Brinker International Reports Second Quarter Fiscal 2010 EPS

Jan 20, 2010, 07:45 ET from Brinker International, Inc.

DALLAS, Jan. 20 /PRNewswire-FirstCall/ -- Brinker International, Inc. (NYSE: EAT) announced second quarter fiscal 2010 earnings per diluted share of $0.29 compared to $0.27 for the second quarter of fiscal 2009, before special items and excluding Romano's Macaroni Grill® (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share increased to $0.18 from a loss per diluted share of $0.21 for the second quarter in the prior year.  

In the second quarter of fiscal 2009, the company completed the sale of Macaroni Grill while retaining a minority ownership interest.  The information presented below includes Macaroni Grill unless otherwise noted.  

Quarterly Revenues

Brinker reported revenues for the 13-week period of $781.9 million, a decrease of 17.6 percent compared with $949.4 million reported for the same period of fiscal 2009. The company experienced a 3.1 percent decrease in comparable restaurant sales (see Table 1) in the second quarter of fiscal 2010.  Revenues were also negatively impacted by a net decline in capacity of 17.7 percent due to the sale of 189 Macaroni Grill restaurants at the end of the second quarter of fiscal 2009.  The decline in capacity was also due to 47 restaurant closures and the sale of 21 restaurants to a franchisee since the second quarter of fiscal 2009.  Royalty and franchise revenues were $17.3 million for the quarter.  

Table 1: Q2 comparable restaurant sales

Q2 10 and Q2 09, company and three reported brands; percentage

Q2 10 Comparable Sales (2)

Q2 09

Comparable

Sales

Q2 10

Pricing

Impact

Q2 10

Mix-Shift

Brinker International (1)

(3.1)

(4.5)

1.2 

(1.7)

 Chili's

(3.2)

(4.2)

1.2 

(1.3)

 On The Border

(4.7)

(3.7)

2.3 

(4.3)

 Maggiano's

(1.6)

(6.9)

0.5 

(2.2)

(1) Brinker International comparable restaurant sales exclude the impact of Macaroni Grill.

(2) Brinker International comparable restaurant sales by period are provided on the company's web site.

Quarterly Operating Performance

Cost of sales, as a percent of revenues, increased from 28.2 percent in the prior year to 28.9 percent in the second quarter of fiscal 2010.  During the quarter, cost of sales was negatively impacted by recent promotions and unfavorable commodity prices primarily related to chicken, produce and dairy, partially offset by favorable menu price changes.

Restaurant expenses, as a percent of revenues, decreased to 56.0 percent from 58.0 percent in the prior year primarily due to reduced labor costs, utility expenses and the receipt of a $3.3 million credit card class action lawsuit settlement.

Depreciation and amortization decreased $2.4 million compared to the prior year due to fully depreciated assets and restaurant closures, partially offset by investments in existing restaurants.  

General and administrative expense decreased $6.0 million for the quarter primarily due to reduced salary and training expenses as well as income related to transitional services provided to Macaroni Grill.  

Other gains and charges primarily includes long-lived asset impairments of $21.4 million related to the closure and impairment of certain underperforming restaurants, partially offset by a $2.8 million gain on the sale of 21 restaurants to a franchisee.  

Interest expense decreased $3.7 million due to lower interest rates and lower average borrowings.

The effective income tax rate increased to a provision of 19.6 percent in the current quarter as compared to a benefit of 51.1 percent due to the loss on the sale of Macaroni Grill and long-lived asset impairment charges in the prior year.  The effective income tax rate before special items and excluding Macaroni Grill increased to 27.6 percent as compared to 22.4 percent in the second quarter of fiscal 2009, primarily due to increased income and lower tax credits.

Special Items

Table 2: Reconciliation of net income, before special items (1)

Q2 10 and Q2 09; $ millions and $ per diluted share after-tax

Item

Q2 10

EPS

Q2 10

Q2 09

EPS

Q2 09

Net Income (Loss)

$ 18.3 

$ 0.18 

$ (21.8)

$ (0.21)

Other (Gains) and Charges

11.8 

0.11 

53.5 

0.52 

Net Income before Special Items

30.1 

0.29 

31.7 

0.31 

Macaroni Grill before Special Items

-

-

(3.8)

(0.04)

Adjusted Net Income before Special Items  and Macaroni Grill

$ 30.1 

$ 0.29 

$  27.9 

$   0.27 

(1) The company believes excluding other gains and charges and Macaroni Grill 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.  

Cash Flow and Capital Allocation

Cash flow from operations for the first six months of fiscal 2010 increased to $156.3 million compared to $94.8 million in the prior year.  Capital expenditures totaled $25.0 million, a reduction of $34.6 million compared to the prior year resulting from a decrease in new company-owned restaurant development.  Due to strong cash flows, the company made payments of $140.0 million on the outstanding term loan during the quarter which reduced the balance to $250.0 million.

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 web site (www.brinker.com) at 9 a.m. CST today (Jan. 20).  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 web site until the end of the day on Feb. 17, 2010.  

Additional financial information, including reconciliation details and debt covenant information, is also available on the Brinker web site under the Financial Information section of the Investor tab.

Forward Calendar

  • SEC Form 10-Q for second quarter fiscal 2010 filing on or before Feb. 1, 2010; and
  • Third quarter earnings release, before market opens, on April 20, 2010.

At the end of the second quarter fiscal year 2010, Brinker International either owned, operated, or franchised 1,712 restaurants under the names Chili's® Grill & Bar (1,504 restaurants), On The Border Mexican Grill & Cantina® (163 restaurants) and Maggiano's Little Italy® (45 restaurants).  Brinker also holds a minority investment in Romano's Macaroni Grill®.

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, 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 growth plan, acts of God, governmental regulations, and inflation.    

Contacts:

Stacey Sullivan, Media Relations

Marie Perry, Investor Relations

(800) 775-7290

(972) 770-1276



                          BRINKER INTERNATIONAL, INC.
                       Consolidated Statements of Income
                   (In thousands, except per share amounts)
                                   (Unaudited)


                                   Thirteen Week          Twenty-Six Week
                                   Periods Ended           Periods Ended
                                 --------------------    ------------------
                                 Dec. 23,    Dec. 24,    Dec. 23,  Dec. 24,
                                   2009        2008       2009       2008
                                   ----        ----       ----       ----
    Revenues                     $781,853   $949,425 $1,559,934 $1,933,832 
    Operating Costs and Expenses:
      Cost of sales               225,854    268,001    445,331    546,968 
      Restaurant expenses         437,947    550,696    893,029  1,129,823 
      Depreciation and
       amortization                38,227     40,647     77,096     81,803 
      General and administrative   33,093     39,088     69,017     78,852 
      Other gains and charges (a)
                                   18,830     85,149     21,617     90,102 
                                   ------     ------     ------     ------
      Total operating costs and
       expenses                   753,951    983,581  1,506,090  1,927,548 
                                  -------    -------  ---------  ---------

    Operating income (loss)        27,902    (34,156)    53,844      6,284 

    Interest expense                6,812     10,535     13,760     19,992 
    Other, net                     (1,692)      (193)    (4,034)    (1,565)
                                   ------       ----     ------     ------

    Income (loss) before tax
     expense (benefit)             22,782    (44,498)    44,118    (12,143)

    Income tax expense (benefit)    4,458    (22,734)    10,027    (14,160)
                                    -----    -------     ------    -------

    Net income (loss)             $18,324   $(21,764)   $34,091     $2,017 
                                  =======   ========    =======     ======

    Basic net income (loss) per
     share                          $0.18     $(0.21)     $0.33      $0.02 
                                    =====     ======      =====      =====

    Diluted net income (loss) per
     share                          $0.18     $(0.21)     $0.33      $0.02 
                                    =====     ======      =====      =====

    Basic weighted average shares
     outstanding                  102,481    101,841    102,362    101,735 
                                  =======    =======    =======    =======
    Diluted weighted average shares
     outstanding                  102,994    102,278    103,005    102,520 
                                  =======    =======    =======    =======

    (a) Current year other gains and charges primarily includes long-lived
        asset impairments of $21.4 million related to the closure and
        impairment of certain underperforming restaurants, partially offset by
        a $2.8 million gain on the sale of 21 restaurants to a franchisee.  In
        the first quarter of fiscal 2010, other gains and charges primarily
        included lease termination costs of $2.0 million and severance costs
        of $0.5 million.

        Prior year other gains and charges primarily includes long-lived asset
        impairments of $44.2 million related to the decision to close 35
        underperforming restaurants, a loss on the sale of Macaroni Grill of
        $43.3 million and $3.6 million of gains on sales of other assets in
        the second quarter of fiscal 2009.  In the first quarter of fiscal
        2009, other gains and charges primarily included lease termination
        costs of $2.0 million, uninsured costs related to hurricanes of $1.7
        million and expenses related to the pending sale of Macaroni Grill of
        $1.3 million.

                         BRINKER INTERNATIONAL, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                               Dec. 23,          June 24,
                                                 2009              2009
                                                 ----              ----
                                             (Unaudited)
    ASSETS
      Current assets                           $325,075          $369,215
      Net property and equipment (a)          1,309,167         1,400,352
      Total other assets                        226,125           179,380
                                                -------           -------
      Total assets                           $1,860,367        $1,948,947
                                             ==========        ==========

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current liabilities                      $441,593          $407,067
      Long-term debt, including current
       installments                             590,543           729,262
      Other liabilities                         163,828           165,694
      Total shareholders' equity                664,403           646,924
                                                -------           -------
      Total liabilities and shareholders'
       equity                                $1,860,367        $1,948,947
                                             ==========        ==========

    (a) At December 23, 2009, the company owned the land and buildings for 220
        of the 1,001 company-owned restaurants.  The net book values of the
        land and buildings associated with these restaurants totaled $175.8
        million and $172.8 million, respectively.

                            BRINKER INTERNATIONAL, INC.
                                 RESTAURANT SUMMARY

                                       Second     Second
                                       Quarter    Quarter
                           Total      Openings/  Closings/  Total    Projected
                        Restaurants Acquisitions   Sales Restaurants  Openings
                          Sept. 23,    Fiscal      Fiscal  Dec. 23,     Fiscal
                            2009        2010        2010     2009        2010
                            ----        ----        ----     ----        ----
    Company-Owned
     Restaurants:
      Chili's                857          -          22       835          -
      On The Border          122          1           1       122          1
      Maggiano's              44          -           -        44          1
                             ---        ---         ---       ---        ---
                           1,023          1          23     1,001          2
                           =====        ===         ===     =====        ===

    Franchise
     Restaurants:
      Chili's                439         26           -       465      11-14
      On The Border           31          -           -        31        1-3
      International(a)       206         10           1       215      30-35
                             ---        ---         ---       ---      -----
                             676         36           1       711      42-52
                             ===        ===         ===       ===      =====

    Total Restaurants:
      Chili's              1,296         26          22     1,300      11-14
      On The Border          153          1           1       153        2-4
      Maggiano's              44          -           -        44          1
      International          206         10           1       215      30-35
                             ---        ---         ---       ---      -----
                           1,699         37          24     1,712      44-54
                           =====        ===         ===     =====      =====

    (a) At December 23, 2009, international franchise restaurants by brand
        were 204 Chili's, 10 On The Borders and one Maggiano's.


FOR ADDITIONAL INFORMATION, CONTACT:

MARIE PERRY

INVESTOR RELATIONS

(972) 770-1276

6820 LBJ FREEWAY

DALLAS, TEXAS 75240

SOURCE Brinker International, Inc.



RELATED LINKS

http://www.brinker.com