Delaware | 1-10275 | 75-1914582 | ||
(State of Incorporation) | (Commission File Number) | (IRS Employment Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
BRINKER INTERNATIONAL, INC. | |||
Dated: October 25, 2016 | By: | /s/ Wyman T. Roberts | |
Wyman T. Roberts, | |||
President and Chief Executive Officer |
• | On a GAAP basis, earnings per diluted share decreased 22.2 percent to $0.42 compared to $0.54 for the first quarter of fiscal 2016 |
• | Earnings per diluted share, excluding special items, decreased 12.5 percent to $0.49 compared to $0.56 for the first quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | Brinker's total revenues decreased 0.5 percent to $758.5 million compared to the first quarter of fiscal 2016 and company sales decreased 0.4 percent to $737.4 million compared to the first quarter of fiscal 2016 |
• | Chili’s company-owned comparable restaurant sales decreased 1.4 percent |
• | Maggiano’s comparable restaurant sales decreased 0.6 percent |
• | Chili's franchise comparable restaurant sales decreased 0.6 percent, which includes a 1.6 percent decrease for U.S. franchise restaurants, partially offset by an increase of 0.9 percent for international franchise restaurants |
• | Operating income, as a percent of total revenues, declined approximately 190 basis points to 5.5 percent compared to 7.4 percent for the first quarter of fiscal 2016 |
• | Restaurant operating margin, as a percent of company sales, declined approximately 130 basis points to 13.3 percent compared to 14.6 percent for the first quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | For the first three months of fiscal 2017, cash flows provided by operating activities were $66.2 million and capital expenditures totaled $27.1 million. Free cash flow was approximately $39.1 million (see non-GAAP reconciliation below) |
• | The company closed the private offering of $350 million of its 5.0% senior notes due 2024, entered into a $300 million accelerated share repurchase agreement ("ASR") and amended the revolving credit agreement to increase the borrowing amount available from $750 million to $1 billion |
• | The company spent $350 million to repurchase shares including the $300 million for the ASR. The company received an initial delivery of approximately 4.6 million shares of common stock pursuant to the ASR agreement and repurchased approximately 1.0 million additional shares of common stock in the open market for a total of 5.6 million shares |
Q1 17 | Q1 16 | |||||
Brinker International | (1.3 | ) | (1.6 | ) | ||
Chili’s Company-Owned | ||||||
Comparable Restaurant Sales | (1.4 | ) | (1.6 | ) | ||
Pricing Impact2 | 1.2 | 1.4 | ||||
Mix-Shift2,3 | 1.5 | (1.6 | ) | |||
Traffic2 | (4.1 | ) | (1.4 | ) | ||
Maggiano’s | ||||||
Comparable Restaurant Sales | (0.6 | ) | (1.7 | ) | ||
Pricing Impact2 | 2.3 | 2.8 | ||||
Mix-Shift2,3 | (1.3 | ) | (0.9 | ) | ||
Traffic2 | (1.6 | ) | (3.6 | ) | ||
Chili's Franchise4 | (0.6 | ) | 2.2 | |||
U.S. Comparable Restaurant Sales | (1.6 | ) | 0.8 | |||
International Comparable Restaurant Sales | 0.9 | 4.8 | ||||
Chili's Domestic5 | (1.3 | ) | (1.1 | ) | ||
System-wide6 | (1.1 | ) | (0.5 | ) |
1 | Comparable restaurant sales includes all restaurants that have been in operation for more than 18 months. | |
2 | Reclassifications have been made between pricing impact, mix-shift and traffic in the prior year to conform with current year classification. | |
3 | Mix shift is calculated as the year over year percentage change in company sales resulting from the change in menu items ordered by guests. | |
4 | 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. | |
5 | 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. | |
6 | 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. |
Q1 17 | EPS Q1 17 | Q1 16 | EPS Q1 16 | |||||||||
Net Income | 23.2 | 0.42 | 33.2 | 0.54 | ||||||||
Special items1 | 6.1 | 0.11 | 1.7 | 0.03 | ||||||||
Income tax effect related to special items | (2.3 | ) | (0.04 | ) | (0.7 | ) | (0.01 | ) | ||||
Special items, net of taxes | 3.8 | 0.07 | 1.0 | 0.02 | ||||||||
Net Income excluding special items | 27.0 | 0.49 | 34.2 | 0.56 |
1 | See footnote "b" to the consolidated statements of comprehensive income for additional details on the composition of these amounts. |
Q1F17 | Q1F16 | |||||
Company sales | 737.4 | 740.5 | ||||
Cost of sales | 192.3 | 196.6 | ||||
Restaurant labor | 250.6 | 246.6 | ||||
Restaurant expenses | 196.6 | 189.2 | ||||
Restaurant operating margin | 97.9 | 108.1 | ||||
Divided by company sales | 737.4 | 740.5 | ||||
Restaurant operating margin as a percent of company sales | 13.3 | % | 14.6 | % | ||
Restaurant operating margin | 97.9 | 108.1 | ||||
Franchise and other revenues | 21.1 | 22.1 | ||||
Depreciation and amortization | (38.9 | ) | (39.2 | ) | ||
General and administrative | (32.5 | ) | (33.1 | ) | ||
Other gains and charges | (6.1 | ) | (1.7 | ) | ||
Operating income | 41.5 | 56.2 | ||||
Divided by total revenues | 758.5 | 762.6 | ||||
Operating income as a percent of total revenues | 5.5 | % | 7.4 | % |
Thirteen Week Period Ended Sept. 28, 2016 | |||
Cash flows provided by operating activities | 66.2 | ||
Capital expenditures | (27.1 | ) | |
Free cash flow | 39.1 |
Thirteen Week Periods Ended | ||||||||
Sept. 28, 2016 | Sept. 23, 2015 | |||||||
Revenues: | ||||||||
Company sales | $ | 737,410 | $ | 740,481 | ||||
Franchise and other revenues (a) | 21,082 | 22,078 | ||||||
Total revenues | 758,492 | 762,559 | ||||||
Operating costs and expenses: | ||||||||
Company restaurants (excluding depreciation and amortization) | ||||||||
Cost of sales | 192,302 | 196,603 | ||||||
Restaurant labor | 250,570 | 246,577 | ||||||
Restaurant expenses | 196,643 | 189,173 | ||||||
Company restaurant expenses | 639,515 | 632,353 | ||||||
Depreciation and amortization | 38,886 | 39,171 | ||||||
General and administrative | 32,537 | 33,111 | ||||||
Other gains and charges (b) | 6,078 | 1,677 | ||||||
Total operating costs and expenses | 717,016 | 706,312 | ||||||
Operating income | 41,476 | 56,247 | ||||||
Interest expense | 8,809 | 7,767 | ||||||
Other, net | (299 | ) | (273 | ) | ||||
Income before provision for income taxes | 32,966 | 48,753 | ||||||
Provision for income taxes | 9,733 | 15,546 | ||||||
Net income | $ | 23,233 | $ | 33,207 | ||||
Basic net income per share | $ | 0.42 | $ | 0.55 | ||||
Diluted net income per share | $ | 0.42 | $ | 0.54 | ||||
Basic weighted average shares outstanding | 54,844 | 60,225 | ||||||
Diluted weighted average shares outstanding | 55,576 | 61,208 | ||||||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustment (c) | $ | (481 | ) | $ | (2,805 | ) | ||
Other comprehensive loss | (481 | ) | (2,805 | ) | ||||
Comprehensive income | $ | 22,752 | $ | 30,402 | ||||
(a) | Franchise and other revenues primarily includes royalties, development fees, franchise fees, Maggiano's banquet service charge income, gift card breakage and discounts, tabletop gaming revenue, Chili's retail food product royalties and delivery fee income. |
(b) | Other gains and charges include: |
Thirteen Week Periods Ended | |||||||
Sept. 28, 2016 | Sept. 23, 2015 | ||||||
Restaurant closure charges | $ | 2,506 | $ | — | |||
Information technology restructuring | 2,491 | — | |||||
Severance | 293 | 2,159 | |||||
Acquisition costs | — | 580 | |||||
Gain on the sale of assets, net | — | (1,762 | ) | ||||
Other | 788 | 700 | |||||
$ | 6,078 | $ | 1,677 |
(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. |
Sept. 28, 2016 | June 29, 2016 | |||||||
ASSETS | ||||||||
Current assets | $ | 174,453 | $ | 176,774 | ||||
Net property and equipment (a) | 1,028,108 | 1,043,152 | ||||||
Total other assets | 255,965 | 249,534 | ||||||
Total assets | $ | 1,458,526 | $ | 1,469,460 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current installments of long-term debt | $ | 3,848 | $ | 3,563 | ||||
Other current liabilities | 421,773 | 428,880 | ||||||
Long-term debt, less current installments | 1,441,979 | 1,110,693 | ||||||
Other liabilities | 141,991 | 139,423 | ||||||
Total shareholders’ deficit | (551,065 | ) | (213,099 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,458,526 | $ | 1,469,460 |
(a) | At Sept. 28, 2016, the company owned the land and buildings for 191 of the 1,000 company-owned restaurants. The net book values of the land totaled $143.2 million and the buildings totaled $103.6 million associated with these restaurants. |
Thirteen Week Periods Ended | ||||||||
Sept. 28, 2016 | Sept. 23, 2015 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 23,233 | $ | 33,207 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 38,886 | 39,171 | ||||||
Stock-based compensation | 4,034 | 4,189 | ||||||
Restructure charges and other impairments | 5,150 | 574 | ||||||
Net loss (gain) on disposal of assets | 481 | (1,233 | ) | |||||
Changes in assets and liabilities | (5,564 | ) | (30,022 | ) | ||||
Net cash provided by operating activities | 66,220 | 45,886 | ||||||
Cash Flows from Investing Activities: | ||||||||
Payments for property and equipment | (27,111 | ) | (23,731 | ) | ||||
Payment for purchase of restaurants | — | (105,577 | ) | |||||
Proceeds from sale of assets | — | 2,756 | ||||||
Net cash used in investing activities | (27,111 | ) | (126,552 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuances of long-term debt | 350,000 | — | ||||||
Purchases of treasury stock | (349,963 | ) | (51,061 | ) | ||||
Payments on revolving credit facility | (83,000 | ) | — | |||||
Borrowings on revolving credit facility | 70,000 | 155,500 | ||||||
Payments of dividends | (18,298 | ) | (18,076 | ) | ||||
Payments for deferred financing costs | (9,183 | ) | — | |||||
Proceeds from issuances of treasury stock | 3,396 | 1,306 | ||||||
Excess tax benefits from stock-based compensation | 1,538 | 4,752 | ||||||
Payments on long-term debt | (890 | ) | (849 | ) | ||||
Net cash (used in) provided by financing activities | (36,400 | ) | 91,572 | |||||
Net change in cash and cash equivalents | 2,709 | 10,906 | ||||||
Cash and cash equivalents at beginning of period | 31,446 | 55,121 | ||||||
Cash and cash equivalents at end of period | $ | 34,155 | $ | 66,027 |
First Quarter Openings Fiscal 2017 | Total Restaurants Sept. 28, 2016 | Projected Openings Fiscal 2017 | |||||||
Company-Owned Restaurants: | |||||||||
Chili’s Domestic | 2 | 936 | 5-6 | ||||||
Chili’s International | — | 13 | 1 | ||||||
Maggiano’s | 1 | 51 | 2 | ||||||
3 | 1,000 | 8-9 | |||||||
Franchise Restaurants: | |||||||||
Chili’s Domestic | 1 | 317 | 5-8 | ||||||
Chili's International | 4 | 335 | 35-40 | ||||||
5 | 652 | 40-48 | |||||||
Total Restaurants: | |||||||||
Chili’s Domestic | 3 | 1,253 | 10-14 | ||||||
Chili's International | 4 | 348 | 36-41 | ||||||
Maggiano’s | 1 | 51 | 2 | ||||||
8 | 1,652 | 48-57 |
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