Brinker International, Inc.

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Brinker International Reports Increases In Second Quarter Fiscal 2013 EPS And Comparable Restaurant Sales

DALLAS, Jan. 22, 2013 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 26, 2012.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 6.4 percent to $0.50 compared to $0.47 for the second quarter of fiscal 2012 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 13.6 percent to $0.50 compared to $0.44 for the second quarter of fiscal 2012
  • Chili's comparable restaurant sales increased 1.0 percent, representing the seventh consecutive quarterly increase.  Chili's comparable restaurant sales increased 1.6 percent after adjusting for holiday timing
  • Maggiano's comparable restaurant sales increased 0.6 percent, representing the 12th consecutive quarterly increase.  Maggiano's comparable restaurant sales increased 1.5 percent after adjusting for holiday timing
  • Company sales increased 1.1 percent to $669.1 million and restaurant operating margin1 improved approximately 30 basis points to 15.7 percent from 15.4 percent
  • The company repurchased approximately 1.5 million shares of its common stock for $45.1 million in the second quarter
  • The company paid a dividend of 20 cents per share in the second quarter, an increase of 25 percent over the prior year second quarter
  • For the first six months of fiscal 2013, cash flows provided by operating activities were $131.3 million and capital expenditures totaled $69.8 million

"Brinker continued to take market share again this quarter, as we delivered our eighth consecutive quarter of positive sales growth, despite fewer holiday days in the quarter versus last year," said Wyman Roberts, President and Chief Executive Officer. "This demonstrates that our strategies designed to strengthen our margins, reinvest in our restaurants, and focus on differentiated food and service initiatives are working, as we continue to track to our goal of doubling EPS."

1 Effective for the fiscal first quarter ended Sept. 26, 2012, 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.

Table 1: Monthly and Q2 comparable restaurant sales

Q2 13 and Q2 12, company-owned, reported brands and franchise; percentage

 


Oct

Nov

Dec

Q2 13

Q2 12

Brinker International

0.9

1.6

0.4

0.9 1

1.7

  Chili's Company-Owned






      Comparable Restaurant Sales

0.8

2.0

0.2

1.0 1

1.4

      Pricing Impact

1.4

1.5

2.0

1.6

1.1

      Mix-Shift

0.8

0.9

2.0

1.3

(0.8)

      Traffic

(1.4)

(0.4)

(3.8)

(1.9)

1.1

  Maggiano's






      Comparable Restaurant Sales

1.2

(0.7)

1.1

0.6 1

2.8

      Pricing Impact

2.3

1.5

2.6

2.3

1.8

      Mix-Shift

0.5

0.2

1.5

0.7

0.4

      Traffic

(1.6)

(2.4)

(3.0)

(2.4)

0.6







Franchise2




2.4

2.6

  Domestic Comparable Restaurant Sales




2.2

1.7

  International Comparable Restaurant Sales




2.7

4.8







System-wide3




1.5

2.0







 

1

Comparable restaurant sales can be affected by the timing of holidays as well as calendar or trading day shifts.  Christmas occurred on Tuesday this year and as a result, there were fewer school and business vacation days in the current quarter compared to the prior year.  Adjusting for the change in holiday timing, Brinker comparable restaurant sales were 1.5%, Chili's comparable restaurant sales were 1.6% and Maggiano's comparable restaurant sales were 1.5% for the current quarter.



2

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.



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 second quarter company sales of $563.3 million represent a 1.2 percent increase from $556.5 million in the prior year period driven by increased menu prices and favorable mix shift. Chili's operating margin improved compared to the prior year primarily due to improved cost of sales. Cost of sales as a percentage of company sales was favorably impacted by increased menu pricing and favorable commodity pricing on produce and poultry, partially offset by unfavorable commodity pricing and product mix primarily related to beef and pork. Restaurant labor was negatively impacted by increased employee health insurance claims and increased overtime incurred to support the installation of new kitchen equipment, partially offset by sales leverage related to higher revenue and improved labor productivity from the installation of the equipment.

MAGGIANO'S second quarter company sales of $105.8 million increased 0.6 percent, primarily driven by menu pricing and mix. Restaurant operating margin improved compared to prior year primarily due to improved cost of sales. Cost of sales was favorably impacted by decreased commodity usage from efforts to reduce waste, increased menu pricing and menu item changes. Restaurant operating margin was negatively impacted by higher workers' compensation insurance expenses, partially offset by lower repair and maintenance expense, utilities expense and sales leverage on fixed costs related to higher revenue.

FRANCHISE AND OTHER revenues totaled $20.6 million for the quarter, an increase of 2.0 percent over the prior year driven primarily by an increase in royalty revenues. International franchise comparable restaurant sales increased 2.7 percent while domestic franchise comparable restaurant sales increased 2.2 percent. Brinker franchisees generated approximately $401 million in sales1 for the second quarter of fiscal 2013.  

Other
Depreciation and amortization expense increased $1.8 million for the quarter primarily due to investments in existing restaurants and asset replacements, partially offset by an increase in fully depreciated assets.

Interest expense increased $0.6 million for the quarter as a result of higher borrowing balances.

Excluding the impact of special items, the effective income tax rate increased to 32.7 percent in the current quarter from 29.7 percent in the same quarter last year.  On a GAAP basis, the effective income tax rate increased to 32.7 percent in the current quarter as compared to 29.0 percent in the same quarter last year. The increase in the income tax rates was driven primarily by increased earnings and the temporary expiration of employment tax credits.   

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

Q2 13 and Q2 12; $ millions and $ per diluted share after-tax

 


Q2 13

EPS

Q2 13

Q2 12

EPS

Q2 12

Net Income

37.2

0.50

35.7

0.44

  Other (Gains) and Charges1

0.1

0.00

2.5

0.03

Net Income excluding Special Items

37.3

0.50

38.2

0.47






    

1

Pre-tax Other gains and charges was $0.2 million and $4.0 million in the second quarter of fiscal 2013 and 2012, 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.

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

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. CST today (Jan. 22). 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. 19, 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-Q for second quarter fiscal 2013 filing on or before Feb. 4, 2013; and
  • Third quarter earnings release, before market opens, April 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 1,593 restaurants under the names Chili's® Grill & Bar (1,549 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

Twenty-Six Week Periods Ended


Dec. 26,

Dec. 28,

Dec. 26,

Dec. 28,


2012

2011

2012

2011






Revenues:





           Company sales

$  669,129

$  661,710

$  1,332,797

$  1,309,465

           Franchise and other revenues (a)

20,635

20,194

40,474

40,841

               Total revenues

689,764

681,904

1,373,271

1,350,306






Operating Costs and Expenses:





           Company restaurants





               Cost of sales

184,591

185,189

369,286

366,807

               Restaurant labor

217,177

214,317

436,043

430,262

               Restaurant expenses

162,191

160,077

325,244

325,642

           Company restaurant expenses

563,959

559,583

1,130,573

1,122,711

           Depreciation and amortization

32,979

31,153

65,608

62,336

           General and administrative

31,030

31,215

68,303

64,034

           Other gains and charges (b)

230

4,033

677

5,718











               Total operating costs and expenses

628,198

625,984

1,265,161

1,254,799






Operating income

61,566

55,920

108,110

95,507






Interest expense

7,066

6,509

13,955

13,557

Other, net

(726)

(854)

(1,523)

(1,946)






Income before provision for income taxes

55,226

50,265

95,678

83,896






       Provision for income taxes

18,049

14,591

30,637

24,601











                 Net income

$  37,177

$  35,674

$     65,041

$    59,295











       Basic net income per share

$      0.51

$      0.45

$         0.89

$        0.73






  Diluted net income per share

$      0.50

$      0.44

$         0.86

$        0.72






  Basic weighted average shares outstanding

72,560

79,840

73,232

80,792






  Diluted weighted average shares outstanding

74,720

81,655

75,639

82,619











    

(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

Twenty-Six Week Periods Ended


Dec. 26,

Dec. 28,

Dec. 26,

Dec. 28,


2012

2011

2012

2011






Restaurant impairment charges

$          661

$     1,098

$           661

$       1,098

Restaurant closure charges

2,148

2,395

2,582

3,122

Gain on sale of assets, net

(2,349)

4

(2,350)

(1,340)

Other

(230)

536

(216)

2,838


$          230

$     4,033

$           677

$       5,718






    

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)







Dec. 26,

June 27,



2012

2012



    (Unaudited)


ASSETS




  Current assets


$     262,604

$     194,846

  Net property and equipment (a)


1,037,976

1,043,564

  Total other assets


200,626

197,662

     Total assets


$  1,501,206

$  1,436,072





LIABILITIES AND SHAREHOLDERS' EQUITY




  Current installments of long-term debt


$       27,462

$       27,334

  Current liabilities


403,922

374,415

  Long-term debt, less current installments


684,171

587,890

  Other liabilities


132,668

136,560

  Total shareholders' equity


252,983

309,873

  Total liabilities and shareholders' equity


$  1,501,206

$  1,436,072





    

(a)    

At Dec. 26, 2012, 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 $141.1 million and $120.0 million, respectively.

    

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)










     Dec. 26,

Dec. 28,


2012

2011

Cash Flows From Operating Activities:



Net income

$   65,041

$  59,295

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



Depreciation and amortization

65,608

62,336

Restructure charges and other impairments

3,027

4,898

Stock-based compensation

9,314

6,449

Net (gain) loss on disposal of assets

(96)

573

Changes in assets and liabilities

(11,617)

(19,306)

Net cash provided by operating activities

131,277

114,245




Cash Flows from Investing Activities:



Payments for property and equipment

(69,752)

(53,475)

Proceeds from sale of assets

5,335

4,279

Investment in equity method investees

-

(912)

Net cash used in investing activities

(64,417)

(50,108)




Cash Flows from Financing Activities:



Purchases of treasury stock      

(131,445)

(125,638)

Borrowings on revolving credit facility

110,000

-

Payments of dividends

(27,677)

(25,073)

Proceeds from issuances of treasury stock

22,515

16,649

Payments on long-term debt

(13,190)

(5,625)

Excess tax benefits from stock-based compensation

6,939

792

Proceeds from issuance of long-term debt

-

70,000

Payments for deferred financing costs

-

(1,620)

Net cash used in financing activities

(32,858)

(70,515)




Net change in cash and cash equivalents              

34,002

(6,378)

Cash and cash equivalents at beginning of period                               

59,103

81,988

Cash and cash equivalents at end of period          

$   93,105

$  75,610

         

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY






Second Quarter

Net Openings/(Closings)

Total Restaurants

Projected Openings


Fiscal 2013

Dec. 26, 2012

Fiscal 2013





Company-Owned

 Restaurants:




        Chili's

2

823

-

        Maggiano's

-

44

-


2

867

-





Franchise

 Restaurants:




  Chili's

(1)

452

2

  International (a)

7

274

30-35


6

726

32-37





Total Restaurants:




  Chili's

1

1,275

2

  Maggiano's

-

44

-

  International (a)

7

274

30-35


8

1,593

32-37





    

(a)

At Dec. 26, 2012, international franchise restaurants by brand were 274 Chili's.

 

SOURCE Brinker International, Inc.

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