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: November 1, 2017 | By: | /s/ Wyman T. Roberts | |
Wyman T. Roberts, | |||
President and Chief Executive Officer |
• | On a GAAP basis, earnings per diluted share were $0.20 for the first quarter of fiscal 2018 representing a 52.4 percent decrease from $0.42 in the first quarter of fiscal 2017 |
• | Earnings per diluted share, excluding special items, were $0.42 for the first quarter of fiscal 2018 representing a 14.3 percent decrease from $0.49 in the first quarter of fiscal 2017 (see non-GAAP reconciliation below) |
• | Brinker International's total revenues were $739.4 million in the first quarter of fiscal 2018 decreasing 2.5 percent compared to the first quarter of fiscal 2017, and company sales were $716.9 million in the first quarter of fiscal 2018 decreasing 2.8 percent compared to the first quarter of fiscal 2017 |
• | Hurricane Harvey and Hurricane Irma negatively impacted Brinker International's company sales by approximately $5.4 million and earnings per diluted share by approximately $0.03 in the first quarter of fiscal 2018 |
• | Chili’s company-owned comparable restaurant sales decreased 3.4 percent in the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. Chili's U.S. franchise comparable restaurant sales decreased 1.7 percent in the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 |
• | Maggiano’s comparable restaurant sales decreased 2.6 percent in the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 |
• | Chili's international franchise comparable restaurant sales decreased 7.9 percent in the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 |
• | Operating income, as a percent of total revenues, was 3.9 percent for the first quarter of fiscal 2018 compared to 5.5 percent for the first quarter of fiscal 2017 representing a decrease of approximately 160 basis points |
• | Restaurant operating margin, as a percent of company sales, was 12.6 percent for the first quarter of fiscal 2018 compared to 13.3 percent for the first quarter of fiscal 2017 representing a decrease of approximately 70 basis points (see non-GAAP reconciliation below) |
• | For the first quarter of fiscal 2018, cash flows provided by operating activities were $50.2 million and capital expenditures totaled $22.5 million. Free cash flow was $27.7 million (see non-GAAP reconciliation below) |
Q1 18 | Q1 17 | ||||
Brinker International | (3.3 | ) | (1.3 | ) | |
Chili’s Company-Owned | |||||
Comparable Restaurant Sales | (3.4 | ) | (1.4 | ) | |
Pricing Impact | 2.8 | 1.2 | |||
Mix-Shift2 | 2.5 | 1.5 | |||
Traffic | (8.7 | ) | (4.1 | ) | |
Maggiano’s | |||||
Comparable Restaurant Sales | (2.6 | ) | (0.6 | ) | |
Pricing Impact | 0.1 | 2.3 | |||
Mix-Shift2 | 0.1 | (1.3 | ) | ||
Traffic | (2.8 | ) | (1.6 | ) | |
Chili's Franchise3 | (4.1 | ) | (0.6 | ) | |
U.S. Comparable Restaurant Sales | (1.7 | ) | (1.6 | ) | |
International Comparable Restaurant Sales | (7.9 | ) | 0.9 | ||
Chili's Domestic4 | (3.0 | ) | (1.3 | ) | |
System-wide5 | (3.5 | ) | (1.1 | ) |
1 | Comparable restaurant sales includes all restaurants that have been in operation for more than 18 months. Restaurants temporarily closed 14 days or more are excluded from comparable restaurant sales. | |
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. |
Q1 18 | EPS Q1 18 | Q1 17 | EPS Q1 17 | |||||||||||||
Net Income | $ | 9.9 | $ | 0.20 | $ | 23.2 | $ | 0.42 | ||||||||
Special items1 | 13.2 | 0.27 | 6.1 | 0.11 | ||||||||||||
Income tax effect related to special items | (4.3 | ) | (0.08 | ) | (2.3 | ) | (0.04 | ) | ||||||||
Special items, net of taxes | 8.9 | 0.19 | 3.8 | 0.07 | ||||||||||||
Adjustment for tax items2 | 1.6 | 0.03 | — | — | ||||||||||||
Net Income excluding special items | $ | 20.4 | $ | 0.42 | $ | 27.0 | $ | 0.49 |
1 | See footnote "b" to the consolidated statements of comprehensive income for additional details on the composition of these amounts. | |
2 | Amounts resulting from the recognition of tax deficiencies from the settlement of stock-based compensation awards in the provision for income taxes. |
Q1 18 | Q1 17 | |||||||
Operating income - GAAP | $ | 28.6 | $ | 41.5 | ||||
Operating income as a percent of total revenues | 3.9 | % | 5.5 | % | ||||
Operating income | 28.6 | 41.5 | ||||||
Less: Franchise and other revenues | (22.4 | ) | (21.1 | ) | ||||
Plus: Depreciation and amortization | 38.5 | 38.9 | ||||||
General and administrative | 32.2 | 32.5 | ||||||
Other gains and charges | 13.2 | 6.1 | ||||||
Restaurant operating margin - non-GAAP | $ | 90.1 | $ | 97.9 | ||||
Restaurant operating margin as a percent of company sales | 12.6 | % | 13.3 | % |
Thirteen Week Period Ended Sept. 27, 2017 | ||||
Cash flows provided by operating activities - GAAP | $ | 50.2 | ||
Capital expenditures | (22.5 | ) | ||
Free cash flow - non-GAAP | $ | 27.7 |
Thirteen Week Periods Ended | |||||||
Sept. 27, 2017 | Sept. 28, 2016 | ||||||
Revenues: | |||||||
Company sales | $ | 716,942 | $ | 737,410 | |||
Franchise and other revenues (a) | 22,448 | 21,082 | |||||
Total revenues | 739,390 | 758,492 | |||||
Operating costs and expenses: | |||||||
Company restaurants (excluding depreciation and amortization) | |||||||
Cost of sales | 187,597 | 192,302 | |||||
Restaurant labor | 251,075 | 250,570 | |||||
Restaurant expenses | 188,129 | 196,643 | |||||
Company restaurant expenses | 626,801 | 639,515 | |||||
Depreciation and amortization | 38,520 | 38,886 | |||||
General and administrative | 32,358 | 32,537 | |||||
Other gains and charges (b) | 13,154 | 6,078 | |||||
Total operating costs and expenses | 710,833 | 717,016 | |||||
Operating income | 28,557 | 41,476 | |||||
Interest expense | 13,884 | 8,809 | |||||
Other, net | (476 | ) | (299 | ) | |||
Income before provision for income taxes | 15,149 | 32,966 | |||||
Provision for income taxes | 5,272 | 9,733 | |||||
Net income | $ | 9,877 | $ | 23,233 | |||
Basic net income per share | $ | 0.20 | $ | 0.42 | |||
Diluted net income per share | $ | 0.20 | $ | 0.42 | |||
Basic weighted average shares outstanding | 48,293 | 54,844 | |||||
Diluted weighted average shares outstanding | 48,732 | 55,576 | |||||
Other comprehensive income (loss): | |||||||
Foreign currency translation adjustment (c) | $ | 1,537 | $ | (481 | ) | ||
Other comprehensive income (loss) | 1,537 | (481 | ) | ||||
Comprehensive income | $ | 11,414 | $ | 22,752 |
(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 | |||||||
Sept. 27, 2017 | Sept. 28, 2016 | ||||||
Restaurant impairment charges | $ | 7,159 | $ | — | |||
Hurricane-related costs | 4,648 | — | |||||
Accelerated depreciation | 483 | — | |||||
Restaurant closure charges | 238 | 2,506 | |||||
Loss on the sale of assets, net | 45 | — | |||||
Information technology restructuring | — | 2,491 | |||||
Other | 581 | 1,081 | |||||
$ | 13,154 | $ | 6,078 |
(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. 27, 2017 | June 28, 2017 | |||||||
ASSETS | ||||||||
Current assets | $ | 140,876 | $ | 144,325 | ||||
Net property and equipment (a) | 974,825 | 1,000,614 | ||||||
Total other assets | 252,924 | 258,694 | ||||||
Total assets | $ | 1,368,625 | $ | 1,403,633 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current installments of long-term debt | $ | 9,015 | $ | 9,649 | ||||
Other current liabilities | 405,347 | 426,712 | ||||||
Long-term debt, less current installments | 1,353,659 | 1,319,829 | ||||||
Other liabilities | 139,632 | 141,124 | ||||||
Total shareholders’ deficit | (539,028 | ) | (493,681 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,368,625 | $ | 1,403,633 |
(a) | At Sept. 27, 2017, the company owned the land and buildings for 190 of the 1,003 company-owned restaurants. The net book values of the land totaled $143.2 million and the buildings totaled $94.6 million associated with these restaurants. |
Thirteen Week Periods Ended | ||||||||
Sept. 27, 2017 | Sept. 28, 2016 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 9,877 | $ | 23,233 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 38,520 | 38,886 | ||||||
Stock-based compensation | 3,480 | 4,034 | ||||||
Restructure charges and other impairments | 9,019 | 5,150 | ||||||
Net loss on disposal of assets | 417 | 481 | ||||||
Changes in assets and liabilities | (11,083 | ) | (4,026 | ) | ||||
Net cash provided by operating activities | 50,230 | 67,758 | ||||||
Cash Flows from Investing Activities: | ||||||||
Payments for property and equipment | (22,460 | ) | (27,111 | ) | ||||
Proceeds from sale of assets | 85 | — | ||||||
Net cash used in investing activities | (22,375 | ) | (27,111 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Borrowings on revolving credit facility | 110,000 | 70,000 | ||||||
Payments on revolving credit facility | (77,000 | ) | (83,000 | ) | ||||
Purchases of treasury stock | (41,718 | ) | (349,963 | ) | ||||
Payments of dividends | (16,978 | ) | (18,298 | ) | ||||
Payments on long-term debt | (2,514 | ) | (890 | ) | ||||
Proceeds from issuances of treasury stock | 245 | 3,396 | ||||||
Proceeds from issuance of long-term debt | — | 350,000 | ||||||
Payments for debt issuance costs | — | (9,183 | ) | |||||
Net cash used in financing activities | (27,965 | ) | (37,938 | ) | ||||
Net change in cash and cash equivalents | (110 | ) | 2,709 | |||||
Cash and cash equivalents at beginning of period | 9,064 | 31,446 | ||||||
Cash and cash equivalents at end of period | $ | 8,954 | $ | 34,155 |
First Quarter Openings Fiscal 2018 | Total Restaurants Sept. 27, 2017 | Projected Openings Fiscal 2018 | |||||||
Company-owned restaurants: | |||||||||
Chili’s domestic | 1 | 937 | 5-6 | ||||||
Chili’s international | — | 14 | — | ||||||
Maggiano’s | 1 | 52 | 1 | ||||||
Total company-owned | 2 | 1,003 | 6-7 | ||||||
Franchise restaurants: | |||||||||
Chili’s domestic | 3 | 315 | 6-8 | ||||||
Chili's international | 10 | 364 | 38-43 | ||||||
Total franchise | 13 | 679 | 44-51 | ||||||
Total restaurants: | |||||||||
Chili’s domestic | 4 | 1,252 | 11-14 | ||||||
Chili's international | 10 | 378 | 38-43 | ||||||
Maggiano’s | 1 | 52 | 1 | ||||||
Grand total | 15 | 1,682 | 50-58 |
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