BRINKER INTERNATIONAL, INC. 
By DALLAS, April 23, 2013 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 27, 2013.
Highlights include the following:
-- Earnings per diluted share, excluding special items, increased 20.0
percent to $0.72 compared to $0.60 for the third quarter of fiscal 2012
(see non-GAAP reconciliation below)
-- On a GAAP basis, earnings per diluted share increased 26.8 percent to
$0.71 compared to $0.56 for the third quarter of fiscal 2012
-- Restaurant operating margin(1) improved approximately 70 basis points to
17.9 percent from 17.2 percent
-- Brinker's operating income, excluding special items, improved 110 basis
points from 9.8 percent to 10.9 percent primarily due to general and
administrative savings in addition to the restaurant operating margin
improvement mentioned above
-- Chili's comparable restaurant sales decreased 1.1 percent for the
quarter consisting of a 0.4 percent and 4.3 percent decrease in January
and February, respectively, offset by a 1.3 percent increase in March
-- Maggiano's comparable restaurant sales increased 0.4 percent,
representing the 13th consecutive quarterly increase
-- Franchise comparable restaurant sales increased 1.3 percent driven by a
5.1 percent increase in international franchise comparable restaurant
sales
-- The company repurchased approximately 1.8 million shares of its common
stock for $60.4 million in the third quarter
-- The company paid a dividend of 20 cents per share in the third quarter,
an increase of 25 percent over the prior year third quarter
-- For the first nine months of fiscal 2013, cash flows provided by
operating activities were $222.6 million and capital expenditures
totaled $98.7 million
"Brinker delivered a 20 percent increase in EPS for the quarter, despite a tough industry sales environment," said Wyman Roberts, President and Chief Executive Officer. "We've remained steadfast in executing our initiatives and are realizing the benefits of our strengthened business model. As such, we are confident we will meet our 2010 promise of doubling EPS as early as next fiscal year."
(1) Effective for the fiscal
first quarter ended Sept.
26, 2012, revenues are
reported in two separate
captions-Company sales and
Franchise and other
revenues. Restaurant
operating margin is now
defined as Company sales
less Cost of sales,
Restaurant labor and
Restaurant expenses.
Table 1: Monthly and Q3 comparable restaurant sales
Q3 13 and Q3 12, company-owned, reported brands and franchise; percentage
Jan Feb March Q3 13 Q3 12
--- --- ----- ----- -----
Brinker
International (0.1) (4.2) 1.5 (0.9) 4.5
Chili's
Company-
Owned
Comparable
Restaurant
Sales (0.4) (4.3) 1.3 (1.1) 4.6
Pricing
Impact 1.9 1.3 1.3 1.5 1.9
Mix-
Shift 0.5 0.2 1.3 0.6 0.9
Traffic (2.8) (5.8) (1.3) (3.2) 1.8
Maggiano's
Comparable
Restaurant
Sales 1.7 (3.4) 2.5 0.4 3.9
Pricing
Impact 2.5 1.1 0.7 1.6 2.2
Mix-
Shift 0.0 (1.1) 0.5 (0.2) 0.2
Traffic (0.8) (3.4) 1.3 (1.0) 1.5
Franchise(1) 1.3 3.5
Domestic
Comparable
Restaurant
Sales (0.3) 3.8
International
Comparable
Restaurant
Sales 5.1 2.6
System-
wide(2) (0.2) 4.2
(1) Revenues generated by franchisees
are not included in revenues on
the consolidated statements of
income; however, we generate
royalty revenue and advertising
fees based on franchisee
revenues, where applicable. We
believe including franchisee
comparable restaurants revenues
provides investors information
regarding brand performance that
is relevant to current operations
and may impact future restaurant
development.
(2) 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 franchisee
operated restaurants.
Quarterly Operating Performance
CHILI'S third quarter company sales of $632.6 million represent a 0.7 percent decrease from $637.0 million in the prior year period driven by traffic declines. As compared to the prior year, Chili's operating margin improved due to lower cost of sales. Cost of sales as a percentage of company sales was favorably impacted by mix changes related to shrimp, ribs and fajita meat coupled with increased menu pricing, partially offset by unfavorable commodity pricing primarily related to beef, pork and chicken wings. Restaurant labor was positively impacted by improved labor productivity from the installation of new kitchen equipment and lower manager bonuses, partially offset by increased health insurance claims and sales deleverage.
MAGGIANO'S third quarter company sales of $92.1 million increased 0.2 percent primarily driven by menu pricing. As compared to the prior year, Maggiano's operating margin improved primarily due to lower cost of sales. Cost of sales was favorably impacted by decreased commodity usage from efforts to reduce waste, menu item changes, favorable commodity pricing on seafood as well as increased menu pricing. Restaurant operating margin was negatively impacted by higher workers' compensation insurance expenses and increased health insurance claims, partially offset by lower repair and maintenance expense and utilities expense.
FRANCHISE AND OTHER revenues totaled $18.1 million for the quarter, an increase of 38.2 percent compared to $13.1 million in the prior year. The increase was driven primarily by a $5.2 million reduction in revenues in the prior year resulting from a change in the estimate of gift card breakage. International franchise comparable restaurant sales increased 5.1 percent while domestic franchise comparable restaurant sales decreased 0.3 percent. Brinker franchisees generated approximately $424 million in sales(1) for the third quarter of fiscal 2013.
(1) Royalty revenues are recognized
based on the sales generated
and reported to the company by
franchisees.
Other
Depreciation and amortization expense increased $2.3 million for the quarter primarily due to investments in existing restaurants and asset replacements, partially offset by an increase in fully depreciated assets.
General and administrative expense decreased $6.0 million primarily due to lower performance-based compensation.
Interest expense increased $0.6 million for the quarter as a result of higher borrowing balances.
Excluding the impact of special items, the effective income tax rate remained flat at 28.9 percent in the current quarter compared to the same quarter last year as the tax impact of increased earnings in the current quarter was offset by a credit related to the prior year. On a GAAP basis, the effective income tax rate increased to 28.7 percent in the current quarter as compared to 28.2 percent in the same quarter last year due to increased earnings in the current quarter and the tax benefit resulting from higher net charges related to special items in the prior year, partially offset by a credit related to the prior year.
Non-GAAP Reconciliation
Brinker believes excluding special items from its financial results provides investors with a clearer perspective of the company's ongoing operating performance and a more relevant comparison to prior period results.
Table 2: Reconciliation of net income excluding special items
Q3 13 and Q3 12; $ millions and $ per diluted share after-tax
Q3 13 EPS Q3 Q3 12 EPS Q3
13 12
----- ------ ----- ------
Net Income 52.0 0.71 44.9 0.56
Other (Gains) and
Charges(1) 0.9 0.01 (0.1) 0.00
Adjustment for
Gift Card
Breakage(2) - - 3.3 0.04
Net Income
excluding Special
Items 52.9 0.72 48.1 0.60
==== ==== ==== ====
(1) Pre-tax Other gains and charges
was a $1.6 million charge and a
$0.1 million gain in the third
quarter of fiscal 2013 and
2012, respectively.
(2) The Company recognized a
pre-tax $5.2 million
reduction to revenue in the
third quarter of fiscal
2012 resulting from a
change in the estimate of
gift card breakage.
Guidance Policy
Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the income statement and will only provide updates if there is a material change versus the original guidance. Consistent with prior practice, management will not discuss intra-period sales or other key operating results not yet reported as the limited data may not accurately reflect the final results of the period or quarter referenced.
Webcast Information
Investors and interested parties are invited to listen to today's conference call, as management will provide further details of the quarter. The call will broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (April 23). For those who are unable to listen to the live broadcast, a replay of the call will be available shortly thereafter and will remain on the Brinker website until the end of the day May 21, 2013.
Additional financial information, including statements of income which detail operations excluding special items, franchise and other revenues, and comparable restaurant sales trends by brand, is also available on the Brinker website under the Financial Information section of the Investor tab.
Forward Calendar
-- SEC Form 10-Q for third quarter fiscal 2013 filing on or before May 6,
2013; and
-- Fourth quarter earnings release, before market opens, Aug. 2, 2013.
About Brinker
Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, Brinker currently owns, operates, or franchises 1,588 restaurants under the names Chili's(®) Grill & Bar (1,544 restaurants) and Maggiano's Little Italy(®) (44 restaurants).
Forward-Looking Statements
The statements contained in this release that are not historical facts are forward-looking statements. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by general business and economic conditions, financial and credit market conditions, credit availability, reduced disposable income, the impact of competition, the impact of mergers, acquisitions, divestitures and other strategic transactions, franchisee success, the seasonality of the company's business, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorists acts, consumer perception of food safety, changes in consumer taste, health epidemics or pandemics, changes in demographic trends, availability of employees, unfavorable publicity, the company's ability to meet its business strategy plan, acts of God, governmental regulations and inflation.
BRINKER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
--------------------------- ------------------------------
March 27, March 28, March 27, March 28,
2013 2012 2013 2012
---- ---- ---- ----
Revenues:
Company sales $724,693 $728,868 $2,057,490 $2,038,333
Franchise and other revenues (a) 18,066 13,177 58,540 54,018
------ ------ ------ ------
Total revenues 742,759 742,045 2,116,030 2,092,351
------- ------- --------- ---------
Operating Costs and Expenses:
Company restaurants
Cost of sales 198,316 205,155 567,602 571,962
Restaurant labor 231,822 233,806 667,865 664,068
Restaurant expenses 164,537 164,230 489,781 489,872
------- ------- ------- -------
Company restaurant expenses 594,675 603,191 1,725,248 1,725,902
Depreciation and amortization 33,222 30,929 98,830 93,265
General and administrative 33,986 40,006 102,289 104,040
Other gains and charges (b) 1,550 (104) 2,227 5,614
----- ---- ----- -----
Total operating costs and expenses 663,433 674,022 1,928,594 1,928,821
------- ------- --------- ---------
Operating income 79,326 68,023 187,436 163,530
Interest expense 7,085 6,530 21,040 20,087
Other, net (573) (1,072) (2,096) (3,018)
---- ------ ------ ------
Income before provision for income taxes 72,814 62,565 168,492 146,461
Provision for income taxes 20,863 17,632 51,500 42,233
------ ------ ------ ------
Net income $51,951 $44,933 $116,992 $104,228
======= ======= ======== ========
Basic net income per share $0.73 $0.58 $1.61 $1.31
===== ===== ===== =====
Diluted net income per share $0.71 $0.56 $1.56 $1.28
===== ===== ===== =====
Basic weighted average shares
outstanding 71,067 77,582 72,511 79,722
====== ====== ====== ======
Diluted weighted average shares
outstanding 73,341 79,735 74,873 81,658
====== ====== ====== ======
(a) Franchise and other
revenues includes royalties,
development fees and franchise
fees, banquet service charge
income, and gift card activity
(breakage and discounts).
(b) Other gains and charges
includes:
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
--------------------------- ------------------------------
March 27, March 28, March 27, March 28,
2013 2012 2013 2012
---- ---- ---- ----
Restaurant
impairment
charges $ - $ - $661 $1,098
Restaurant
closure
charges 305 1,032 2,887 4,154
Severance and
other
benefits 1,269 - 1,269 100
Gain on sale
of assets,
net (81) (25) (2,430) (1,365)
Other 57 (1,111) (160) 1,627
--- ------ ---- -----
$1,550 $(104) $2,227 $5,614
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 27, June 27,
2013 2012
---- ----
(Unaudited)
ASSETS
Current assets $214,897 $194,846
Net property and equipment (a) 1,029,921 1,043,564
Total other assets 201,044 197,662
------- -------
Total assets $1,445,862 $1,436,072
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current installments of long-term debt $27,528 $27,334
Current liabilities 363,107 374,415
Long-term debt, less current installments 677,309 587,890
Other liabilities 132,709 136,560
Total shareholders' equity 245,209 309,873
------- -------
Total liabilities and shareholders' equity $1,445,862 $1,436,072
========== ==========
(a) At March 27, 2013, the company
owned the land and buildings
for 189 of the 865 company-
owned restaurants. The net book
values of the land and
buildings associated with these
restaurants totaled $141.4
million and $119.2 million,
respectively.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Thirty-Nine Week Periods Ended
------------------------------
March 27, March 28,
2013 2012
---- ----
Cash Flows From Operating Activities:
Net income $116,992 $104,228
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 98,830 93,265
Restructure charges and other impairments 3,792 5,042
Stock-based compensation 12,909 10,393
Net loss on disposal of assets 1,115 1,541
Changes in assets and liabilities (11,002) 19,341
------- ------
Net cash provided by operating activities 222,636 233,810
------- -------
Cash Flows from Investing Activities:
Payments for property and equipment (98,690) (85,177)
Proceeds from sale of assets 6,535 4,344
Investment in equity method investees - (1,083)
--- ------
Net cash used in investing activities (92,155) (81,916)
------- -------
Cash Flows from Financing Activities:
Purchases of treasury stock (191,799) (208,347)
Borrowings on revolving credit facility 110,000 -
Payments of dividends (42,161) (37,850)
Proceeds from issuances of treasury stock 32,042 27,946
Payments on long-term debt (19,785) (12,187)
Excess tax benefits from stock-based
compensation 7,811 924
Proceeds from issuance of long-term debt - 70,000
Payments for deferred financing costs - (1,620)
--- ------
Net cash used in financing activities (103,892) (161,134)
-------- --------
Net change in cash and cash equivalents 26,589 (9,240)
Cash and cash equivalents at beginning of
period 59,103 81,988
------ ------
Cash and cash equivalents at end of period $85,692 $72,748
======= =======
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
Third Quarter Total Restaurants Projected Openings
Net Openings/
(Closings) March 27, 2013 Fiscal 2013
Fiscal 2013
-----------
Company-Owned Restaurants:
Chili's (2) 821 -
Maggiano's - 44 -
--- --- ---
(2) 865 -
--- --- ---
Franchise Restaurants:
Chili's (5) 447 2
International (a) 2 276 30-35
--- --- -----
(3) 723 32-37
--- --- -----
Total Restaurants:
Chili's (7) 1,268 2
Maggiano's - 44 -
International (a) 2 276 30-35
--- --- -----
(5) 1,588 32-37
=== ===== =====
(a) At March 27, 2013, there were
276 Chili's international
franchise restaurants.
SOURCE Brinker International, Inc.
