Brinker International Reports Increase in Third Quarter Fiscal 2009 EPS

Brinker International Reports Increase in Third Quarter Fiscal 2009 EPS

Dallas, // PRNewswire-FirstCall // -- Brinker International, Inc. (NYSE: EAT) announced third quarter fiscal 2009 earnings per diluted share of $0.45 compared to $0.33 for the third quarter of fiscal 2008, before special items and excluding Romano's Macaroni Grill (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share increased to $0.34 from a loss per diluted share of $0.38 for the third quarter in the prior year.

"We are focused on delivering flavorful food at a great value with outstanding hospitality for our guests. The combination of a commitment to our guests and disciplined restaurant management resulted in margin improvement in the third quarter and will enable our continued success over the long-term," stated Doug Brooks, Chairman and CEO.

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 $857.4 million, a decrease of 20.4 percent compared with $1,077.2 million reported for the same period of fiscal 2008. The company experienced a 5.6 percent decrease in comparable restaurant sales (see Table 1) in the third quarter of fiscal 2009 due to decreases across all brands. Revenues were also negatively impacted by a net decline in capacity of 17.7 percent due to 47 restaurant closures (3 of which were Macaroni Grills) and the sale of 198 restaurants since the third quarter of fiscal 2008 (189 of which were Macaroni Grills).

Table 1: Q3 comparable restaurant sales
Q3 09 and Q3 08, company and three reported brands; percentage

Q3 09 Q3 08 Q3 09
Comparable Comparable Pricing Q3 09
Sales Sales Impact Mix-Shift

Brinker International(1) (5.6) 1.1 3.5 0.6
Chili's (5.2) 1.6 3.7 0.7
On The Border (5.0) (1.8) 3.3 2.2
Maggiano's (9.5) (0.4) 1.7 (2.0)

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

Quarterly Operating Performance
Operating margins for the third quarter of fiscal 2009 were positively impacted by a disciplined focus on cost of sales, labor productivity and fixed costs, which helped offset the impact of the current sales environment. Efforts to reduce waste and update menus to reflect the guests' current focus on value resulted in improvements in cost of sales. In addition, Brinker's shift in emphasis from company-owned new restaurant development to the operations of existing restaurants led to lower pre-opening expenses as well as improved operational efficiency and lower labor costs through a reduction in turnover. The company believes these changes along with the closure of underperforming restaurants will allow margin improvements to be sustainable in the future.

Cost of sales, as a percent of revenues, decreased from 28.9 percent in the prior year to 27.9 percent in the third quarter of fiscal 2009. During the quarter, efficiency improvements, menu item changes at Chili's and On The Border and favorable menu price changes more than offset the negative impact of unfavorable commodity prices primarily related to chicken, beef, cooking oil and sauces.

Restaurant expenses, as a percent of revenues, decreased to 54.6 percent from 56.8 percent in the prior year primarily due to lower labor costs and pre-opening expenses.

Depreciation and amortization remained essentially flat on a dollar basis compared to the prior year.

General and administrative expense decreased $5.0 million for the quarter due to reduced salary expense from lower headcount and income related to transitional services provided to Macaroni Grill that offsets the internal cost of providing the services.

Other gains and charges resulted in $17.9 million of charges in the third quarter of fiscal 2009 primarily due to $10.2 million of lease termination charges related to the closure of certain underperforming restaurants and $5.4 million of severance costs.

Interest expense decreased $3.3 million due to lower interest rates and lower average borrowings as compared to the same quarter last year.

The effective income tax rate changed from a benefit of 44.7 percent in the third quarter of fiscal 2008 to a provision of 28.9 percent in the current quarter primarily due to the tax effects of the impairment of Macaroni Grill assets in the prior year.

Special Items

Table 2: Reconciliation of net income (loss), before special items(1)
Q3 09 and Q3 08; $ millions and $ per diluted share after-tax

Q3 09 Q3 09 Q3 08 Q3 08
Net Income (Loss) 35.0 0.34 (38.8) (0.38)
Other (Gains) and Charges 11.2 0.11 83.6 0.82
---- ---- ---- ----
Net Income before Special Items 46.2 0.45 44.8 0.44
Macaroni Grill before Special
Items - - (11.1) (0.11)
---- ---- ------ ------
Adjusted Net Income before Special
Items and Macaroni Grill 46.2 0.45 33.7 0.33
==== ==== ==== ====

(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

For the first nine months of fiscal 2009, cash flow from operations was $184.5 million and capital expenditures totaled $74.6 million. In February 2009, the company entered into a $215 million unsecured, three-year revolving credit facility replacing its existing facility that was set to expire in October 2009. Payments of $59.3 million were made on the revolving credit facility during the third quarter of fiscal 2009 resulting in fiscal year-to-date debt reductions of $123.3 million. Subsequent to the end of the third quarter, the remaining $30.7 million balance on the revolving credit facility was paid down to zero.

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 ( at 9 a.m. CDT today (April 21). 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 May 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
-- Third Quarter SEC Form 10-Q filing on or before May 4, 2009; and

-- Fourth quarter earnings release, before market opens, on Aug. 6, 2009.

At the end of the third quarter of fiscal quarter 2009, Brinker International either owned, operated, or franchised 1,679 restaurants under the names Chili's Grill & Bar (1,478 restaurants), On The Border Mexican Grill & Cantina (156 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.

Consolidated Statements of Income
(In thousands, except per share amounts)

Thirteen Week Thirty-Nine Week
Periods Ended Periods Ended
March 25, March 26, March 25, March 26,
2009 2008 2009 2008

Revenues $857,378 $1,077,183 $2,791,210 $3,161,654
-------- ---------- ---------- ----------
Operating Costs and
Cost of sales 238,946 311,152 785,914 894,229
Restaurant expenses 468,238 611,901 1,598,061 1,798,346
Depreciation and
amortization 39,858 39,958 121,661 123,954
General and
administrative 36,664 41,663 115,516 126,110
Other gains and
charges (a) 17,862 133,235 107,964 125,483
------ ------- ------- -------
Total operating costs
and expenses 801,568 1,137,909 2,729,116 3,068,122
------- --------- --------- ---------

Operating income (loss) 55,810 (60,726) 62,094 93,532

Interest expense 7,452 10,800 27,444 36,191
Other, net (852) (1,368) (2,417) (3,470)
----- ------- ------- -------

Income (loss) before
tax expense (benefit) 49,210 (70,158) 37,067 60,811

Income tax expense
(benefit) 14,207 (31,340) 47 7,549
------ -------- -- -----

Net income (loss) $35,003 $(38,818) $37,020 $53,262
======= ========= ======= =======

Basic net income (loss)
per share $0.34 $(0.38) $0.36 $0.51
======== ========= ======== ========

Diluted net income
(loss) per share (b) $0.34 $(0.38) $0.36 $0.50
======== ========= ======== ========

Basic weighted average
shares outstanding 101,882 101,175 101,784 103,713
======= ======= ======= =======

Diluted weighted
average shares
outstanding 102,752 102,377 102,598 105,624
======= ======= ======= =======

(a) Current year other gains and charges in the third quarter primarily
includes lease termination charges of $10.2 million and severance
costs of $5.4 million. In the first six months of fiscal 2009, other
gains and charges consisted primarily of 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
lease termination costs of $2.0 million.

Prior year other gains and charges in the third quarter primarily
includes charges of $73.1 million related to the write-down of
Macaroni Grill assets to estimated fair value less costs to sell,
$31.9 million related to restaurant closures and impairments of
long-lived assets, $12.5 million related to asset write-offs
resulting from the company's reduced development schedule, $7.7
million of lease termination charges and $7.0 million of severance
costs. In the first six months of fiscal 2008, other gains and
charges consisted primarily of $29.2 million gain on the sale of 76
restaurants to a franchisee, $9.7 million of charges related to
restaurant closures and impairments of long-lived assets and $9.2
million of charges related to the expected sale of Macaroni Grill.

(b) Due to the net loss in third quarter of fiscal 2008, basic weighted
average shares outstanding were used in the diluted earnings per share
calculation. Using actual diluted shares would result in
anti-dilution of earnings per share.

(In thousands)

March 25, June 25,
2009 2008
---- ----
Current assets $318,313 $320,173
Assets held for sale - 135,850
Net property and equipment (a) 1,442,299 1,529,715
Total other assets 242,191 207,384
------- -------
Total assets $2,002,803 $2,193,122
========== ==========

Current liabilities $442,470 $506,443
Liabilities associated with assets held
for sale - 18,408
Debt, including current installments 780,300 903,577
Other liabilities 172,540 169,605
Total shareholders' equity 607,493 595,089
------- -------
Total liabilities and shareholders'
equity $2,002,803 $2,193,122
=========== ===========

(a) At March 25, 2009, the company owned the land and buildings for 224 of
the 1,032 company-owned restaurants. The net book values of the land
and buildings associated with these restaurants totaled $179.9 million
and $183.8 million, respectively.


Third Third
Quarter Quarter
Total Openings/ Closings/ Total Projected
Restaurants Acquisitions Sales Restaurants Openings
Dec. 24, Fiscal Fiscal Mar. 25, Fiscal
2008 2009 2009 2009 2009

Chili's 885 1 (27) 859 8-9
On The Border 129 - (7) 122 -
Maggiano's 43 1 - 44 2
International(a) 7 - - 7 2
----- - ---- ----- -----
1,064 2 (34) 1,032 12-13
===== = ==== ===== =====

Chili's 427 3 - 430 25-28
On The Border 31 - (3) 28 5-7
International(a) 182 8 (1) 189 46-49
--- -- --- --- -----
640 11 (4) 647 76-84
=== == === === =====

Total Restaurants:
Chili's 1,312 4 (27) 1,289 33-37
On The Border 160 - (10) 150 5-7
Maggiano's 43 1 - 44 2
International 189 8 (1) 196 48-51
--- - --- --- -----
1,704 13 (38) 1679 88-97
===== == ==== ==== =====

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

SOURCE Brinker International, Inc.



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