be shareholders. The directors shall be elected at the annual meeting of the shareholders, except as provided in Sections 4 and 5 of this Article III.
(a)    The term of any director elected at any annual meeting shall be a one (1) year term commencing on the first (1st) day of January following their election and expiring on thirty-first (31st) day of the following December, except that term of any director who is not re-elected (or, who has elected not to stand for re-election) at any subsequent annual meeting shall expire on the date of such annual meeting.
(b)    With respect to any new director who is elected for the first time at any annual meeting of shareholders, each such newly-elected director shall hold office for an interim term commencing on the date of their election until the thirty-first (31st) day of the following December. Thereafter, each such director shall hold office for a term as set forth in subparagraph (a) above.
(c)    With respect to any director who is elected at the annual meeting of shareholders in October 2014, each such director shall hold office for an interim term commencing on the date of their election until December 31, 2014. Thereafter, each such director shall hold office for a term as set forth in subparagraph (a) above.
(d)    Each director shall hold office for their term as set forth above and his successor is elected and qualified, or until his death or retirement or until he shall earlier resign or shall earlier be removed in the manner hereinafter provided.
Section 3.    Resignation. Any director may resign at any time by giving written notice of his resignation to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by the Secretary. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 4.    Removal of Directors. Any director may be removed, either with or without cause, at any time, by the affirmative vote of a majority in voting interest of the shareholders of record of the Corporation entitled to vote, given at any annual or special meeting of the shareholders called for that purpose. The vacancy in the Board of Directors caused by any such removal shall be filled by the Board of Directors as provided in Section 5 of this Article III.

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Section 5.    Vacancies. In the event of open directorships resulting from resignation or removal of directors and/or any increase in the authorized number of directors, then person(s) to fill such open directorships may be chosen by a majority of the directors then in office though less than a quorum, or by a sole remaining director, and the person(s) so chosen shall hold office as director(s) until the thirty-first (31st) day of the following December, except that term of any such director who is not re-elected (or, who has elected not to stand for re-election) at the next annual meeting shall expire on the date of such annual meeting. Any director so chosen shall hold for a term as set forth in the preceding sentence and until their successors are elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6.    Place of Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 7.    Annual Meetings. The first meeting of each newly elected Board of Directors shall be held immediately following the annual meeting of shareholders and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held immediately following the annual meeting of shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.
Section 8.    Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.
Section 9.    Special Meetings; Notice. Special meetings of the Board of Directors may be called by the Chairman of the Board, President or Secretary on 24 hours notice to each director, either personally or by telephone or by mail, telegraph, telex, cable, wireless or other form of recorded communication; special meetings shall be called by the Chairman of the Board, President or Secretary in like manner and on like notice on the written request of two directors. Notice of any such meeting need not be given to any director, however, if waived by him in writing or by telegraph, telex, cable, wireless or other form of recorded communication, or if he shall be present at such meeting.
Section 10.    Quorum and Manner of Acting. At all meetings of the Board of Directors, a majority of the directors at the time in office shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a

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quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 11.    Remuneration. Unless otherwise expressly provided by resolution adopted by the Board of Directors, no director shall, as such, receive any stated remuneration for his services; but the Board of Directors may at any time and from time to time by resolution provide that a specified sum shall be paid to any director of the Corporation, either as his annual remuneration as such director or member of any committee of the Board of Directors or as remuneration for his attendance at each meeting of the Board of Directors or any such committee. The Board of Directors may also likewise provide that the Corporation shall reimburse each director for any expenses paid by him on account of his attendance at any meeting. Nothing in this Section 11 shall be construed to preclude any director from serving the Corporation in any other capacity and receiving remuneration thereof.
COMMITTEES OF DIRECTORS
Section 12.    Executive Committee; How Constituted and Powers. The Board of Directors may, in its discretion, by resolution passed by a majority of the whole Board of Directors, designate an Executive Committee consisting of one or more of the directors of the Corporation. Subject to the provisions of Section 141 of the General Corporation Law of the State of Delaware, the Certificate of Incorporation, and these Bylaws, the Executive Committee shall have and may exercise, when the Board of Directors is not in session, all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and shall have the power to authorize the seal of the Corporation to be affixed to all papers which may require it; but the Executive Committee shall not have the power to amend the Certificate of Incorporation (except that the Executive Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemptions, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares or any series), to fill vacancies in the Board of Directors or the Executive Committee, to adopt an agreement of merger or consolidation under Section 251, 252, 254, 255, 256, 257, 258, 263 or 264 of the Delaware General Corporation Law, to recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, to recommend to the shareholders a dissolution of the Corporation or a revocation of a dissolution, or to amend the Bylaws of the Corporation. Except as otherwise provided herein or in the Corporation’s Certificate of Incorporation, the Executive

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Committee shall have the power and authority to authorize the issuance of common stock and grant and authorize options and other rights with respect to such issuance, to declare a dividend, to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law, and to fill vacancies in any other committee of directors elected or approved by officers of the Corporation. The Board of Directors shall have the power at any time, by resolution passed by a majority of the whole Board of Directors, to change the membership of the Executive Committee, to fill all vacancies in it, or to dissolve it, with or without cause.
Section 13.    Organization. The Chairman of the Executive Committee, to be selected by the Board of Directors, shall act as chairman at all meetings of the Executive Committee and the Secretary shall act as secretary thereof. In case of the absence from any meeting of the Executive Committee of the Chairman of the Executive Committee or the Secretary, the Executive Committee may appoint a chairman or secretary, as the case may be, of the meeting.
Section 14.    Meetings. Regular meetings of the Executive Committee, of which no notice shall be necessary, may be held on such days and at such places, within or without the State of Delaware, as shall be fixed by resolution adopted by a majority of the Executive Committee and communicated in writing to all its members. Special meetings of the Executive Committee shall be held whenever called by the Chairman of the Executive Committee or a majority of the members of the Executive Committee then in office. Notice of each special meeting of the Executive Committee shall be given by mail, telegraph, telex, cable, wireless or other form of recorded communication or be delivered personally or by telephone to each member of the Executive Committee not later than the day before the day on which such meeting is to be held. Notice of any such meeting need not be given to any member of the Executive Committee, however, if waived by him in writing or by telegraph, telex, cable, wireless or other form of recorded communication, or if he shall be present at such meeting; and any meeting of the Executive Committee shall be a legal meeting without any notice thereof having been given, if all the members of the Executive Committee shall be present thereat. Subject to the provisions of this Article III, the Executive Committee, by resolution adopted by a majority of the whole Committee, shall fix its own rules of procedure.
Section 15.    Quorum and Manner of Acting. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at a meeting thereof at which a quorum is present shall be the act of the Committee.
Section 16.    Other Committees. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more other committees consisting of one or more directors of the Corporation, which, to the extent provided in said resolution or resolutions, shall have and may exercise, subject to the provisions of Section 141 of the General Corporation Law of the State of Delaware,

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the Certificate of Incorporation and these Bylaws, the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and shall have the power to authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power to fill vacancies in the Board of Directors, the Executive Committee or any other committee or in their respective membership, appoint or remove officers of the Corporation, or authorize the issuance of shares of the capital stock of the corporation except that such a committee may, to the extent provided in said resolutions, grant and authorize options and other rights with respect to the common stock of the Corporation pursuant to and in accordance with any plan approved by the Board of Directors. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, within or without the State of Delaware, and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise provide. Special meetings of the committees shall be held whenever called by the Chairman of the applicable committee or a majority of the members of such committee then in office. Notice of each special meeting of the any such committee shall be given by mail, telegraph, telex, cable, wireless or other form of recorded communication or be delivered personally or by telephone to each member of such committee not later than the day before the day on which such meeting is to be held. Notice of any such meeting need not be given to any member of such committee, however, if waived by him in writing or by telegraph, telex, cable, wireless or other form of recorded communication, or if he shall be present at such meeting; and any meeting of such committee shall be a legal meeting without any notice thereof having been given, if all the members of such committee shall be present thereat. The Board of Directors shall have power to change the members of any such committee at any time to fill vacancies, and to discharge any such committee, either with or without cause, at any time.
Section 17.    Alternate Members of Committees. The Board of Directors may designate one or more directors as alternate members of the Executive Committee or any other committee, who may replace any absent or disqualified member at any meeting of the committee, or if none be so appointed, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 18.    Minutes of Committees. Each committee shall keep regular minutes of its meetings and proceedings and report the same to the Board of Directors at the next meeting thereof.
GENERAL

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Section 19.    Actions Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or the committee.
Section 20.    Presence at Meetings by Means or Communications Equipment. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 20 shall constitute presence in person at such meeting.
ARTICLE IV    

NOTICES
Section 1.    Type of Notice. Whenever, under the provisions of the statutes, the Certificate of Incorporation or these Bylaws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, in person or by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given in any manner permitted by Article III hereof and shall be deemed to be given at the time when first transmitted by the method of communication so permitted.
Section 2.    Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto, and transmission of a waiver of notice by a director or shareholder by mail, telegraph, telex, cable, wireless or other form of recorded communication may constitute such a waiver.
ARTICLE V    

OFFICERS
Section 1.    Elected and Appointed Officers. The elected officers of the Corporation shall be a Chief Executive Officer, a President, one or more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, with or without such descriptive titles as the Board of Directors shall deem appropriate, a Secretary and a Treasurer and, if the Board of Directors so elects, a Chairman of the Board (who shall be a director). The

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Board of Directors or the Executive Committee of the Board of Directors by resolution also may appoint one or more Assistant Vice Presidents, Assistant Treasurers, Assistant Secretaries, and such other officers and agents as from time to time may appear to be necessary or advisable in the conduct of the affairs of the Corporation.
Section 2.    Time of Election or Appointment. The Board of Directors at shall elect or appoint officers to fill the positions designated in or pursuant to Section 1 of this Article V at least annually and otherwise at any other time as necessary or advisable in the conduct of the affairs of the Corporation.
Section 3.    Salaries of Elected Officers. The salaries of all elected officers of the Corporation shall be fixed by the Board of Directors.
Section 4.    Term. Each officer of the Corporation shall hold his office until his successor is elected or appointed and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors or the Executive Committee may be removed at any time by the affirmative vote of a majority of the whole Board of Directors. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors or the appropriate committee thereof.
Section 5.    Chairman of the Board. The Chairman of the Board shall preside, if present, at all meetings of the Board of Directors and the shareholders and shall perform such other reasonable duties as may be prescribed from time to time by the Board of Directors or by the Bylaws.
Section 6.    Chief Executive Officer. The Chief Executive Officer shall have general supervision of the affairs of the Corporation and shall have general and active control of all its business. He shall preside, in the absence of the Chairman of the Board, at all meetings of shareholders. He shall see that all orders and resolutions of the Board of Directors and the shareholders are carried into effect. He shall have general authority to execute bonds, deeds, and contracts in the name of the Corporation and affix the corporation seal thereto; to sign stock certificates; to cause the employment or appointment of such officers, employees, and agents of the Corporation as the proper conduct of operations may require, and to fix their compensation, subject to the provisions of these Bylaws; to remove or suspend any employee or agent who was employed or appointed under his authority or under authority of an officer subordinate to him; to suspend for cause, pending final action by the authority that elected or appointed him, any officer subordinate to him; in coordination with the other officers and directors of the Corporation, to develop the Corporation’s basic strategic and long-range plans, including marketing programs, expansion plans and financial structure; and, in general, to exercise all of the powers of authority usually appertaining to the chief executive officer of a corporation, except as otherwise provided in these Bylaws.

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Section 7.    President. The President shall be the Chief Operating Officer of the Corporation and, as such, shall have, subject to review and approval of the Chief Executive Officer, the responsibility for the day-to-day operations of the Corporation.
Section 8.    Executive Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Executive Vice President (or, if there be more than one, the Executive Vice Presidents in the order designated or, in the absence of any designation, in the order of their election) shall perform the duties of the President and, when so acting, shall have all of the powers of and be subject to all of the restrictions upon the President. The Executive Vice Presidents shall perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. The officer in charge of finance, if one is so elected, shall also perform the duties and assume the responsibilities described in Section 14 of this Article for the Treasurer.
Section 9.    Senior Vice Presidents. In the absence of the Executive Vice President or in the event of his inability or refusal to act, the Senior Vice President (or, if there be more than one, the Senior Vice Presidents in the order designated or, in the absence of any designation, in the order of their election) shall perform the duties of the Executive Vice President and, when so acting, shall have all of the powers of and be subject to all of the restrictions upon the Executive Vice President. The Senior Vice Presidents shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer, or the Chief Operating Officer may from time to time prescribe. The officer in charge of finance, if one is so elected, shall also perform the duties and assume the responsibilities described in Section 14 of this Article for the Treasurer.
Section 10.    Vice Presidents. In the absence of the Senior Vice President or in the event of his inability or refusal to act, the Vice President (or, if there be more than one, the Vice Presidents in the order designated or, in the absence of any designation, in the order of their election) shall perform the duties of the Senior Vice President and, when so acting, shall have all of the powers of and be subject to all of the restrictions upon the Senior Vice President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer, or the Chief Operating Officer may from time to time prescribe. The officer in charge of finance, if one is so elected, shall also perform the duties and assume the responsibilities described in Section 14 of this Article for the Treasurer.
Section 11.    Assistant Vice Presidents. In the absence of a Vice President or in the event of his inability or refusal to act, the Assistant Vice President (or, if there be more than one, the Assistant Vice Presidents in the order designated or of their election or in such other manner as the Board of Directors shall determine) shall perform the duties and exercise the powers of that Vice President and shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer, the Chief

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Operating Officer, or the Vice President under whose supervision he is appointed may from time to time prescribe.
Section 12.    Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all proceedings of such meetings in a book to be kept for that purpose and shall perform like duties for the Executive Committee or other standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall keep and account for all books, documents, papers, and records of the Corporation except those for which some other officer or agent is properly accountable. He shall have authority to sign stock certificates and shall generally perform all of the duties usually appertaining to the office of the secretary of a corporation.
Section 13.    Assistant Secretaries. In the absence of the Secretary or in the event of his inability or refusal to act, the Assistant Secretary (or, if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors or, if there be no such determination, in the order of their appointment) shall perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer, or the Secretary may from time to time prescribe.
Section 14.    Treasurer. The Treasurer (or the Vice President in charge of finance, if one is so elected) shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors, at its regular meetings or when the Board of Directors so requires, an account of all of his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond (which shall be reviewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property or whatever kind in his possession or under his control belonging to the Corporation. The Treasurer shall perform such other duties as

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may be prescribed by the Board of Directors, the Chief Executive Officer, or any such officer in charge of finance.
Section 15.    Assistant Treasurers. The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer and, in the absence of the Treasurer or in the event of his inability or refusal to act, the Assistant Treasurer (or if there be more than one, the Assistant Treasurers in the order determined by the Board of Directors or, if there is no such determination, in the order of their appointment), shall perform the duties and exercise the powers of the Treasurer, and shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer, or the Treasurer may from time to time prescribe.
ARTICLE VI    

INDEMNIFICATION
Section 1.    Actions Other Than by or in the Right of the Corporation. The Corporation shall indemnify any person, to the fullest extent permitted by law, who was or is a party or is threatened to be made a party to any threatened, pending, or contemplated action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than as provided in Article VI, Section 2 with respect to an action by or in the right of the Corporation), by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise (all of such persons being hereafter referred to in this Article as a “Corporate Functionary”), against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendre or its equivalent, shall not, of itself, create a presumption that the Corporate Functionary did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.
Section 2.    Actions by or in the Right of the Corporation. The Corporation shall indemnify any Corporate Functionary who was or is a party or is threatened to be made a party to any threatened, pending, or contemplated action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Corporate Functionary against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not

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opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 3.    Determination of Right to Indemnification. Any indemnification under Sections 1 or 2 of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Corporate Functionary is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article VI. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders.
Section 4.    Right to Indemnification. Notwithstanding the other provisions of this Article VI, to the extent that a Corporate Functionary has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article VI, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney’s fees) actually and reasonably incurred by him in connection therewith.
Section 5.    Prepaid Expenses. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined he is entitled to be indemnified by the Corporation as authorized in this Article VI.
Section 6.    Other Rights and Remedies. The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 7.    Insurance. Upon resolution passed by the Board of Directors, the Corporation may purchase and maintain insurance on behalf of any past or present Corporate Functionary against any liability asserted against him and incurred by him in

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any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
Section 8.    Mergers. For purposes of this Article VI, references to “the Corporation” shall include, in addition to the resulting or surviving corporation, constituent corporations (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
ARTICLE VII    

CERTIFICATES OF STOCK
Section 1.    Right to Certificate. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board, the President or a Vice President, and the Secretary or an Assistant Secretary of the Corporation certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each shareholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, provide that some or all of any or all classes or series of the Corporation's stock may be in the form of uncertificated shares.
Section 2.    Facsimile Signatures. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer,

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transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
Section 3.    New Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate.
Section 4.    Transfers. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation, subject to any proper restrictions on transfer, to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
Section 5.    Record Date. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the date is adopted by the Board of Directors and which shall not be less than ten nor more than 60 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6.    Registered Shareholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not provided by the laws of the State of Delaware.

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ARTICLE VIII    

GENERAL PROVISIONS
Section 1.    Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors (but not any committee thereof) at any regular meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
Section 2.    Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
Section 3.    Annual Statement. The Board of Directors shall present at each annual meeting, and at any special meeting of the shareholders when called for by vote of the shareholders, a full and clear statement of the business and condition of the Corporation.
Section 4.    Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time prescribe.
Section 5.    Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors.
Section 6.    Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word “Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed, reproduced or otherwise.
ARTICLE IX    

AMENDMENTS
Section 1.    Amendments. These Bylaws may be altered, amended or repealed or new Bylaws may be adopted by the shareholders or by the Board of Directors at any regular meeting of the shareholders or the Board of Directors or at any special meeting of the shareholders or the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting.

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* * * * * * * *

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EAT 2014.09.24 10Q1 EX-31A


EXHIBIT 31(a)
CERTIFICATIONS
I, Wyman T. Roberts, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Brinker International, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
A.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
B.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles;
C.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
D.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);
A.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
B.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
November 3, 2014
By:
 
/s/ Wyman T. Roberts
 
 
 
 
Wyman T. Roberts,
 
 
 
 
Chief Executive Officer and
 
 
 
 
President and President of Chili’s Grill and Bar
 
 
 
 
(Principal Executive Officer)


EAT 2014.09.24 10Q1 EX-31B


EXHIBIT 31(b)
CERTIFICATIONS
I, Marie L. Perry, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Brinker International, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
A.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
B.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles;
C.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
D.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);
A.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
B.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
November 3, 2014
By:
 
/s/ Marie L. Perry
 
 
 
 
Marie L. Perry,
 
 
 
 
Senior Vice President, Treasurer,
 
 
 
 
Controller and Chief Financial Officer
 
 
 
 
(Principal Financial Officer)


EAT 2014.09.24 10Q1 EX-32A


EXHIBIT 32(a)
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Brinker International, Inc. (the “Company”), hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended September 24, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
November 3, 2014
By:
 
/s/ Wyman T. Roberts
 
 
 
 
Wyman T. Roberts,
 
 
 
 
Chief Executive Officer and
 
 
 
 
President and President of Chili’s Grill and Bar
 
 
 
 
(Principal Executive Officer)


EAT 2014.09.24 10Q1 EX-32B


EXHIBIT 32(b)
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Brinker International, Inc. (the “Company”), hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended September 24, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
November 3, 2014
By:
 
/s/ Marie L. Perry
 
 
 
 
Marie L. Perry,
 
 
 
 
Senior Vice President, Treasurer,
 
 
 
 
Controller and Chief Financial Officer
 
 
 
 
(Principal Financial Officer)