Brinker International Reports Year-Over-Year Increases In Fourth Quarter And Full Fiscal Year EPS

02 Aug, 2013, 07:45 ET from Brinker International

DALLAS, Aug. 2, 2013 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal fourth quarter and year ended June 26, 2013.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 26.2 percent to $0.77 compared to $0.61 for the fourth quarter of fiscal 2012 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 4.9 percent to $0.64 compared to $0.61 for the fourth quarter of fiscal 2012
  • Brinker's operating income, excluding special items, improved 180 basis points from 9.8 percent to 11.6 percent driven by a 60 basis point restaurant operating margin1 improvement in addition to reduced general and administrative expenses
  • Chili's domestic comparable restaurant sales2 decreased 0.3 percent for the quarter consisting of a 0.6 percent decrease for company-owned restaurants, partially offset by a 0.5 percent increase for franchised restaurants. Chili's international franchise comparable restaurant sales increased 2.3 percent
  • Maggiano's comparable restaurant sales increased 0.2 percent, representing the 14th consecutive quarterly increase
  • Cash flows provided by operating activities were $290.7 million and capital expenditures totaled $131.5 million for fiscal 2013
  • The company repurchased approximately 3.5 million shares of its common stock for $141.6 million in the fourth quarter
  • The company paid a dividend of 20 cents per share in the fourth quarter, an increase of 25 percent over the prior year fourth quarter
  • On June 1, 2013, the company completed the acquisition of 11 Chili's restaurants located in Alberta, Canada
  • On May 8, 2013, the company completed a public offering of $550 million in notes consisting of two tranches, $250 million due 2018 and $300 million due 2023

"We are confident we will achieve our previously stated goal of doubling of our fiscal 2010 earnings per share next fiscal year, a full year ahead of schedule," said Wyman Roberts, Chief Executive Officer and President.

1

Effective for the first quarter of fiscal 2013, revenues are reported in two separate captions—Company sales and Franchise and other revenues. Restaurant operating margin is now defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses.

2

Chili's Domestic comparable restaurant sales is a new presentation item beginning in the fourth quarter of fiscal 2013 and is defined as comparable restaurant sales generated from company-owned and franchise operated Chili's restaurants in the United States.

 

Table 1: Monthly, Q4 and FY comparable restaurant sales

Company-owned, reported brands and franchise; percentage

April

May

June

Q4 13

Q4 12

FY 13

FY 12

Brinker International

(0.6)

(0.2)

(0.7)

(0.5)

2.1

0.5

2.6

  Chili's Company-Owned

     Comparable Restaurant Sales

(0.7)

(0.3)

(0.8)

(0.6)

2.2

0.5

2.5

     Pricing Impact

1.3

1.3

1.3

1.3

1.3

1.4

1.4

     Mix-Shift

0.5

0.4

(0.4)

0.2

(0.3)

0.9

(0.4)

     Traffic

(2.5)

(2.0)

(1.7)

(2.1)

1.2

(1.8)

1.5

  Maggiano's

     Comparable Restaurant Sales

0.1

0.8

(0.3)

0.2

1.9

0.5

3.0

     Pricing Impact

0.6

0.3

0.5

0.5

2.6

1.8

2.2

     Mix-Shift

0.7

1.2

1.4

1.1

0.1

0.5

0.0

     Traffic

(1.2)

(0.7)

(2.2)

(1.4)

(0.8)

(1.8)

0.8

Franchise1

1.0

2.1

1.9

2.9

  U.S. Comparable Restaurant Sales

0.5

2.4

1.6

2.4

  International Comparable Restaurant Sales

2.3

1.3

2.7

4.2

Domestic2

(0.3)

2.2

0.8

2.5

System-wide3

0.0

2.1

1.0

2.7

1

Revenues generated by franchisees are not included in revenues on the consolidated statements of income; however, we generate royalty revenue and advertising fees based on franchisee revenues, where applicable. We believe including franchisee comparable restaurants revenues provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.

2

Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States.

3

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 fourth quarter company sales of $615.7 million represent a 0.2 percent decrease from $616.8 million in the prior year period driven by traffic declines. As compared to the prior year, Chili's operating margin improved due to lower cost of sales and restaurant labor. Cost of sales as a percentage of company sales was favorably impacted by mix changes related to the introduction of new menu items, improved waste control and menu pricing, partially offset by unfavorable commodity pricing primarily related to alcohol and chicken wings. Restaurant labor was positively impacted by improved labor productivity from the installation of new kitchen equipment. Restaurant expense was negatively impacted by higher workers' compensation insurance expenses.

MAGGIANO'S fourth quarter company sales of $93.4 million increased 0.1 percent primarily driven by favorable mix and menu pricing. As compared to the prior year, Maggiano's operating margin improved primarily due to lower cost of sales. Cost of sales as a percentage of company sales was positively impacted by favorable commodity pricing on seafood and meat, decreased commodity usage from efforts to reduce waste, menu item changes, as well as increased menu pricing. Restaurant operating margin was negatively impacted by higher long-term incentive compensation expenses.

FRANCHISE AND OTHER revenues totaled $20.9 million for the quarter, an increase of 14.8 percent compared to $18.2 million in the prior year. The increase was driven primarily by a one-time development fee refund in the prior year. International and U.S. franchise comparable restaurant sales increased 2.3 percent and 0.5 percent, respectively. Brinker franchisees generated approximately $415 million in sales1 for the fourth quarter of fiscal 2013.

1

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

 

Other Depreciation and amortization expense increased $0.9 million for the quarter primarily due to Chili's reimage, kitchen equipment and software investments in existing restaurants, partially offset by an increase in fully depreciated assets.

General and administrative expense decreased $7.1 million primarily due to lower performance-based compensation and professional fees.

Interest expense increased $1.4 million for the quarter as a result of higher borrowing balances which occurred prior to the retirement of the 5.75% notes. 

Excluding the impact of special items, the effective income tax rate remained flat for the current quarter at 28.3 percent as the tax impact of increased earnings and lower tax credits was offset by prior year state tax adjustments and deductions related to increased stock option exercises. On a GAAP basis, the effective income tax rate increased to 25.0 percent in the current quarter compared to 24.6 percent last year due to lower tax credits and the positive impact of resolved tax positions in the prior year, partially offset by the increased tax benefit resulting from higher special item charges in the current year.

Non-GAAP Reconciliation Brinker 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.

Special items in the fourth quarter of fiscal 2013 consist primarily of the loss associated with the retirement of the 5.75% notes, with other offsetting items related to the gain on the sale of the company's minority interest in Romano's Macaroni Grill and losses associated with the impairment of restaurants and other fixed assets, including the company-owned restaurant in Brazil. 

Table 2: Reconciliation of net income excluding special items

Q4 13 and Q4 12; $ millions and $ per diluted share after-tax

Q4 13

EPS Q4 13

Q4 12

EPS Q4 12

Net Income

46.4

0.64

47.0

0.61

Other (Gains) and Charges, net of taxes1

9.3

0.13

2.1

0.03

Adjustment for Tax Items

(0.6)

0.00

(2.0)

(0.03)

Net Income excluding Special Items

55.1

0.77

47.1

0.61

 

Table 3: Reconciliation of net income excluding special items

FY 13 and FY 12; $ millions and $ per diluted share after-tax

FY 13

EPS FY 13

FY 12

EPS FY 12

Net Income

163.4

2.20

151.2

1.87

Other (Gains) and Charges, net of taxes1

10.7

0.14

5.5

0.07

Adjustment for Tax Items

(0.6)

0.00

(2.0)

(0.02)

Adjustment for Gift Card Breakage2

3.3

0.04

Net Income excluding Special Items

173.5

2.34

158.0

1.96

1

Pre-tax Other gains and charges was $15.1 million and $3.4 million in the fourth quarter of fiscal 2013 and 2012, respectively. Pre-tax Other gains and charges was $17.3 million and $9.0 million year to date for fiscal 2013 and 2012, respectively.

2

The company recognized a pre-tax $5.2 million reduction to revenue in the third quarter of fiscal 2012 resulting from a change in the estimate of gift card breakage.

 

Fiscal 2014 Outlook The company anticipates earnings per diluted share, excluding special items, to increase 15 to 22 percent in the range of $2.70 to $2.85. Earnings are based on the following expectations:

  • Comparable sales are expected to increase one to two percent
  • Company-owned new restaurant development combined with the recent acquisition of restaurants in Canada is expected to add year-over-year capacity growth of about two percent
  • Restaurant operating margin is expected to improve 50 to 75 basis points year-over-year
  • Depreciation expense is expected to increase slightly on a dollar basis, assuming capital expenditures of $150 to $160 million
  • General and administrative expense is expected to be slightly higher on a dollar basis due to the fact that incentive compensation is planned at target
  • Interest expense is expected to be essentially flat driven by lower rates despite higher borrowing balances
  • Excluding the impact of special items, the effective income tax rate is projected to be approximately 32 percent
  • Free cash flow will be $180 to $190 million
  • Diluted weighted average shares outstanding will be 66 to 68 million

The company believes providing fiscal 2014 earnings per diluted share guidance provides investors the appropriate insight into the company's ongoing operating performance.

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 broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (Aug. 2). 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 Aug. 30, 2013.

Additional financial information, including statements of income which detail operations excluding special items, franchise and other revenues, 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-K for fiscal 2013 filing on or before Aug. 26, 2013; and

-

First quarter earnings release, before market opens, Oct. 23, 2013.

 

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 1,591 restaurants under the names Chili's® Grill & Bar (1,547 restaurants) and Maggiano's Little Italy® (44 restaurants).

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

Fifty-Two Week Periods Ended

June 26,

2013

June 27,

2012

June 26,

2013

June 27,

2012

Revenues:

Company sales

$

709,128

$

710,129

$

2,766,618

$

2,748,462

Franchise and other revenues (a)

20,940

18,242

79,480

72,260

     Total revenues

730,068

728,371

2,846,098

2,820,722

Operating Costs and Expenses:

Company restaurants

     Cost of sales

190,775

197,767

758,377

769,729

     Restaurant labor

224,548

227,842

892,413

891,910

     Restaurant expenses

165,433

159,958

655,214

649,830

Company restaurant expenses

580,756

585,567

2,306,004

2,311,469

Depreciation and amortization

32,651

31,789

131,481

125,054

General and administrative

32,249

39,348

134,538

143,388

Other gains and charges (b)

15,073

3,360

17,300

8,974

     Total operating costs and expenses

660,729

660,064

2,589,323

2,588,885

Operating income

69,339

68,307

256,775

231,837

Interest expense

8,078

6,713

29,118

26,800

Other, net

(562)

(754)

(2,658)

(3,772)

Income before provision for income taxes

61,823

62,348

230,315

208,809

Provision for income taxes

15,456

15,344

66,956

57,577

     Net income

$

46,367

$

47,004

$

163,359

$

151,232

Basic net income per share

$

0.67

$

0.63

$

2.28

$

1.93

Diluted net income per share

$

0.64

$

0.61

$

2.20

$

1.87

Basic weighted average shares outstanding

69,607

75,070

71,788

78,559

Diluted weighted average shares outstanding

71,999

77,682

74,158

80,664

(a)

Franchise and other revenues includes royalties, development fees and franchise fees, banquet service charge income, and gift card activity (breakage and discounts).

(b)

Other gains and charges includes:

Thirteen Week Periods Ended

Fifty-Two Week Periods Ended

June 26,

2013

June 27,

2012

June 26,

2013

June 27,

2012

Loss on extinguishment of debt

$

15,768

$

0

$

15,768

$

0

Gain on sale of assets, net

(8,798)

(1,941)

(11,228)

(3,306)

Restaurant impairment charges

4,615

2,041

5,276

3,139

Restaurant closure charges

750

501

3,637

4,655

Impairment of liquor licenses

170

2,641

170

2,641

Severance and other benefits

966

0

2,235

0

Other

1,602

118

1,442

1,845

$

15,073

$

3,360

$

17,300

$

8,974

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

June 26, 2013

June 27, 2012 (a)

(Unaudited)

ASSETS

Current assets

$

198,591

$

198,182

Net property and equipment (b)

1,035,815

1,043,564

Total other assets

218,197

197,662

     Total assets

$

1,452,603

$

1,439,408

LIABILITIES AND SHAREHOLDERS' EQUITY

Current installments of long-term debt

$

27,596

$

27,334

Current liabilities

362,615

374,415

Long-term debt, less current installments

780,121

587,890

Other liabilities

132,914

139,896

Total shareholders' equity

149,357

309,873

     Total liabilities and shareholders' equity

$

1,452,603

$

1,439,408

(a)

Certain prior year amounts have been reclassified to conform to the fiscal 2013 presentation. These reclassifications have no effect on the company's net income or financial position as previously reported.

(b)

At June 26, 2013, the company owned the land and buildings for 189 of the 877 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.5 million and $118.3 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fifty-Two Week Periods Ended

June 26,

2013

June 27,

2012

Cash Flows From Operating Activities:

Net income

$

163,359

$

151,232

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

     Depreciation and amortization

131,481

125,054

     Stock-based compensation

15,909

13,461

     Restructure charges and other impairments

11,425

10,396

     Net (gain) loss on disposal of assets

(6,905)

490

     Changes in assets and liabilities

(24,581)

2,805

Net cash provided by operating activities

290,688

303,438

Cash Flows from Investing Activities:

Payments for property and equipment

(131,531)

(125,226)

Payments for purchase of restaurants

(24,622)

(3,120)

Proceeds from sale of assets

17,157

8,112

Insurance recoveries

1,152

Investment in equity method investees

(3,170)

Net cash used in investing activities

(137,844)

(123,404)

Cash Flows from Financing Activities:

Proceeds from issuance of long-term debt

549,528

70,000

Purchases of treasury stock

(333,384)

(287,291)

Payments on long-term debt

(316,380)

(18,749)

Payments on revolving credit facility

(150,000)

Borrowings on revolving credit facility

110,000

40,000

Payments of dividends

(56,343)

(50,081)

Proceeds from issuances of treasury stock

41,190

43,416

Excess tax benefits from stock-based compensation

8,778

1,406

Payments for deferred financing costs

(5,969)

(1,620)

Net cash used in financing activities

(152,580)

(202,919)

Net change in cash and cash equivalents

264

(22,885)

Cash and cash equivalents at beginning of period

59,103

81,988

Cash and cash equivalents at end of period

$

59,367

$

59,103

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

Fourth Quarter

Net  Openings/(Closings)

Fiscal 2013

Total Restaurants

June 26, 2013

Net Openings/(Closings) Fiscal 2013

Company-Owned Restaurants:

Chili's Domestic

1

822

1

Chili's International (a)

11

11

11

Maggiano's

44

12

877

12

Franchise Restaurants:

Chili's Domestic

(4)

443

(15)

Chili's International (a)

(5)

271

13

(9)

714

(2)

Total Restaurants:

Chili's Domestic

(3)

1,265

(14)

Maggiano's

44

Chili's International (a)

6

282

24

3

1,591

10

(a)

During the fourth quarter of fiscal 2013, the company acquired 11 Chili's restaurants in Canada from a franchisee.

SOURCE Brinker International



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