Brinker International Reports Increases In Fourth Quarter And Full Year Fiscal 2012 EPS, Comparable Restaurant Sales And Traffic

DALLAS, Aug. 9, 2012 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal fourth quarter and year ended June 27, 2012.

Highlights include the following:

• Fourth quarter fiscal 2012 earnings per diluted share, excluding special items, increased 27.1 percent to $0.61 compared to $0.48 for the fourth quarter of fiscal 2011. Full year fiscal 2012 earnings per diluted share, excluding special items, increased 28.9 percent to $1.96 compared to $1.52 for the prior fiscal year (see non-GAAP reconciliation below)
• On a GAAP basis, fourth quarter fiscal 2012 earnings per diluted share increased 24.5 percent to $0.61 compared to $0.49 for the fourth quarter of fiscal 2011 and full year fiscal 2012 increased 22.2 percent to $1.87 compared to $1.53 for the prior fiscal year
• Chili's comparable restaurant sales increased 2.2 percent, representing the fifth consecutive quarterly increase, and customer traffic increased 1.2 percent, representing the sixth consecutive quarterly increase
• Maggiano's comparable restaurant sales increased 1.9 percent, representing the tenth consecutive quarterly increase
• Total revenues increased 1.5 percent to $728.4 million and restaurant operating margin¹ improved 130 basis points to 19.6 percent
• The company repurchased approximately 2.7 million shares of its common stock for $78.9 million in the fourth quarter resulting in a total of approximately 11.1 million shares for $287.3 million in fiscal year 2012
• The company paid a dividend of 16 cents per share in the fourth quarter, an increase of 14.3 percent over the prior year quarter
• Cash flows provided by operating activities were $303.4 million and capital expenditures totaled $125.2 million for the fiscal year 2012

"Brinker grew EPS by 27 percent during the fourth quarter as we again delivered positive sales and traffic growth that significantly outpaced the industry. Our results demonstrate the effectiveness of our strategy to improve our margins and reinvest in initiatives that drive top line growth," said Doug Brooks, President and Chief Executive Officer. "As we build on this momentum in fiscal 2013, we're confident we'll deliver on our long-term promise to double EPS to $2.75 to $2.80."

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

Table 1: Monthly, Q4 and FY comparable restaurant sales
Company-owned, reported brands and franchise; percentage

Quarterly Operating Performance

CHILI'S fourth quarter revenues of $614.6 million represent a 1.8 percent increase from $603.9 million in the prior year period driven by increased menu prices and improved guest traffic. Restaurant expense benefited from lower repair and maintenance expense, credit card fees, insurance and utilities expense, as well as sales leverage on fixed costs related to higher revenue. Restaurant labor was positively impacted by lower vacation expenses and improved labor productivity related to the installation of new kitchen equipment, partially offset by higher restaurant manager bonuses resulting from improved restaurant performance. Cost of sales was negatively impacted by unfavorable pricing on pork, beef and oils, partially offset by favorable pricing on produce, poultry and dairy.

MAGGIANO'S fourth quarter revenues of $97.7 million increased 1.7 percent, primarily driven by increased menu prices. Restaurant operating margin improved compared to prior year primarily due to improved cost of sales resulting from the elimination of certain menu items and increased pricing, partially offset by unfavorable commodity pricing. Restaurant operating margin was also positively impacted by lower vacation expenses and sales leverage on fixed costs related to higher revenue.

ROYALTY AND FRANCHISE revenues totaled $16.1 million for the quarter, a decrease of 8.0 percent over the prior year driven primarily by a one-time development fee refund of approximately $1.0 million related to the company's decision to discontinue Maggiano's international development. This decision is consistent with Brinker's strategy to focus on domestic new restaurant development of Maggiano's.  Domestic franchise comparable restaurant sales increased 2.4 percent while international comparable restaurant sales increased 1.3 percent. Brinker franchisees generated $414 million in sales1 for the fourth quarter of fiscal 2012.

"At the end of another solid quarter for Brinker, we've crossed the halfway mark toward our goal of improving operating margins by 400 basis points," said Guy Constant, Executive Vice President and Chief Financial Officer. "We will continue to strengthen our business model and drive sales and traffic in the coming year, as we complete the rollout of our kitchen retrofit and point of sale initiatives."

Other

General and administrative expense increased $3.5 million for the quarter primarily due to an increase in performance based compensation, consulting fees and relocation expenses.

Excluding the impact of special items, the effective income tax rate decreased to 28.3 percent in the current quarter from 28.9 percent in the same quarter last year driven by an increased FICA tip credit, partially offset by increased earnings. On a GAAP basis, the effective income tax rate increased to 24.6 percent in the current quarter as compared to 24.4 percent in the same quarter last year primarily due to increased earnings and a lower impact from resolved tax positions, partially offset by an increased FICA tip credit.

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 excluding special items
Q4 12 and Q4 11; $ millions and $ per diluted share after-tax

Table 3: Reconciliation of net income excluding special items
FY 12 and FY 11; $ millions and $ per diluted share after-tax

¹ Royalty revenues are recognized based on the sales generated and reported to the company by its franchisees.

Fiscal 2013 Outlook

The company anticipates earnings per diluted share, excluding special items, to increase 17 to 25 percent in the range of $2.30 to $2.45. Earnings are based on the following expectations:

• Comparable sales are expected to increase two to three percent
• Cost of sales as a percent of Revenues is projected to be flat compared to fiscal 2012
• Restaurant labor is projected to improve 50 to 70 basis points year over year
• Restaurant expense as a percent of Revenues is projected to be slightly better compared to fiscal 2012
• Depreciation expense is expected to increase slightly on a dollar basis, assuming capital expenditures of $130 to $140 million
• General and administrative spend is expected to be lower than fiscal 2012 due to the fact that incentive compensation is planned at target
• Operating margin is projected to improve approximately 100 basis points
• Interest expense is expected to increase approximately $2.5 million
• Excluding the impact of special items, the effective income tax rate is projected to be approximately 31 percent
• Free cash flow will be $160 to $170 million
• Diluted weighted average shares outstanding will be 74 to 76 million

The company believes that providing fiscal 2013 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 be broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (Aug. 9). 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 Sept. 6, 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-K for fiscal 2012 filing on or before Aug. 27, 2012; and
• First quarter earnings release, before market opens, Oct. 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 1,581 restaurants under the names Chili's^® Grill & Bar (1,536 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.

SOURCE Brinker International