DALLAS - Oct. 20, 2015 // PRNewswire // - Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal first quarter ended Sept. 23, 2015.
Highlights include the following:
"Brinker again delivered solid earnings growth for the quarter, demonstrating the strength of our business model and our ability to deliver bottom line results in a highly competitive market," said Wyman Roberts, Chief Executive Officer and President. "But our top line performance fell short of our expectations, and we are moving aggressively to respond to competitive activity and return to positive sales and traffic."
1Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant Labor and Restaurant expenses. Restaurant operating margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. Restaurant operating margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to operating income or other similarly titled measures of other companies.
2Free cash flow is defined as cash flows provided by operating activities less capital expenditures.
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CHILI'S first quarter company sales increased 8.8 percent to $653.1 million from $600.1 million in the prior year primarily due to an increase in restaurant capacity resulting from the acquisition of 103 Chili's restaurants on June 25, 2015. As compared to the prior year, Chili's restaurant operating margin1 declined slightly primarily due to the impact of the recently acquired restaurants. Cost of sales, as a percent of company sales, was positively impacted by favorable menu pricing and commodity pricing related to avocados, cheese and seafood, partially offset by unfavorable menu item mix and commodity pricing primarily related to chicken and beef. Restaurant expenses, as a percent of company sales, increased slightly due to higher repairs and maintenance and rent expenses, partially offset by decreased advertising. Restaurant labor, as a percent of company sales, increased slightly compared to the prior year due to higher wage rates.
MAGGIANO'S first quarter company sales increased 0.7 percent to $87.4 million from $86.8 million in the prior year primarily due to increases in restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin1 improved. Cost of sales, as a percent of company sales, was positively impacted by menu item changes, increased menu pricing and favorable commodity pricing. Restaurant expenses, as a percent of company sales, were positively impacted by lower preopening and advertising expenses, partially offset by increased repair and maintenance expenses. Restaurant labor, as a percent of company sales, increased compared to prior year due to higher wage rates.
1Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses. Restaurant operating margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. Restaurant operating margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to operating income or other similarly titled measures of other companies.
FRANCHISE AND OTHER revenues decreased 8.6 percent to $22.1 million for the first quarter compared to $24.2 million in the prior year driven primarily by a decrease in royalty revenues resulting from the acquisition of 103 Chili's restaurants. Brinker franchisees generated approximately $331 million in sales2 for the first quarter of fiscal 2016.
2Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.
Depreciation and amortization expense increased $3.6 million for the quarter primarily due to investments in the Chili's reimage program, depreciation on acquired restaurants and new restaurant openings, partially offset by an increase in fully depreciated assets.
General and administrative expense increased approximately $0.5 million primarily due to the acquisition of 103 Chili's restaurants resulting in the termination of accounting and information technology support fees paid by the franchisee to Brinker.
On a GAAP basis, the effective income tax rate increased to 31.9 percent in the current quarter from 31.5 percent in the prior year quarter. Excluding the impact of special items, the effective income tax rate increased to 32.1 percent in the current quarter compared to 31.7 percent in the prior year. The effective income tax rate increased due to higher profits and lower tax credits.
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 first quarter of fiscal 2016 consist primarily of severance and transaction costs, partially offset by a gain on the sale of property.
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"We are reaffirming our fiscal year 2016 earnings per diluted share guidance of $3.55 to $3.65, with lower sales offset by commodity and other cost management actions," said Tom Edwards, Executive Vice President and Chief Financial Officer. "We are confident in our ability to drive long term earnings growth due to our continued focus on revenue-driving initiatives, effective cost and margin management and utilization of our substantial free cash flow."
The company reaffirms earnings per diluted share, excluding special items, to increase 15 to 18 percent in the range of $3.55 to $3.65. Fiscal 2016 includes a 53rd week versus 52 weeks in fiscal 2015. Earnings are based on the following expectations, including the impact of the 103 Chili's restaurants acquired in the first quarter of fiscal 2016:
The company believes providing fiscal 2016 earnings per diluted share guidance provides investors the appropriate insight into the company's ongoing operating performance.
Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, excluding special items, and other key line items in the comprehensive 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.
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 (Oct. 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 website until the end of the day Nov. 17, 2015.
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.
Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, as of June 24, 2015, Brinker owned, operated, or franchised 1,632 restaurants under the names Chili's® Grill & Bar (1,583 restaurants) and Maggiano's Little Italy® (49 restaurants).
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, increased minimum wages, increased health care costs, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorist 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, inflation, technology failures, and failure to protect the security of data of our guests and teammates.
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SOURCE Brinker International, Inc.
Joe Taylor
Investor Relations
(972) 770-9040
Ashley Johnson
Media Relations
(800) 775-7290
Brinker International, Inc. is one of the world's leading casual dining restaurant companies.