BRINKER INTERNATIONAL, INC. DALLAS, April 21, 2015 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 25, 2015.
Highlights include the following:
-- Earnings per diluted share, excluding special items, increased 11.9
percent to $0.94 compared to $0.84 for the third quarter of fiscal 2014
-- On a GAAP basis, earnings per diluted share increased 24.4 percent to
$1.02 compared to $0.82 for the third quarter of fiscal 2014
-- Brinker International company sales increased 3.0 percent to $761.7
million and comparable restaurant sales at company-owned restaurants
increased 1.7 percent. Comparable restaurant sales increased 2.6 percent
excluding the impact of Christmas Day moving to the third quarter
-- Chili's company-owned comparable restaurant sales increased 1.9 percent
-- Maggiano's comparable restaurant sales increased 0.1 percent,
representing the 21st consecutive quarterly increase
-- Chili's franchise comparable restaurant sales increased 2.5 percent
which includes a 3.1 percent increase for U.S. franchise restaurants and
a 1.2 percent increase for international franchise restaurants
-- Restaurant operating margin,(1 )as a percent of company sales, improved
approximately 30 basis points to 18.9 percent compared to 18.6 percent
for the third quarter of fiscal 2014
-- For the first nine months of fiscal 2015, cash flows provided by
operating activities were $274.9 million and capital expenditures
totaled $107.1 million. Free cash flow(2) was approximately $167.8
million
-- The company repurchased approximately 1.7 million shares of its common
stock for $104.2 million in the third quarter and a total of
approximately 3.9 million shares for $217.0 million year-to-date
-- The company paid a dividend of 28 cents per share in the third quarter,
an increase of 17 percent over the prior year third quarter, and
declared a dividend of 28 cents per share to be paid in the fourth
quarter
"Brinker delivered another solid quarter of double digit EPS growth," said Wyman Roberts, Chief Executive Officer and President. "We believe our ongoing culinary and technology innovations will drive traffic and help us deliver a differentiated guest experience."
1 Restaurant operating margin is
defined as Company sales less
Cost of sales, Restaurant Labor
and Restaurant expenses.
2 Free cash flow is defined as cash
flows provided by operating
activities less capital
expenditures.
Table 1: Q3 comparable restaurant sales
Q3 F15 and Q3 F14, company-owned, reported brands and franchise; percentage
Q3 14
Q3 15
-----
Brinker International 1.7 0.7
Chili's Company-Owned
Comparable Restaurant
Sales 1.9 0.7
Pricing Impact 0.6 1.1
Mix-Shift 1.5 0.8
Traffic (0.2) (1.2)
Maggiano's
Comparable Restaurant
Sales 0.1 0.2
Pricing Impact 2.5 1.5
Mix-Shift (1.1) (0.4)
Traffic (1.3) (0.9)
Chili's Franchise(1) 2.5 0.2
U.S. Comparable
Restaurant Sales 3.1 0.1
International
Comparable Restaurant
Sales 1.2 0.6
Chili's Domestic(2) 2.2 0.5
System-wide(3) 2.0 0.5
1 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 franchisee
revenues, 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.
2 Chili's Domestic comparable restaurant
sales percentages are derived from
sales generated by company-owned and
franchise operated Chili's restaurants
in the United States.
3 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.
Quarterly Operating Performance
CHILI'S third quarter company sales increased 2.6 percent to $662.9 million from $645.8 million in the prior year primarily due to increases in comparable restaurant sales and restaurant capacity. As compared to the prior year, Chili's restaurant operating margin(1,2) improved. Restaurant expenses, as a percent of company sales, decreased due to leverage related to higher company sales and lower workers' compensation insurance expense, partially offset by equipment charges associated with tabletop devices(2 )and higher credit card fees. Restaurant labor, as a percent of company sales, was favorably impacted by leverage related to higher company sales coupled with lower health insurance expense, partially offset by increased wage rates. Cost of sales, as a percent of company sales, was negatively impacted by menu item mix and unfavorable commodity pricing primarily related to burger meat, which is market based, as well as unfavorable pricing related to fajita beef and salmon, partially offset by favorable menu pricing and efficiency gains related to new fryer equipment.
MAGGIANO'S third quarter company sales increased 5.8 percent to $98.8 million from $93.4 million in the prior year primarily due to increases in restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin(1) improved. Restaurant expenses, as a percent of company sales, were positively impacted by lower workers' compensation insurance expense coupled with leverage related to higher company sales, partially offset by higher utilities expense. Cost of sales, as a percent of company sales, was positively impacted by menu item changes and increased menu pricing, partially offset by unfavorable commodity pricing on beef, seafood, cheese and produce. Restaurant labor, as a percent of company sales, was negatively impacted by higher performance-based compensation, partially offset by leverage related to higher company sales.
(1 )Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses.
(2)As compared to the prior year, the Chili's restaurant operating margin metric was negatively impacted by the classification of revenues and expenses associated with tabletop devices. The revenues associated with tabletop devices are included in Franchise and other revenues while the associated equipment charges are included in Restaurant expenses, a component of the restaurant operating margin calculation.
FRANCHISE AND OTHER revenues increased 11.9 percent to $22.5 million for the third quarter compared to $20.1 million in the prior year driven primarily by the revenues associated with tabletop devices, royalty revenues related to Chili's new retail food products, and higher royalty income primarily driven by international franchise restaurant openings. U.S. franchise comparable restaurant sales increased 3.1 percent and international comparable restaurant sales increased 1.2 percent. Brinker franchisees generated approximately $424 million in sales(3) for the third quarter of fiscal 2015.
(3)Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.
Other
Depreciation and amortization expense increased $2.4 million for the quarter primarily due to investments in the Chili's reimage program, new restaurant openings and new fryer equipment, partially offset by an increase in fully depreciated assets.
General and administrative expense increased $1.2 million primarily due to an increase in technology and innovation expenditures made in support of sales driving initiatives.
On a GAAP basis, the effective income tax rate increased to 32.1 percent in the current quarter from 30.4 percent in the prior year quarter primarily due to increased earnings, partially offset by the impact of tax credit changes. Excluding the impact of special items, the effective income tax rate increased to 31.5 percent in the current quarter compared to 30.6 percent in the prior year primarily due to increased earnings, partially offset by the impact of tax credit changes.
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. Special items in the third quarter of fiscal 2015 consist primarily of proceeds received from a lawsuit settlement.
Table 2: Reconciliation of net income excluding special items
Q3 15 and Q3 14; $ millions and $ per diluted share after-tax
Q3 15 EPS Q3 Q3 14 EPS Q3
15 14
----- ------- ----- ------
Net Income 65.4 1.02 56.3 0.82
Other (Gains) and
Charges, net of
taxes(1) (5.2) (0.08) 1.3 0.02
Net Income
excluding Special
Items 60.2 0.94 57.6 0.84
==== ==== ==== ====
1 Pre-tax Other gains and charges
included a gain of $8.5 million and a
charge of $2.1 million in the third
quarter of fiscal 2015 and 2014,
respectively. See footnote "b" to the
consolidated statements of
comprehensive income for additional
details.
Guidance Policy
Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the comprehensive 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 21). 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, 2015.
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 2015 filing on or before May 4, 2015; and
- Fourth quarter earnings release, before market opens, Aug. 6, 2015.
About Brinker
Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, as of March 25, 2015, Brinker owned, operated, or franchised 1,629 restaurants under the names Chili's(®) Grill & Bar (1,580 restaurants) and Maggiano's Little Italy(®) (49 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, increased minimum wages, increased health care costs, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorist 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, inflation, technology failures, and failure to protect the security of data of our guests and teammates.
BRINKER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
--------------------------- ------------------------------
March 25, 2015 March 26, 2014 March 25, 2015 March 26, 2014
-------------- -------------- -------------- --------------
Revenues:
Company sales $761,736 $739,200 $2,166,368 $2,088,087
Franchise and other revenues (a) 22,479 20,093 71,763 61,528
Total revenues 784,215 759,293 2,238,131 2,149,615
------- ------- --------- ---------
Operating costs and expenses:
Company restaurants (excluding
depreciation and amortization)
Cost of sales 203,960 195,439 582,507 561,276
Restaurant labor 240,105 233,890 695,114 672,525
Restaurant expenses 173,611 172,459 528,047 511,293
-------
Company restaurant expenses 617,676 601,788 1,805,668 1,745,094
Depreciation and amortization 36,599 34,218 108,213 100,912
General and administrative 35,194 34,009 100,488 98,792
Other gains and charges (b) (8,477) 2,088 747 4,315
----- --- -----
Total operating costs and expenses 680,992 672,103 2,015,116 1,949,113
------- ------- --------- ---------
Operating income 103,223 87,190 223,015 200,502
Interest expense 7,361 7,068 21,709 21,128
Other, net (454) (693) (1,568) (1,736)
---- ---- ------ ------
Income before provision for income taxes 96,316 80,815 202,874 181,110
Provision for income taxes 30,889 24,552 63,403 55,891
------ ------ ------
Net income $65,427 $56,263 $139,471 $125,219
======= ======= ======== ========
Basic net income per share $1.04 $0.85 $2.19 $1.88
===== ===== ===== =====
Diluted net income per share $1.02 $0.82 $2.14 $1.83
===== ===== ===== =====
Basic weighted average shares outstanding 62,891 66,479 63,719 66,661
====== ====== ====== ======
Diluted weighted average shares
outstanding 64,091 68,342 65,108 68,591
====== ====== ====== ======
Other comprehensive loss:
Foreign currency translation adjustment
(c) $(2,847) $(1,108) $(7,183) $(1,862)
Other comprehensive loss (2,847) (1,108) (7,183) (1,862)
------ ------ ------ ------
Comprehensive income $62,580 $55,155 $132,288 $123,357
======= ======= ======== ========
(a) Franchise and other revenues primarily
includes royalties, development fees
and franchise fees, banquet service
charge income, gift card activity
(breakage and discounts), tabletop
device revenue, Chili's retail food
product royalties and delivery fee
income. Beginning in fiscal 2015,
income primarily related to Maggiano's
delivery is included in Franchise and
other revenues on the consolidated
statements of comprehensive income.
This income was previously included in
Restaurant expenses. The prior year
consolidated statements of
comprehensive income has been adjusted
to conform to the fiscal 2015
presentation. This adjustment has no
effect on net income previously
reported.
(b) Other gains and charges include:
Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
--------------------------- ------------------------------
March 25, 2015 March 26, 2014 March 25, 2015 March 26, 2014
-------------- -------------- -------------- --------------
Litigation $(8,553) $ - $(2,753) $ -
Restaurant
impairment
charges - - 747 1,285
Restaurant
closure
charges 76 1,224 1,457 2,330
Loss (Gain) on
the sale of
assets, net - - 1,093 (579)
Impairment of
liquor
licenses - - 175 -
Other - 864 28 1,279
$(8,477) $2,088 $747 $4,315
======= ====== ==== ======
(c) 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 and the Mexican
joint venture from their respective
functional currencies to U.S.
dollars. This amount is not included
in net income and would only be
realized upon disposition of the
businesses.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 25, 2015 June 25, 2014
-------------- -------------
ASSETS
Current assets $190,046 $210,854
Net property and equipment (a) 1,037,425 1,056,454
Total other assets 209,848 223,296
------- -------
Total assets $1,437,319 $1,490,604
========== ==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current installments of long-term debt 3,115 $27,884
Other current liabilities 403,526 438,226
Long-term debt, less current installments 933,207 832,302
Other liabilities 129,600 129,098
Total shareholders' (deficit) equity (32,129) 63,094
------- ------
Total liabilities and shareholders' (deficit) equity $1,437,319 $1,490,604
========== ==========
(a) At March 25, 2015, the company
owned the land and buildings
for 189 of the 889 company-
owned restaurants. The net book
values of the land and
buildings associated with these
restaurants totaled $142.2
million and $115.3 million,
respectively.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Thirty-Nine Week Periods Ended
------------------------------
March 25, 2015 March 26, 2014
-------------- --------------
Cash Flows From Operating Activities:
Net income $139,471 $125,219
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 108,213 100,912
Stock-based compensation 11,587 12,990
Restructure charges and other impairments 8,402 3,836
Net loss on disposal of assets 3,819 3,208
Changes in assets and liabilities 3,415 30,935
----- ------
Net cash provided by operating activities 274,907 277,100
------- -------
Cash Flows from Investing Activities:
Payments for property and equipment (107,108) (113,980)
Proceeds from sale of assets 1,950 833
Net cash used in investing activities (105,158) (113,147)
-------- --------
Cash Flows from Financing Activities:
Borrowings on revolving credit facility 442,750 98,000
Purchases of treasury stock (217,019) (191,811)
Payments on long-term debt (188,758) (19,890)
Payments on revolving credit facility (177,000) (40,000)
Payments of dividends (53,248) (47,556)
Excess tax benefits from stock-based
compensation 16,920 17,972
Proceeds from issuances of treasury stock 14,965 24,574
Payments for deferred financing costs (2,501) -
Net cash used in financing activities (163,891) (158,711)
-------- --------
Net change in cash and cash equivalents 5,858 5,242
Cash and cash equivalents at beginning of
period 57,685 59,367
------ ------
Cash and cash equivalents at end of period $63,543 $64,609
======= =======
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
Third Quarter Total Restaurants Projected
Openings
Fiscal 2015
Openings March 25, 2015
Fiscal 2015
-----------
Company-Owned
Restaurants:
Chili's Domestic 2 827 8-10
Chili's
International - 13 1
Maggiano's - 49 3
--- --- ---
2 889 12-14
--- --- -----
Franchise
Restaurants:
Chili's Domestic 1 435 5
Chili's
International 2 305 28-30
--- --- -----
3 740 33-35
--- --- -----
Total
Restaurants:
Chili's Domestic 3 1,262 13-15
Chili's
International 2 318 29-31
Maggiano's - 49 3
--- --- ---
5 1,629 45-49
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SOURCE Brinker International, Inc.
