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: April 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 third quarter of fiscal 2017 decreased 14.0 percent to $0.86 compared to $1.00 for the third quarter of fiscal 2016 |
• | Earnings per diluted share, excluding special items, in the third quarter of fiscal 2017 decreased 6.0 percent to $0.94 compared to $1.00 for the third quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | Brinker's total revenues in the third quarter of fiscal 2017 decreased 1.7 percent to $810.6 million compared to the third quarter of fiscal 2016 and company sales in the third quarter of fiscal 2017 decreased 1.8 percent to $790.6 million compared to the third quarter of fiscal 2016 |
• | Chili’s company-owned comparable restaurant sales in the third quarter of fiscal 2017 decreased 2.3 percent compared to the third quarter of fiscal 2016 but increased sequentially by 1.0 percent from the second quarter of fiscal 2017. Chili's U.S. franchise comparable restaurant sales in the third quarter of fiscal 2017 increased 0.3 percent compared to the third quarter of fiscal 2016 and also improved sequentially by 3.3 percent from the second quarter of fiscal 2017 |
• | Maggiano’s comparable restaurant sales in the third quarter of fiscal 2017 decreased 1.6 percent compared to the third quarter of fiscal 2016 |
• | Chili's international franchise comparable restaurant sales in the third quarter of fiscal 2017 decreased 7.1 percent compared to the third quarter of fiscal 2016 |
• | Operating income, as a percent of total revenues, declined approximately 150 basis points to 9.0 percent in the third quarter of fiscal 2017 compared to 10.5 percent for the third quarter of fiscal 2016 |
• | Restaurant operating margin, as a percent of company sales, declined approximately 40 basis points to 17.0 percent in the third quarter of fiscal 2017 compared to 17.4 percent for the third quarter of fiscal 2016 (see non-GAAP reconciliation below) but improved sequentially by 190 basis points from the second quarter of fiscal 2017 |
• | For the first nine months of fiscal 2017, cash flows provided by operating activities were $243.6 million and capital expenditures totaled $79.7 million. Free cash flow was $163.9 million (see non-GAAP reconciliation below) |
Q3 17 | Q3 16 | |||||
Brinker International | (2.2 | ) | (3.6 | ) | ||
Chili’s Company-Owned | ||||||
Comparable Restaurant Sales | (2.3 | ) | (4.1 | ) | ||
Pricing Impact | 2.9 | 1.1 | ||||
Mix-Shift2 | 1.0 | (0.3 | ) | |||
Traffic | (6.2 | ) | (4.9 | ) | ||
Maggiano’s | ||||||
Comparable Restaurant Sales | (1.6 | ) | 0.2 | |||
Pricing Impact | 2.4 | 1.5 | ||||
Mix-Shift2 | 1.4 | (2.4 | ) | |||
Traffic | (5.4 | ) | 1.1 | |||
Chili's Franchise3 | (2.5 | ) | (1.7 | ) | ||
U.S. Comparable Restaurant Sales | 0.3 | (2.2 | ) | |||
International Comparable Restaurant Sales | (7.1 | ) | (0.7 | ) | ||
Chili's Domestic4 | (1.7 | ) | (3.6 | ) | ||
System-wide5 | (2.3 | ) | (3.1 | ) |
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. |
Q3 17 | EPS Q3 17 | Q3 16 | EPS Q3 16 | |||||||||
Net Income | 42.4 | 0.86 | 57.5 | 1.00 | ||||||||
Special items1 | 6.6 | 0.13 | 3.9 | 0.07 | ||||||||
Income tax effect related to special items | (2.6 | ) | (0.05 | ) | (1.5 | ) | (0.03 | ) | ||||
Adjustment for tax items2 | — | — | (2.6 | ) | (0.04 | ) | ||||||
Special items, net of taxes | 4.0 | 0.08 | (0.2 | ) | 0.00 | |||||||
Net Income excluding special items | 46.4 | 0.94 | 57.3 | 1.00 |
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. |
Q3F17 | Q3F16 | |||||
Operating income | 72.9 | 86.3 | ||||
Operating income as a percent of total revenues | 9.0 | % | 10.5 | % | ||
Operating income | 72.9 | 86.3 | ||||
Less: Franchise and other revenues | (20.0 | ) | (19.5 | ) | ||
Plus: Depreciation and amortization | 39.3 | 39.1 | ||||
General and administrative | 35.9 | 30.2 | ||||
Other gains and charges | 6.6 | 3.9 | ||||
Restaurant operating margin | 134.7 | 140.0 | ||||
Restaurant operating margin as a percent of company sales | 17.0 | % | 17.4 | % |
Thirty-Nine Week Period Ended March 29, 2017 | |||
Cash flows provided by operating activities | 243.6 | ||
Capital expenditures | (79.7 | ) | |
Free cash flow | 163.9 |
Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | |||||||||||||||
March 29, 2017 | March 23, 2016 | March 29, 2017 | March 23, 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Company sales | $ | 790,624 | $ | 805,145 | $ | 2,276,743 | $ | 2,311,298 | ||||||||
Franchise and other revenues (a) | 20,017 | 19,494 | 63,433 | 64,510 | ||||||||||||
Total revenues | 810,641 | 824,639 | 2,340,176 | 2,375,808 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Company restaurants (excluding depreciation and amortization) | ||||||||||||||||
Cost of sales | 201,903 | 215,362 | 587,742 | 615,764 | ||||||||||||
Restaurant labor | 261,632 | 262,701 | 760,894 | 756,874 | ||||||||||||
Restaurant expenses | 192,372 | 187,216 | 582,146 | 567,049 | ||||||||||||
Company restaurant expenses | 655,907 | 665,279 | 1,930,782 | 1,939,687 | ||||||||||||
Depreciation and amortization | 39,335 | 39,050 | 117,526 | 117,335 | ||||||||||||
General and administrative | 35,931 | 30,170 | 102,014 | 95,190 | ||||||||||||
Other gains and charges (b) | 6,600 | 3,864 | 13,984 | 5,454 | ||||||||||||
Total operating costs and expenses | 737,773 | 738,363 | 2,164,306 | 2,157,666 | ||||||||||||
Operating income | 72,868 | 86,276 | 175,870 | 218,142 | ||||||||||||
Interest expense | 13,658 | 8,403 | 36,108 | 24,077 | ||||||||||||
Other, net | (402 | ) | (277 | ) | (1,084 | ) | (1,110 | ) | ||||||||
Income before provision for income taxes | 59,612 | 78,150 | 140,846 | 195,175 | ||||||||||||
Provision for income taxes | 17,243 | 20,648 | 40,607 | 56,772 | ||||||||||||
Net income | $ | 42,369 | $ | 57,502 | $ | 100,239 | $ | 138,403 | ||||||||
Basic net income per share | $ | 0.87 | $ | 1.01 | $ | 1.96 | $ | 2.36 | ||||||||
Diluted net income per share | $ | 0.86 | $ | 1.00 | $ | 1.93 | $ | 2.33 | ||||||||
Basic weighted average shares outstanding | 48,954 | 56,673 | 51,211 | 58,699 | ||||||||||||
Diluted weighted average shares outstanding | 49,506 | 57,407 | 51,854 | 59,505 | ||||||||||||
Other comprehensive gain (loss): | ||||||||||||||||
Foreign currency translation adjustment (c) | $ | 734 | $ | (29 | ) | $ | (1,411 | ) | $ | (3,294 | ) | |||||
Other comprehensive gain (loss) | 734 | (29 | ) | (1,411 | ) | (3,294 | ) | |||||||||
Comprehensive income | $ | 43,103 | $ | 57,473 | $ | 98,828 | $ | 135,109 | ||||||||
(a) | Franchise and other revenues primarily includes royalties, development fees, franchise fees, Maggiano's banquet service charge income, gift card breakage and discounts, digital entertainment revenue, Chili's retail food product royalties and delivery fee income. |
(b) | Other gains and charges include: |
Thirteen Week Periods Ended | Thirty-Nine Week Periods Ended | ||||||||||||||
March 29, 2017 | March 23, 2016 | March 29, 2017 | March 23, 2016 | ||||||||||||
Severance | $ | 5,929 | $ | — | $ | 6,222 | $ | 2,368 | |||||||
Restaurant closure charges | 794 | 89 | 3,621 | 89 | |||||||||||
Gain on the sale of assets, net | (55 | ) | (1,096 | ) | (2,624 | ) | (2,858 | ) | |||||||
Information technology restructuring | — | — | 2,700 | — | |||||||||||
Restaurant impairment charges | — | 3,413 | 1,851 | 3,937 | |||||||||||
Impairment of investment | — | 1,000 | — | 1,000 | |||||||||||
Litigation | — | — | — | (2,032 | ) | ||||||||||
Acquisition costs | — | 120 | — | 700 | |||||||||||
Other | (68 | ) | 338 | 2,214 | 2,250 | ||||||||||
$ | 6,600 | $ | 3,864 | $ | 13,984 | $ | 5,454 |
(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. |
March 29, 2017 | June 29, 2016 | |||||||
ASSETS | ||||||||
Current assets | $ | 148,196 | $ | 176,774 | ||||
Net property and equipment (a) | 997,053 | 1,043,152 | ||||||
Total other assets | 257,829 | 249,534 | ||||||
Total assets | $ | 1,403,078 | $ | 1,469,460 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current installments of long-term debt | $ | 3,860 | $ | 3,563 | ||||
Other current liabilities | 433,407 | 428,880 | ||||||
Long-term debt, less current installments | 1,325,604 | 1,110,693 | ||||||
Other liabilities | 138,907 | 139,423 | ||||||
Total shareholders’ deficit | (498,700 | ) | (213,099 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,403,078 | $ | 1,469,460 |
(a) | At March 29, 2017, the company owned the land and buildings for 190 of the 1,000 company-owned restaurants. The net book values of the land totaled $143.2 million and the buildings totaled $99.9 million associated with these restaurants. |
Thirty-Nine Week Periods Ended | ||||||||
March 29, 2017 | March 23, 2016 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 100,239 | $ | 138,403 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 117,526 | 117,335 | ||||||
Stock-based compensation | 13,237 | 12,095 | ||||||
Restructure charges and other impairments | 8,837 | 5,937 | ||||||
Net gain on disposal of assets | (628 | ) | (633 | ) | ||||
Changes in assets and liabilities | 4,411 | 26,444 | ||||||
Net cash provided by operating activities | 243,622 | 299,581 | ||||||
Cash Flows from Investing Activities: | ||||||||
Payments for property and equipment | (79,730 | ) | (76,090 | ) | ||||
Proceeds from sale of assets | 3,077 | 4,256 | ||||||
Payment for business acquisition, net of cash acquired | — | (105,577 | ) | |||||
Net cash used in investing activities | (76,653 | ) | (177,411 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuances of long-term debt | 350,000 | — | ||||||
Purchases of treasury stock | (350,768 | ) | (266,157 | ) | ||||
Payments on revolving credit facility | (328,000 | ) | (50,000 | ) | ||||
Borrowings on revolving credit facility | 200,000 | 256,500 | ||||||
Payments of dividends | (54,087 | ) | (56,192 | ) | ||||
Payments for debt issuance costs | (10,216 | ) | — | |||||
Proceeds from issuances of treasury stock | 4,505 | 4,725 | ||||||
Payments on long-term debt | (2,847 | ) | (2,547 | ) | ||||
Excess tax benefits from stock-based compensation | 2,041 | 5,365 | ||||||
Net cash used in financing activities | (189,372 | ) | (108,306 | ) | ||||
Net change in cash and cash equivalents | (22,403 | ) | 13,864 | |||||
Cash and cash equivalents at beginning of period | 31,446 | 55,121 | ||||||
Cash and cash equivalents at end of period | $ | 9,043 | $ | 68,985 |
Third Quarter Openings Fiscal 2017 | Total Restaurants March 29, 2017 | Projected Openings Fiscal 2017 | |||||||
Company-owned restaurants: | |||||||||
Chili’s domestic | 1 | 934 | 6-7 | ||||||
Chili’s international | — | 14 | 1 | ||||||
Maggiano’s | — | 52 | 2 | ||||||
Total company-owned | 1 | 1,000 | 9-10 | ||||||
Franchise restaurants: | |||||||||
Chili’s domestic | 3 | 316 | 5-8 | ||||||
Chili's international | 4 | 344 | 31-33 | ||||||
Total franchise | 7 | 660 | 36-41 | ||||||
Total restaurants: | |||||||||
Chili’s domestic | 4 | 1,250 | 11-15 | ||||||
Chili's international | 4 | 358 | 32-34 | ||||||
Maggiano’s | — | 52 | 2 | ||||||
Grand total | 8 | 1,660 | 45-51 |
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