Brinker International Reports Increases in Second Quarter Fiscal 2012 EPS, Comparable Restaurant Sales and Traffic

DALLAS, Jan. 24, 2012 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 28, 2011.

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

  • Earnings per diluted share, before special items, increased 23.7 percent to $0.47 compared to $0.38 for the second quarter of fiscal 2011 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 7.3 percent to $0.44 from $0.41 in the second quarter of the prior year
  • Total revenues increased 1.5 percent to $681.9 million
  • Restaurant operating margin(1) improved 50 basis points to 17.9 percent compared to the second quarter of fiscal 2011
  • Chili's comparable restaurant sales increased 1.4 percent and customer traffic increased 1.1 percent, the third consecutive quarterly increase for both metrics
  • Maggiano's comparable restaurant sales increased 2.8 percent, representing the eighth consecutive quarterly increase, and customer traffic increased by 0.6 percent, representing the ninth consecutive quarterly increase
  • The company repurchased approximately 2.0 million shares of its common stock for $47.8 million in the second quarter
  • The company paid a dividend of 16 cents per share in the second quarter, an increase of 14.3 percent over the prior year quarter
  • For the first six months of fiscal 2012, cash flows provided by operating activities were $114.2 million and capital expenditures totaled $53.5 million

"Brinker delivered another strong quarter as evidenced by a 24 percent increase in our EPS. This marked Brinker's fourth consecutive quarter of comp sales and traffic growth, which demonstrates the effectiveness of our strategies, the strength of our team and the receptivity of our guests to the changes we're making to our business," said Doug Brooks, President and Chief Executive Officer. "We are confident we'll deliver on our promise to double EPS by 2015."  

Table 1: Monthly and Q2 comparable restaurant sales

Q2 12 and Q2 11, company-owned, reported brands and franchise; percentage

 

 

 

 

 

 

 

Oct

Nov

Dec

Q2 12

Q2 11

Brinker International

1.4

1.4

2.1

1.7

(3.5)

  Chili's Company-Owned

 

 

 

 

 

     Comparable Restaurant Sales

1.4

1.4

1.5

1.4

(4.9)

     Pricing Impact

1.0

1.0

1.1

1.1

1.0

     Mix-Shift

(0.5)

(0.5)

(1.3)

(0.8)

1.2

     Traffic

0.9

0.9

1.7

1.1

(7.1)

  Maggiano's

 

 

 

 

 

     Comparable Restaurant Sales

1.6

1.4

4.8

2.8

4.7

     Pricing Impact

2.1

1.9

1.5

1.8

1.0

     Mix-Shift

(0.4)

0.0

1.3

0.4

(2.0)

     Traffic

(0.1)

(0.5)

2.0

0.6

5.7

 

 

 

 

 

 

Franchise(1)

 

 

 

2.6

(4.1)

  Domestic Comparable Restaurant Sales

 

 

 

1.7

(6.5)

  International Comparable Restaurant Sales

 

 

 

4.8

2.9

 

 

 

 

 

 

System-wide(2)

 

 

 

2.0

(3.7)

(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 second quarter revenues of $554.8 million represent a 1.2 percent increase from $548.3 million in the prior year period driven by increased guest traffic and menu prices. Chili's operating margin improved compared to the prior year primarily due to successful labor savings initiatives related to food preparation procedures. Restaurant expense was also positively impacted by lower repair and maintenance expense, credit card fees, workers' compensation insurance expenses and sales leverage on fixed costs related to higher revenue. Cost of sales was negatively impacted by unfavorable pricing on oils, beef, produce and dairy, partially offset by favorable pricing on poultry.

MAGGIANO'S second quarter revenues of $110.9 million increased 2.9 percent primarily driven by increased menu prices and improved traffic. Restaurant operating margin improved compared to prior year primarily due to lower workers' compensation insurance expense, credit card fees and sales leverage on fixed costs related to higher revenue.

ROYALTY AND FRANCHISE revenues totaled $16.2 million for the quarter, an increase of 2.5 percent over the prior year driven primarily by 22 international net openings since the second quarter of fiscal 2011. International comparable restaurant sales increased 4.8 percent while domestic franchise comparable restaurant sales increased 1.7 percent. Brinker franchisees generated $389 million in sales(2) for the second quarter of fiscal 2012, an increase of 4.5 percent over the prior year.

"We're pleased with the progress we made during the second quarter on our journey toward a 400 basis-point margin improvement in our business," said Guy Constant, Executive Vice President and Chief Financial Officer. "Our solid results and significant progress on what is a challenging strategic plan gives us confidence we will continue to increase shareholder value."

Other

General and administrative expense remained flat for the quarter primarily due to a decrease in performance based compensation, offset by the impact of the expiration of the transition services agreements with Macaroni Grill and On The Border.

Interest expense decreased $0.5 million for the quarter primarily due to lower interest rates.

Excluding the impact of special items, the effective income tax rate increased to 29.7 percent in the current quarter from 27.3 percent in the same quarter last year driven by increased earnings. On a GAAP basis, the effective income tax rate increased to 29.0 percent in the current quarter as compared to 17.5 percent in the same quarter last year primarily due to the positive impact of resolved tax positions in the prior year and increased earnings.

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

Q2 12 and Q2 11; $ millions and $ per diluted share after-tax

 

 

 

  EPS

 

   EPS

 

   Q2 12

   Q2 12

    Q2 11

    Q2 11

Net Income

35.7

0.44

37.5

0.41

  Other (Gains) and Charges(1)

2.5

0.03

1.7

0.02

  Adjustment for Tax Items

-

-

(4.1)

(0.05)

Net Income before Special Items

38.2

0.47

35.1

0.38

 

 

 

 

 

(1) Pre-tax Other gains and charges was $4.0 million and $2.8 million in the second quarter of fiscal 2012 and 2011, respectively.  


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 8 a.m. CST today (Jan. 24). 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 Feb. 21, 2012. 

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 second quarter fiscal 2012 filing on or before Feb. 6, 2012; and
  • Third quarter earnings release, before market opens, April 23, 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 1,574 restaurants under the names Chili's® Grill & Bar (1,529 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

Twenty-Six Week Periods Ended

 

 Dec. 28,

Dec. 29,

Dec. 28,

Dec. 29,

 

2011

2010

2011

2010

 

 

 

 

 

Revenues

$  681,904

$  671,886

$1,350,306

$  1,326,779

Operating Costs and Expenses:

 

 

 

 

Cost of sales

185,189

179,298

366,807

353,778

Restaurant labor (a)

214,317

213,465

430,262

430,611

Restaurant expenses

160,077

162,050

325,642

327,199

Depreciation and amortization

31,153

32,452

62,336

65,025

General and administrative

31,215

31,387

64,034

61,431

Other gains and charges (b)

4,033

2,774

5,718

5,894

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

625,984

621,426

1,254,799

1,243,938

 

 

 

 

 

Operating income

55,920

50,460

95,507

82,841

 

 

 

 

 

Interest expense

6,509

7,034

13,557

14,230

Other, net

(854)

(2,000)

(1,946)

(3,734)

 

 

 

 

 

Income before provision for income taxes

50,265

45,426

83,896

72,345

 

 

 

 

 

Provision for income taxes

14,591

7,962

24,601

13,450

 

 

 

 

 

Net Income                                                            

$   35,674

$    37,464

$   59,295

$     58,895

 

 

 

 

 

 

 

 

 

 

      Basic net income per share

$  0.45

$  0.41

$  0 .73

$  0.61

 

 

 

 

 

 

 

 

 

 

      Diluted net income per share

$  0.44

$  0.41

$  0 .72

$  0.61

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

79,840

90,936

80,792

95,815

 

 

 

 

 

Diluted weighted average shares outstanding

81,655

92,111

82,619

96,847

 

 

 

 

 

(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)   In the second quarter of fiscal 2012, Other gains and charges includes long-lived asset impairments of $1.5 million related to the closure and impairment of certain underperforming restaurants and lease termination charges of $1.9 million. In the first quarter of fiscal 2012, Other gains and charges includes litigation charges of $2.5 million and lease termination charges of $0.5 million, partially offset by a $1.3 million gain related to the sale of land. In the second quarter of fiscal 2011, Other gains and charges primarily includes long-lived asset impairments of $1.7 million related to restaurant closures and impairments and $0.9 million of severance costs.  In the first quarter of fiscal 2011, Other gains and charges primarily includes $2.8 million of severance costs.

 


BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

 

 

 

Dec. 28,

June 29,

 

 

2011

2011

 

 

 (Unaudited)

 

ASSETS

 

 

 

  Current assets

 

$     252,742

$     221,360

  Net property and equipment (a)

 

1,038,698

1,056,279

  Total other assets

 

196,770

206,929

     Total assets

 

$  1,488,210

$  1,484,568

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

  Current installments of long-term debt

 

$       27,211

$       22,091

  Current liabilities

 

394,938

383,510

  Long-term debt, less current installments

 

561,482

502,572

  Other liabilities

 

135,884

137,485

  Total shareholders' equity

 

368,695

438,910

  Total liabilities and shareholders' equity

 

$  1,488,210

$  1,484,568

 

 

 

 

(a)    At Dec. 28, 2011, the company owned the land and buildings for 188 of the 865 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.8 million and $128.0 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

 

 Dec. 28,

Dec. 29,

 

2011

2010

Cash Flows From Operating Activities:

 

 

Net income

$  59,295

$  58,895

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

 

 

Depreciation and amortization

62,336

65,025

Restructure charges and other impairments

4,898

4,129

Stock-based compensation

6,449

6,455

Net loss (gain) on disposal of assets

573

(1,468)

Changes in assets and liabilities

(19,306)

(63,031)

Net cash provided by operating activities

114,245

70,005

 

 

 

Cash Flows from Investing Activities:

 

 

Payments for property and equipment

(53,475)

(31,842)

Proceeds from sale of assets

4,279

6,873

Investment in equity method investees

(912)

(1,556)

Net cash used in investing activities

(50,108)

(26,525)

 

 

 

Cash Flows from Financing Activities:

 

 

Purchases of treasury stock      

(125,638)

(251,818)

Proceeds from issuance of long-term debt

70,000

-

Payments of dividends

(25,073)

(28,562)

Proceeds from issuances of treasury stock

16,649

12,165

Payments on long-term debt

(5,625)

(5,564)

Payments for deferred financing costs

(1,620)

-

Excess tax benefits from stock-based compensation

792

140

Net cash used in financing activities

(70,515)

(273,639)

 

 

 

Net change in cash and cash equivalents              

(6,378)

(230,159)

Cash and cash equivalents at beginning of period                               

81,988

344,624

Cash and cash equivalents at end of period          

$  75,610

$  114,465

 


BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 

 

 

 

 

 

Second Quarter

Net Openings/(Closings)

Total Restaurants

Projected Openings

 

Fiscal 2012

Dec. 28, 2011

Fiscal 2012

 

 

 

 

Company-Owned

 Restaurants:

 

 

 

        Chili's

(2)

821

-

        Maggiano's

-

44

-

 

(2)

865

-

 

 

 

 

Franchise

 Restaurants:

 

 

 

  Chili's

(3)

467

3

  International (a)

1

242

37-42

 

(2)

709

40-45

 

 

 

 

Total Restaurants:

 

 

 

  Chili's

(5)

1,288

3

  Maggiano's

-

44

-

  International (a)

1

242

37-42

 

(4)

1,574

40-45

 

 

 

 

(a)     At Dec. 28, 2011, international franchise restaurants by brand were 241 Chili's and one Maggiano's.

 

 

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

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

 

 

 

SOURCE Brinker International, Inc.



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