Brinker International Announces Second Quarter Fiscal 2009 Results

Dallas, // PRNewswire-FirstCall // -- Brinker International, Inc. (NYSE: EAT) announced a second quarter fiscal 2009 loss per diluted share of $0.21 compared to earnings per diluted share of $0.52 in the prior year. Before special items and excluding Macaroni Grill, earnings per diluted share decreased to $0.27 from $0.31 in the prior year (reconciliation included in Table 2).

On Dec. 18, 2008, the company completed the sale of Romano's Macaroni Grill to Mac Acquisition LLC, an affiliate of San Francisco-based Golden Gate Capital, for $88 million while retaining a 19.9 percent continuing ownership interest. Cash attributable to the transaction of approximately $130 million either has been or will be used to pay down outstanding bank debt. The information presented below includes Macaroni Grill unless otherwise noted.

Quarterly Revenues

Brinker reported revenues for the 13-week period of $949.4 million, a decrease of 7.8 percent compared with $1,029.8 million reported for the same period of fiscal 2008. The company experienced a 5.4 percent decrease in comparable restaurant sales (see Table 1) in the second quarter of fiscal 2009 due to decreases across all brands. Revenues were also negatively impacted by a net decline in capacity of 3.3 percent due to 47 restaurant closures (26 of which were Macaroni Grills) and the sale of 198 restaurants since the second quarter of fiscal 2008 (189 of which were Macaroni Grills). Capacity was also impacted by the sale of 76 restaurants to a franchisee during the second quarter of the prior year. Royalty revenues from franchisees increased 9.7 percent to $15.8 million from $14.4 million in the prior year. Franchise and development fees decreased to $1.3 million in the current year from $6.5 million primarily due to the sale of 76 restaurants to a franchisee in the prior year.


Table 1: Q2 comparable restaurant sales
Q2 09 and Q2 08, company and four reported brands; percentage

Q2 09 Q2 08 Q2 09 Q2 09
Comparable Comparable Pricing Mix-
Sales Sales Impact Shift
Brinker Excluding Macaroni
Grill (4.5) (2.1) 2.9 (1.7)

Brinker International (5.4) (2.4) 2.9 (1.7)
Chili's (4.2) (2.4) 3.3 (1.7)
On The Border (3.7) (4.3) 2.6 (1.5)
Maggiano's (6.9) 1.7 1.6 (2.3)
Macaroni Grill (10.6) (4.0) 2.7 (1.0)


Quarterly Operating Performance

Cost of sales, as a percent of revenues, decreased from 28.3 percent in the prior year to 28.2 percent in the second quarter of fiscal 2009. During the quarter, favorable menu price changes more than offset the negative impact on cost of sales of unfavorable commodity prices primarily related to chicken, produce and oils and sauces.

Restaurant expenses, as a percent of revenues, increased to 58.0 percent from 56.8 percent in the prior year primarily driven by sales deleverage on fixed costs and increased utility and labor costs, partially offset by lower pre-opening expenses.

Depreciation and amortization increased $1.6 million primarily driven by additional depreciation on new restaurants and investments in Chili's reimage program, partially offset by restaurant closures and fully depreciated assets.

Compared to the prior year, general and administrative expense decreased $2.3 million for the quarter due to reduced salary expense.

Other gains and charges resulted in $85.1 million of charges in the second quarter of fiscal 2009 primarily due to $44.2 million of long-lived asset impairment charges related to the decision to close 35 underperforming restaurants, a $43.3 million loss on the sale of Macaroni Grill and $3.6 million of gains on sales of other assets.

Interest expense decreased $1.9 million primarily due to lower interest rates and lower average borrowings as compared to the same quarter last year.

The effective income tax rate decreased from a provision of 30.2 percent in the second quarter of fiscal 2008 to a benefit of 51.1 percent in the current quarter. The change in the tax rate was primarily due to the loss on the sale of Macaroni Grill and long-lived asset impairment charges.

Cash Flow and Capital Allocation

Cash flow from operations for the first six months of fiscal 2009 decreased to approximately $94.8 million compared to $241.1 million in the prior year due primarily to a decline in operating profitability, a reduction in gift card sales and the timing of income tax payments as well as operational payments and receipts. Capital expenditures for the first six months of fiscal year 2009 totaled $59.6 million, a reduction of $99.6 million compared to the prior year resulting from a decrease in new company-owned restaurant development.


Special Items
Table 2: Reconciliation of net income (loss), before special items(1)
Q2 09 and Q2 08; $ millions and $ per diluted share after-tax

Item EPS EPS
Q2 09 Q2 09 Q2 08 Q2 08

Net Income (Loss) (21.8) (0.21) 54.5 0.52
Other (Gains) and Charges 53.5 0.52 (10.3) (0.10)
---- ---- ------ ------
Net Income before Special Items 31.7 0.31 44.2 0.42
Macaroni Grill before Special
Items (3.8) (0.04) (11.8) (0.11)
----- ------ ------ ------
Adjusted Net Income before
Special Items 27.9 0.27 32.4 0.31
==== ==== ==== ====


(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.


Web-cast 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 (http://www.brinker.com) at 9 a.m. CDT 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 Web site until the end of the day on Feb. 19, 2009.

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

Forward Calendar
<ul>
<li>Second Quarter SEC Form 10-Q filing on or before Feb. 2, 2009; and</li>
<li>Third quarter earnings release, before market opens, on Apr. 21, 2009.</li>
</ul>
At the end of the second quarter of fiscal quarter 2009, Brinker International either owned, operated, or franchised 1,704 restaurants under the names Chili's Grill & Bar (1,495 restaurants), On The Border Mexican Grill & Cantina (165 restaurants) and Maggiano's Little Italy (44 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.


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

Thirteen Week Twenty-Six Week
Periods Ended Periods Ended
-----------------------------------------------
December December December December
24, 26, 24, 26,
2008 2007 2008 2007
---- ---- ---- ----


Revenues $949,425 $1,029,785 $1,933,832 $2,084,471
-------- ---------- --------- ----------
Operating Costs and
Expenses:
Cost of sales 268,001 291,339 546,968 583,077
Restaurant expenses 550,696 584,567 1,129,823 1,186,445
Depreciation and
amortization 40,647 39,089 81,803 83,996
General and
administrative 39,088 41,396 78,852 84,447
Other gains and
charges (a) 85,149 (16,343) 90,102 (7,752)
------ -------- ------ -------
Total operating costs
and expenses 983,581 940,048 1,927,548 1,930,213
------- ------- --------- ---------

Operating income
(loss) (34,156) 89,737 6,284 154,258

Interest expense 10,535 12,476 19,992 25,391

Other, net (193) (845) (1,565) (2,102)
----- ----- ------- -------

Income (loss) before
tax expense
(benefit) (44,498) 78,106 (12,143) 130,969

Income tax expense
(benefit) (22,734) 23,626 (14,160) 38,889
-------- ------ -------- ------

Net income (loss) $(21,764) $54,480 $2,017 $92,080
========= ======= ====== =======


Basic net income
(loss) per share $(0.21) $0.53 $0.02 $0.88
========= ======== ======= ========

Diluted net income
(loss) per share $(0.21) $0.52 $0.02 $0.86
========= ======== ======= ========



Basic weighted
Average shares
outstanding 101,841 103,498 101,735 104,981
======= ======= ======= =======

Diluted weighted
Average shares
outstanding 101,841 105,339 102,520 107,247
======= ======= ======= =======



(a) Current 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.

Prior year other gains and charges primarily includes a $29.2 million
gain on the sale of 76 restaurants to a franchisee, $10.5 million of
charges primarily related to the impairment of long-lived assets and
$1.9 million of charges related to the sale of Macaroni Grill in the
second quarter of fiscal 2008. In the first quarter of fiscal 2008,
other gains and charges primarily included $7.8 million of charges
related to the expected sale of Macaroni Grill.



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

December June
24, 25,
2008 2008
---- ----
(Unaudited)
ASSETS
Current assets $386,064 $320,173
Assets held for sale - 135,850
Net property and equipment (a) 1,465,972 1,529,715
Total other assets 248,372 207,384
------- -------
Total assets $2,100,408 $2,193,122
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $493,918 $506,443
Liabilities associated with assets held
for sale 7,875 18,408
Debt, including current installments 839,926 903,577
Other liabilities 178,645 169,605
Total shareholders' equity 580,044 595,089
------- -------
Total liabilities and shareholders'
equity $2,100,408 $2,193,122
=========== ===========



(a) At December 24, 2008, the company owned the land and buildings for 228
of the 1,064 company-owned restaurants. The net book values of the
land and buildings associated with these restaurants totaled $180.6
million and $186.1 million, respectively.


BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY


Total Second Second Total Projected
Restaurants Quarter Quarter Restaurants Openings
Sept. 24, Openings/ Closings/ Dec. 24, Fiscal
2008 Acquisitions Sales 2008 2009
Fiscal Fiscal
2009 2009
--------- ----------- --------- ---- ----

Company-Owned
Restaurants:
Chili's 894 - 9 885 9
On The Border 131 - 2 129 -
Maggiano's 42 1 - 43 2
International(a) 6 1 - 7 2
--- --- --- --- ---
1,073 2 11 1,064 13
===== = == ===== ==

Franchise
Restaurants:
Chili's 410 19 2 427 25-30
On The Border 33 2 4 31 6-8
International(a) 169 13 - 182 34-39
--- -- --- --- -----
612 34 6 640 65-77
=== == = === =====

Total Restaurants:
Chili's 1,304 19 11 1,312 34-39
On The Border 164 2 6 160 6-8
Maggiano's 42 1 - 43 2
International 175 14 - 189 36-41
--- -- --- --- -----
1,685 36 17 1,704 78-90
===== == == ===== =====


(a) At the end of second quarter fiscal year 2009, international company-
owned restaurants by brand were six Chili's and one Maggiano's.
International franchise restaurants by brand were 177 Chili's and five
On The Border's.


SOURCE Brinker International, Inc.

###

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