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: January 25, 2017 | By: | /s/ Wyman T. Roberts | |
Wyman T. Roberts, | |||
President and Chief Executive Officer |
• | On a GAAP basis, earnings per diluted share in the second quarter of fiscal 2017 decreased 13.8 percent to $0.69 compared to $0.80 for the second quarter of fiscal 2016 |
• | Earnings per diluted share, excluding special items, in the second quarter of fiscal 2017 decreased 9.0 percent to $0.71 compared to $0.78 for the second quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | Brinker's total revenues in the second quarter of fiscal 2017 decreased 2.2 percent to $771.0 million compared to the second quarter of fiscal 2016 and company sales in the second quarter of fiscal 2017 decreased 2.2 percent to $748.7 million compared to the second quarter of fiscal 2016 |
• | Chili’s company-owned comparable restaurant sales in the second quarter of fiscal 2017 decreased 3.3 percent |
• | Maggiano’s comparable restaurant sales in the second quarter of fiscal 2017 decreased 0.8 percent |
• | Chili's franchise comparable restaurant sales in the second quarter of fiscal 2017 decreased 3.5 percent, which includes a 3.0 percent and 4.2 percent decrease for U.S. and international franchise restaurants, respectively |
• | Operating income, as a percent of total revenues, declined approximately 160 basis points to 8.0 percent in the second quarter of fiscal 2017 compared to 9.6 percent for the second quarter of fiscal 2016 |
• | Restaurant operating margin, as a percent of company sales, declined approximately 100 basis points to 15.1 percent in the second quarter of fiscal 2017 compared to 16.1 percent for the second quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | For the first six months of fiscal 2017, cash flows provided by operating activities were $141.1 million and capital expenditures totaled $60.1 million. Free cash flow was $81.0 million (see non-GAAP reconciliation below) |
• | The company is updating its fiscal 2017 outlook and now estimates earnings per diluted share, excluding special items, to be in the range of $3.05 to $3.15 for fiscal 2017 |
Q2 17 | Q2 16 | |||||
Brinker International | (2.9 | ) | (2.6 | ) | ||
Chili’s Company-Owned | ||||||
Comparable Restaurant Sales | (3.3 | ) | (2.8 | ) | ||
Pricing Impact | 1.8 | 0.8 | ||||
Mix-Shift2 | 1.4 | 0.4 | ||||
Traffic | (6.5 | ) | (4.0 | ) | ||
Maggiano’s | ||||||
Comparable Restaurant Sales | (0.8 | ) | (1.8 | ) | ||
Pricing Impact | 2.6 | 2.3 | ||||
Mix-Shift2 | (0.9 | ) | (1.2 | ) | ||
Traffic | (2.5 | ) | (2.9 | ) | ||
Chili's Franchise3 | (3.5 | ) | 0.9 | |||
U.S. Comparable Restaurant Sales | (3.0 | ) | (0.1 | ) | ||
International Comparable Restaurant Sales | (4.2 | ) | 2.6 | |||
Chili's Domestic4 | (3.2 | ) | (2.1 | ) | ||
System-wide5 | (3.1 | ) | (1.6 | ) |
1 | Comparable restaurant sales includes all restaurants that have been in operation for more than 18 months. | |
2 | Mix shift is calculated as the year over year percentage change in company sales resulting from the change in menu items ordered by guests. | |
3 | 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. | |
4 | 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. | |
5 | 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 Chili's restaurants. |
Q2 17 | EPS Q2 17 | Q2 16 | EPS Q2 16 | |||||||||
Net Income | 34.6 | 0.69 | 47.7 | 0.80 | ||||||||
Special items1 | 1.3 | 0.03 | (0.1 | ) | 0.00 | |||||||
Income tax effect related to special items | (0.3 | ) | (0.01 | ) | 0.1 | 0.00 | ||||||
Adjustment for tax items2 | — | — | (0.8 | ) | (0.02 | ) | ||||||
Special items, net of taxes | 1.0 | 0.02 | (0.8 | ) | (0.02 | ) | ||||||
Net Income excluding special items | 35.6 | 0.71 | 46.9 | 0.78 |
1 | See footnote "b" to the consolidated statements of comprehensive income for additional details on the composition of these amounts. | |
2 | Discrete tax items result from the resolution of certain tax positions which directly impacts tax expense. |
Q2F17 | Q2F16 | |||||
Company sales | 748.7 | 765.7 | ||||
Cost of sales | 193.5 | 203.8 | ||||
Restaurant labor | 248.7 | 247.6 | ||||
Restaurant expenses | 193.1 | 190.7 | ||||
Restaurant operating margin | 113.4 | 123.6 | ||||
Divided by company sales | 748.7 | 765.7 | ||||
Restaurant operating margin as a percent of company sales | 15.1 | % | 16.1 | % | ||
Restaurant operating margin | 113.4 | 123.6 | ||||
Franchise and other revenues | 22.3 | 22.9 | ||||
Depreciation and amortization | (39.3 | ) | (39.1 | ) | ||
General and administrative | (33.5 | ) | (31.9 | ) | ||
Other gains and charges | (1.3 | ) | 0.1 | |||
Operating income | 61.6 | 75.6 | ||||
Divided by total revenues | 771.0 | 788.6 | ||||
Operating income as a percent of total revenues | 8.0 | % | 9.6 | % |
Twenty-six Week Period Ended Dec. 28, 2016 | |||
Cash flows provided by operating activities | 141.1 | ||
Capital expenditures | (60.1 | ) | |
Free cash flow | 81.0 |
• | Total revenues are now estimated to decrease approximately 2.0 to 2.5 percent on a GAAP basis and decrease approximately 1.0 to 1.5 percent excluding the impact of the 53rd week in fiscal 2016 |
• | Comparable restaurant sales are now estimated to be down 1.5 to 2.0 percent |
• | Restaurant operating margin is now estimated to be down approximately 90 basis points year-over-year on a 52 week basis |
• | General and administrative expense is now estimated to be an increase of approximately $6.0 to $8.0 million |
• | Depreciation is now estimated to be flat to an increase of approximately $1.0 million |
• | Free cash flow is estimated to be $205 to $215 million |
Thirteen Week Periods Ended | Twenty-Six Week Periods Ended | |||||||||||||||
Dec. 28, 2016 | Dec. 23, 2015 | Dec. 28, 2016 | Dec. 23, 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Company sales | $ | 748,709 | $ | 765,672 | $ | 1,486,119 | $ | 1,506,153 | ||||||||
Franchise and other revenues (a) | 22,334 | 22,938 | 43,416 | 45,016 | ||||||||||||
Total revenues | 771,043 | 788,610 | 1,529,535 | 1,551,169 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Company restaurants (excluding depreciation and amortization) | ||||||||||||||||
Cost of sales | 193,537 | 203,799 | 385,839 | 400,402 | ||||||||||||
Restaurant labor | 248,692 | 247,596 | 499,262 | 494,173 | ||||||||||||
Restaurant expenses | 193,131 | 190,660 | 389,774 | 379,833 | ||||||||||||
Company restaurant expenses | 635,360 | 642,055 | 1,274,875 | 1,274,408 | ||||||||||||
Depreciation and amortization | 39,305 | 39,114 | 78,191 | 78,285 | ||||||||||||
General and administrative | 33,546 | 31,909 | 66,083 | 65,020 | ||||||||||||
Other gains and charges (b) | 1,306 | (87 | ) | 7,384 | 1,590 | |||||||||||
Total operating costs and expenses | 709,517 | 712,991 | 1,426,533 | 1,419,303 | ||||||||||||
Operating income | 61,526 | 75,619 | 103,002 | 131,866 | ||||||||||||
Interest expense | 13,641 | 7,907 | 22,450 | 15,674 | ||||||||||||
Other, net | (383 | ) | (560 | ) | (682 | ) | (833 | ) | ||||||||
Income before provision for income taxes | 48,268 | 68,272 | 81,234 | 117,025 | ||||||||||||
Provision for income taxes | 13,631 | 20,578 | 23,364 | 36,124 | ||||||||||||
Net income | $ | 34,637 | $ | 47,694 | $ | 57,870 | $ | 80,901 | ||||||||
Basic net income per share | $ | 0.70 | $ | 0.81 | $ | 1.11 | $ | 1.35 | ||||||||
Diluted net income per share | $ | 0.69 | $ | 0.80 | $ | 1.09 | $ | 1.34 | ||||||||
Basic weighted average shares outstanding | 49,833 | 59,198 | 52,339 | 59,712 | ||||||||||||
Diluted weighted average shares outstanding | 50,480 | 59,899 | 53,028 | 60,553 | ||||||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustment (c) | $ | (1,664 | ) | $ | (460 | ) | $ | (2,145 | ) | $ | (3,265 | ) | ||||
Other comprehensive loss | (1,664 | ) | (460 | ) | (2,145 | ) | (3,265 | ) | ||||||||
Comprehensive income | $ | 32,973 | $ | 47,234 | $ | 55,725 | $ | 77,636 | ||||||||
(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 | Twenty-Six Week Periods Ended | ||||||||||||||
Dec. 28, 2016 | Dec. 23, 2015 | Dec. 28, 2016 | Dec. 23, 2015 | ||||||||||||
Gain on the sale of assets, net | $ | (2,569 | ) | $ | — | $ | (2,569 | ) | $ | (1,762 | ) | ||||
Restaurant impairment charges | 1,851 | 468 | 1,851 | 525 | |||||||||||
Restaurant closure charges | 321 | — | 2,827 | — | |||||||||||
Information technology restructuring | 209 | — | 2,700 | — | |||||||||||
Severance | — | 209 | 293 | 2,368 | |||||||||||
Litigation | — | (2,032 | ) | — | (2,032 | ) | |||||||||
Acquisition costs | — | — | — | 580 | |||||||||||
Other | 1,494 | 1,268 | 2,282 | 1,911 | |||||||||||
$ | 1,306 | $ | (87 | ) | $ | 7,384 | $ | 1,590 |
(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. |
Dec. 28, 2016 | June 29, 2016 | |||||||
ASSETS | ||||||||
Current assets | $ | 224,268 | $ | 176,774 | ||||
Net property and equipment (a) | 1,018,221 | 1,043,152 | ||||||
Total other assets | 255,616 | 249,534 | ||||||
Total assets | $ | 1,498,105 | $ | 1,469,460 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current installments of long-term debt | $ | 3,815 | $ | 3,563 | ||||
Other current liabilities | 465,989 | 428,880 | ||||||
Long-term debt, less current installments | 1,416,212 | 1,110,693 | ||||||
Other liabilities | 142,675 | 139,423 | ||||||
Total shareholders’ deficit | (530,586 | ) | (213,099 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,498,105 | $ | 1,469,460 |
(a) | At Dec. 28, 2016, the company owned the land and buildings for 190 of the 1,001 company-owned restaurants. The net book values of the land totaled $143.2 million and the buildings totaled $101.0 million associated with these restaurants. |
Twenty-Six Week Periods Ended | ||||||||
Dec. 28, 2016 | Dec. 23, 2015 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 57,870 | $ | 80,901 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 78,191 | 78,285 | ||||||
Stock-based compensation | 8,152 | 7,522 | ||||||
Restructure charges and other impairments | 8,000 | 1,229 | ||||||
Net gain on disposal of assets | (811 | ) | (274 | ) | ||||
Changes in assets and liabilities | (10,266 | ) | (11,424 | ) | ||||
Net cash provided by operating activities | 141,136 | 156,239 | ||||||
Cash Flows from Investing Activities: | ||||||||
Payments for property and equipment | (60,055 | ) | (52,199 | ) | ||||
Proceeds from sale of assets | 3,022 | 2,756 | ||||||
Payment for business acquisition, net of cash acquired | — | (105,577 | ) | |||||
Net cash used in investing activities | (57,033 | ) | (155,020 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuances of long-term debt | 350,000 | — | ||||||
Purchases of treasury stock | (349,994 | ) | (140,089 | ) | ||||
Payments on revolving credit facility | (138,000 | ) | (20,000 | ) | ||||
Borrowings on revolving credit facility | 100,000 | 207,500 | ||||||
Payments of dividends | (36,944 | ) | (37,363 | ) | ||||
Payments for debt issuance costs | (10,216 | ) | — | |||||
Proceeds from issuances of treasury stock | 3,837 | 1,691 | ||||||
Payments on long-term debt | (1,862 | ) | (1,698 | ) | ||||
Excess tax benefits from stock-based compensation | 1,688 | 4,907 | ||||||
Net cash (used in) provided by financing activities | (81,491 | ) | 14,948 | |||||
Net change in cash and cash equivalents | 2,612 | 16,167 | ||||||
Cash and cash equivalents at beginning of period | 31,446 | 55,121 | ||||||
Cash and cash equivalents at end of period | $ | 34,058 | $ | 71,288 |
Second Quarter Openings Fiscal 2017 | Total Restaurants Dec. 28, 2016 | Projected Openings Fiscal 2017 | |||||||
Company-owned restaurants: | |||||||||
Chili’s domestic | 1 | 935 | 5-6 | ||||||
Chili’s international | 1 | 14 | 1 | ||||||
Maggiano’s | 1 | 52 | 2 | ||||||
Total company-owned | 3 | 1,001 | 8-9 | ||||||
Franchise restaurants: | |||||||||
Chili’s domestic | 1 | 316 | 5-8 | ||||||
Chili's international | 8 | 341 | 35-40 | ||||||
Total franchise | 9 | 657 | 40-48 | ||||||
Total restaurants: | |||||||||
Chili’s domestic | 2 | 1,251 | 10-14 | ||||||
Chili's international | 9 | 355 | 36-41 | ||||||
Maggiano’s | 1 | 52 | 2 | ||||||
Grand total | 12 | 1,658 | 48-57 |
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