EX-99.(A) 2 d247381dex99a.htm PRESS RELEASE Press Release

Exhibit 99(a)

 

Contacts: Stacey Sullivan, Media Relations       Tony Laday, Investor Relations
(800) 775-7290       (972) 770-8890

BRINKER INTERNATIONAL REPORTS AN INCREASE IN FIRST QUARTER FISCAL 2012 EPS; COMPARABLE RESTAURANT SALES AND TRAFFIC UP 1.9 PERCENT

DALLAS (Oct. 26, 2011) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal first quarter ended Sept. 28, 2011.

Highlights for the first quarter of fiscal 2012 include the following:

 

   

Earnings per diluted share, before special items, increased to $0.30 compared to $0.21 for the first quarter of fiscal 2011 (see non-GAAP reconciliation below)

 

   

On a GAAP basis, earnings per diluted share increased to $0.28 from $0.21 in the first quarter of the prior year

 

   

Total revenues increased 2.1 percent to $668.4 million

 

   

Restaurant operating margin1 improved 80 basis points to 15.8 percent compared to the first quarter of fiscal 2011

 

   

Chili’s customer traffic increased by 1.9 percent and comparable restaurant sales increased 1.7 percent

 

   

Chili’s customer traffic and comparable restaurant sales have increased for eight consecutive periods

 

   

Maggiano’s customer traffic increased by 2.1 percent, representing the eighth consecutive quarterly increase, and comparable restaurant sales increased 3.5 percent, representing the seventh consecutive quarterly increase

 

   

Cash flows provided by operating activities were $30.9 million and capital expenditures totaled $27.7 million

 

   

The company repurchased approximately 3.2 million shares of its common stock for $75.0 million in the first quarter

 

   

The company paid a dividend of 14 cents per share

 

 

1 

Restaurant operating margin is defined as Revenues less Cost of sales, Restaurant labor and Restaurant expenses.


“As evidenced in Brinker’s first quarter results, guests are responding positively to our core value strategies, as we achieved our third consecutive quarter of positive sales and traffic growth. This upward trend, coupled with our continued margin improvements, resulted in profitable growth for Brinker and is keeping us on track to double EPS by 2015,” said Doug Brooks, President and Chief Executive Officer.

Table 1: Monthly and Q1 comparable restaurant sales

Q1 12 and Q1 11, company-owned, reported brands and franchise; percentage

 

     Jul     Aug     Sep     Q1 12     Q1 11  

Brinker International

     3.4        0.3        1.7        1.9        (4.2

Chili’s Company-Owned

          

Comparable Restaurant Sales

     3.4        0.2        1.1        1.7        (5.0

Pricing Impact

     1.6        1.4        1.1        1.3        1.1   

Mix-Shift

     (2.4     (1.6     (0.4     (1.5     2.0   

Traffic

     4.2        0.4        0.4        1.9        (8.1

Maggiano’s

          

Comparable Restaurant Sales

     3.3        1.3        6.1        3.5        1.4   

Pricing Impact

     0.8        2.1        2.3        1.8        0.0   

Mix-Shift

     (1.1     (0.1     1.3        (0.4     (1.8

Traffic

     3.6        (0.7     2.5        2.1        3.2   

Franchise1

          

Domestic Comparable Restaurant Sales

           0.2        (5.8

International Comparable Restaurant Sales

           7.5        0.4   

System-wide2

           2.0        (4.3

 

1 

Although franchise comparable sales are not derived from sales attributable to the company, including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development. The company generates royalty revenue and advertising fees based on franchisee sales, where applicable.

2

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 franchisee operated restaurants.

Quarterly Operating Performance

CHILI’S first quarter revenues of $566.9 million represent a 1.6 percent increase from $557.8 million in the prior year period driven by increased guest traffic. Chili’s operating margin improved compared to the prior year primarily due to successful labor savings initiatives related to food preparation procedures. Restaurant expenses were also positively impacted by sales leverage on fixed costs related to higher revenue. Cost of sales was negatively impacted by unfavorable pricing on oils, beef and produce, partially offset by favorable pricing on poultry.

MAGGIANO’S first quarter revenues of $85.3 million increased 4.4 percent primarily driven by improved traffic. Restaurant operating margin improved compared to prior year primarily due to favorable restaurant labor and restaurant expenses.

ROYALTY AND FRANCHISE revenues totaled $16.2 million for the quarter, an increase of 5.2 percent over the prior year driven primarily by 25 international net openings since the first quarter of fiscal 2011. International comparable restaurant sales increased 7.5 percent while domestic franchise comparable restaurant sales increased 0.2 percent. Brinker franchisees generated approximately $389 million in sales2 for the first quarter of fiscal 2012, an increase of 4.5 percent over the prior year.

 

 

2 

Royalty revenues are recognized based on the sales generated and reported to the company by its franchisees.


“Our balanced approach of driving top line growth while improving operating margins continued to generate strong returns for our shareholders,” said Guy Constant, Executive Vice President and Chief Financial Officer. “Brinker’s margin improvement efforts accelerated during the first quarter as we continued to make progress towards our 400 bps target.”

Other

General and administrative expense increased $2.8 million for the quarter primarily due to a decrease in income resulting from the expiration of the transition services agreements with Macaroni Grill and On The Border.

Interest expense remained flat for the quarter primarily due to lower interest rates. Interest expense included a charge of $0.4 million related to deferred financing fees associated with the revision of the company’s unsecured senior credit facility executed in August 2011. This charge was lower than originally expected.

Excluding the impact of special items, the effective income tax rate increased to 30.2 percent in the current quarter from 27.9 percent in the same quarter last year driven by increased earnings for the quarter. The effective income tax rate increased to 29.8 percent in the current quarter as compared to 20.4 percent in the same quarter last year primarily due to increased earnings for the quarter, a decrease in special charges and the positive impact of resolved tax positions in the prior year.

Non-GAAP Reconciliation

The company 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.

Table 2: Reconciliation of net income before special items

Q1 12 and Q1 11; $ millions and $ per diluted share after-tax

     Q1 12      EPS
Q1 12
     Q1 11     EPS
Q1 11
 

Net Income

     23.6         0.28         21.4        0.21   

Other (Gains) and Charges

     1.1         0.02         1.9        0.02   

Adjustment for Tax Items

     —           —           (1.7     (0.02
  

 

 

    

 

 

    

 

 

   

 

 

 

Net Income before Special Items

     24.7         0.30         21.6        0.21   
  

 

 

    

 

 

    

 

 

   

 

 

 

Guidance Policy

Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the 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 be broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (Oct. 26). 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 Nov. 23, 2011.

Additional financial information, including statements of income which detail operations excluding special items, franchise development and royalty fees, 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 first quarter fiscal 2012 filing on or before Nov. 7, 2011; and
  - Second quarter earnings release, before market opens, Jan. 24, 2012.

About Brinker

Brinker International Inc. is one of the world’s leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, Brinker currently owns, operates, or franchises 1,578 restaurants under the names Chili’s® Grill & Bar (1,533 restaurants) and Maggiano’s Little Italy® (45 restaurants). Brinker also holds a minority investment in Romano’s Macaroni Grill®.

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, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorists 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 and inflation.

###


 

BRINKER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 
     Thirteen Week Periods Ended  
   Sept. 28,     Sept. 29,  
   2011     2010  

Revenues

   $ 668,402      $ 654,893   

Operating Costs and Expenses:

    

Cost of sales

     181,618        174,480   

Restaurant labor (a)

     215,945        217,146   

Restaurant expenses

     165,565        165,149   

Depreciation and amortization

     31,183        32,573   

General and administrative

     32,819        30,044   

Other gains and charges (b)

     1,685        3,120   
  

 

 

   

 

 

 

Total operating costs and expenses

     628,815        622,512   
  

 

 

   

 

 

 

Operating income

     39,587        32,381   

Interest expense

     7,048        7,196   

Other, net

     (1,092     (1,734
  

 

 

   

 

 

 

Income before provision for income taxes

     33,631        26,919   

Provision for income taxes

     10,010        5,488   
  

 

 

   

 

 

 

Net income

   $ 23,621      $ 21,431   
  

 

 

   

 

 

 

Basic net income per share

   $ 0.29      $ 0.21   
  

 

 

   

 

 

 

Diluted net income per share

   $ 0.28      $ 0.21   
  

 

 

   

 

 

 

 


Basic weighted average shares outstanding

     81,744         100,667   
  

 

 

    

 

 

 

Diluted weighted average shares outstanding

     83,583         101,556   
  

 

 

    

 

 

 

 

(a) Restaurant labor includes all compensation related expenses, including benefits and incentive compensation, for restaurant employees at the general manager level and below. Labor related expenses attributable to multi-restaurant (or above-restaurant) supervision is included in Restaurant expenses.
(b) Current quarter Other gains and charges includes charges related to litigation, lease terminations and severance, partially offset by a gain related to the sale of land. Prior quarter Other gains and charges primarily includes $2.8 million of severance costs.

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

      Sept. 28,
2011
     June 29,
2011
 
     (Unaudited)         

ASSETS

     

Current assets

   $ 185,752       $ 221,360   

Net property and equipment (a)

     1,049,425         1,056,279   

Total other assets

     202,117         206,929   
  

 

 

    

 

 

 

Total assets

   $ 1,437,294       $ 1,484,568   
  

 

 

    

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current installments of long-term debt

   $ 20,900       $ 22,091   

Current liabilities

     333,186         383,510   

Long-term debt, less current installments

     568,278         502,572   

Other liabilities

     136,196         137,485   

Total shareholders’ equity

     378,734         438,910   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 1,437,294       $ 1,484,568   
  

 

 

    

 

 

 

 

(a) At Sept. 28, 2011, the company owned the land and buildings for 189 of the 867 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $142.6 million and $130.6 million, respectively.

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

      Sept. 28,
2011
     Sept. 29,
2010
 

Cash Flows From Operating Activities:

     

Net income

   $ 23,621       $ 21,431   

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

     31,183         32,573   

Restructure charges and other impairments

     3,029         3,007   


Stock-based compensation

     3,918        3,959   

Net gain on disposal of assets

     (364     (903

Changes in assets and liabilities

     (30,534     (66,703
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     30,853        (6,636
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Payments for property and equipment

     (27,662     (15,628

Proceeds from sale of assets

     2,523        3,243   

Investment in equity method investees

     (729     (1,556
  

 

 

   

 

 

 

Net cash used in investing activities

     (25,868     (13,941
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Purchases of treasury stock

     (77,822     (94,536

Payments of dividends

     (12,222     (14,557

Proceeds from issuances of treasury stock

     3,449        291   

Payments on long-term debt

     (5,312     (282

Proceeds from issuance of long-term debt

     70,000        —     

Payments for deferred financing costs

     (1,620     —     

Excess tax benefits from stock-based compensation

     662        106   
  

 

 

   

 

 

 

Net cash used in financing activities

     (22,865     (108,978
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (17,880     (129,555

Cash and cash equivalents at beginning of period

     81,988        344,624   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 64,108      $ 215,069   
  

 

 

   

 

 

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 

    

First Quarter

Net Openings/(Closings)

    Total Restaurants      Projected Openings  
   Fiscal 2012     Sept. 28, 2011      Fiscal 2012  

Company-Owned

Restaurants:

       

Chili’s

     (1     823         —     

Maggiano’s

     —          44         —     
  

 

 

   

 

 

    

 

 

 
     (1     867         —     
  

 

 

   

 

 

    

 

 

 

Franchise

Restaurants:

       

Chili’s

     (5     470         3   

International(a)

     5        241         37-42   
  

 

 

   

 

 

    

 

 

 
     —          711         40-45   
  

 

 

   

 

 

    

 

 

 

Total Restaurants:

       

Chili’s

     (6     1,293         3   

Maggiano’s

     —          44         —     

International (a)

     5        241         37-42   
  

 

 

   

 

 

    

 

 

 
     (1     1,578         40-45   
  

 

 

   

 

 

    

 

 

 

 

(a) At Sept. 28, 2011, international franchise restaurants by brand were 240 Chili’s and one Maggiano’s.

FOR ADDITIONAL INFORMATION, CONTACT:

TONY LADAY

INVESTOR RELATIONS

(972) 770-8890

6820 LBJ FREEWAY

DALLAS, TEXAS 75240