DALLAS - Aug. 10, 2017 // PRNewswire // - Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal fourth quarter and year ended June 28, 2017.
Highlights include the following:
"Our ability to again report adjusted earnings above expectations is a testament to our team's ability to operate restaurants and supporting functions in a manner that delivers bottom line results," said Wyman Roberts, chief executive officer and president. "That being said, we are focusing our efforts on improving traffic at Chili's through a quality food-driven experience."
1Prior year amounts are revised due to the correction of an immaterial error. Refer to disclosures in tables 6 and 7 in this press release for further information.
2Amounts are calculated based on comparable 13 weeks in each fiscal quarter.
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Quarterly Operating Performance
CHILI'S fourth quarter company sales decreased 8.6 percent to $682.9 million from $747.3 million in the prior year primarily due to one less operating week in fiscal 2017 and a decline in comparable restaurant sales. As compared to the prior year, Chili's restaurant operating margin1 declined. Restaurant expenses, as a percent of company sales, increased due to sales deleverage, higher advertising and marketing related expenses and increased workers' compensation insurance expenses. Restaurant labor, as a percent of company sales, increased slightly compared to the prior year due to sales deleverage and higher wage rates, partially offset by lower manager bonuses. Cost of sales, as a percent of company sales, decreased due to increased menu pricing and favorable commodity pricing primarily related to beef and poultry, partially offset by unfavorable commodity pricing primarily related to avocados.
MAGGIANO'S fourth quarter company sales decreased 4.8 percent to $102.9 million from $108.1 million in the prior year primarily due to one less operating week in fiscal 2017, partially offset by an increase in comparable restaurant sales and restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin1 declined. Restaurant expenses, as a percent of company sales, increased primarily due to sales deleverage and higher advertising and workers' compensation insurance expenses. Restaurant labor, as a percent of company sales, was flat compared to the prior year. Cost of sales, as a percent of company sales, was negatively impacted by unfavorable menu item mix, partially offset by increased menu pricing.
1Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses and excludes Depreciation and amortization expenses. (See non-GAAP reconciliation below)
FRANCHISE AND OTHER revenues decreased 5.7 percent to $24.8 million for the fourth quarter of fiscal 2017 compared to $26.3 million in the prior year fourth quarter primarily due to lower digital entertainment revenue from one less operating week and a slight decrease in royalty income from franchisees.
Other
Depreciation and amortization expense decreased $0.2 million for the quarter compared to the fourth quarter of fiscal 2016 primarily due to an increase in fully-depreciated assets and restaurant closures, partially offset by depreciation on asset replacements and new restaurant openings.
General and administrative expense decreased $1.6 million for the quarter compared to the fourth quarter of fiscal 2016 primarily due to one less operating week and lower payroll and stock-based compensation expenses.
On a GAAP basis, the effective income tax rate decreased to 25.2 percent in the current quarter from 31.8 percent in the fourth quarter of fiscal 2016. Excluding the impact of special items, the effective income tax rate decreased to 27.8 percent in the current quarter compared to 32.3 percent in the fourth quarter of fiscal 2016. The decline in profit in the current quarter compared to the fourth quarter of fiscal 2016 coupled with no significant change in realized tax credits resulted in a decrease in both the GAAP basis effective tax rate and the effective tax rate excluding special items. The decline in the GAAP basis effective tax rate in the current quarter was partially offset by the impact of lower restaurant impairment and closure charges compared to the fourth quarter of fiscal 2016.
Immaterial Correction of Prior Period Financial Statements
In connection with the preparation of the consolidated financial statements for the year ended June 28, 2017, the Company discovered immaterial errors in prior years relating to the accuracy of the deferred income tax liability, primarily related to property and equipment. While the Company has concluded that the impact of these errors on the Company's previously-issued consolidated financial statements was not material, the Company is revising its previously-reported consolidated financial statements for the fiscal years ended June 29, 2016 and June 24, 2015. The revisions include a net increase in the provision for income taxes of $0.1 million and $2.0 million for fiscal 2016 and 2015, respectively. These revisions resulted in no change to earnings per diluted share for fiscal 2016 and a $0.03 decrease for fiscal 2015. Please refer to tables 6 and 7 in this press release for further information relating to these revisions to prior periods. The cumulative effect of the changes to retained earnings at the beginning of fiscal 2016, the earliest date presented in the consolidated financial statements for the year ended June 28, 2017, was a reduction of $12.4 million.
Fiscal 2018 Outlook
The company estimates earnings per diluted share, excluding special items, in the range of $3.25 to $3.35. We are unable to reliably forecast special items such as restaurant impairments, restaurant closures, reorganization charges and legal settlements without unreasonable effort. As such, we do not present a reconciliation of forecasted non-GAAP measures to the corresponding US GAAP measures. When these items are reported in fiscal 2018, reconciliations to the appropriate US GAAP measures will be provided. The non-GAAP measures included as a supplement to our estimated earnings per diluted share range are adjusted earnings per diluted share, restaurant operating margin, effective income tax rate excluding special items, free cash flow, and EBITDA.
Estimated earnings per diluted share are based on the following expectations:
The company believes providing estimated fiscal 2018 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, excluding special items, and other key line items in the statements of comprehensive income and will only provide updates if there is a material change versus the original guidance. We do not provide annual guidance as it relates to US GAAP earnings per diluted share as we are unable to reliably forecast special items such as restaurant impairments, restaurant closures, reorganization charges and legal settlements without unreasonable effort.
Non-GAAP Measures
Brinker management uses certain non-GAAP measures in analyzing operating performance and believes that the presentation of these measures in this release provides investors with information that is beneficial to gaining an understanding of the company's operating results. Non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP measures are included in the tables below.
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The revisions had no impact on cash flows from operating, investing, or financing activities on the consolidated statements of cash flows for fiscal years 2016 and 2015. The revisions to the consolidated statements of shareholders' deficit include the change to net income and the changes to comprehensive income, as noted above, and a $12.4 million decrease to retained earnings at the beginning of fiscal 2016.
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 Brinker's website at 9 a.m. CDT today (Aug. 10) -
http://investors.brinker.com/phoenix.zhtml?c=119205&p=irol-EventDetails&EventId=5260922
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 Brinker's website until the end of the day Sept. 7, 2017.
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 Brinker's website under the Financial Information section of the Investor tab.
Forward Calendar
- SEC Form 10-K for fiscal 2017 filing on or before Aug. 28, 2017; and
- First quarter earnings release, before market opens, Nov. 1, 2017.
About Brinker
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 28, 2017, Brinker owned, operated, or franchised 1,674 restaurants under the names Chili's® Grill & Bar (1,622 restaurants) and Maggiano's Little Italy® (52 restaurants).
Forward-Looking Statements
The statements contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which could cause actual results to differ materially from our historical results or from those projected in forward-looking statements. These risks and uncertainties are, in many instances, beyond our control. Such risks and uncertainties include, among other things, general business and economic conditions, financial and credit market conditions, litigation, 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, loss of key management personnel, product availability, actions of activist shareholders, 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, material weakness in internal control over financial reporting, governmental regulations, inflation, technology failures, and failure to protect the security of data of our guests and teammates, as well as the risks described under the caption "Risk Factors" in our Annual Report on Form 10-K and future filings with the Securities and Exchange Commission.
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Joe Taylor
Investor Relations
Investor.relations@brinker.com
Aisha Fletcher
Media Relations
Media.requests@brinker.com
(800) 775-7290
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Source Brinker International, Inc.
Brinker International, Inc. is one of the world's leading casual dining restaurant companies.