Brinker International Reports Second Quarter Fiscal 2010 EPS

DALLAS /PRNewswire via COMTEX/ -- Brinker International, Inc. (NYSE: EAT) announced second quarter fiscal 2010 earnings per diluted share of $0.29 compared to $0.27 for the second quarter of fiscal 2009, before special items and excluding Romano's Macaroni Grill(R) (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share increased to $0.18 from a loss per diluted share of $0.21 for the second quarter in the prior year.

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 $781.9 million, a decrease of 17.6 percent compared with $949.4 million reported for the same period of fiscal 2009. The company experienced a 3.1 percent decrease in comparable restaurant sales (see Table 1) in the second quarter of fiscal 2010. Revenues were also negatively impacted by a net decline in capacity of 17.7 percent due to the sale of 189 Macaroni Grill restaurants at the end of the second quarter of fiscal 2009. The decline in capacity was also due to 47 restaurant closures and the sale of 21 restaurants to a franchisee since the second quarter of fiscal 2009. Royalty and franchise revenues were $17.3 million for the quarter.


Table 1: Q2 comparable restaurant sales
Q2 10 and Q2 09, company and three reported brands; percentage

Q2 09
Q2 10
Comparable
Sales (2) Comparable
---------- Sales
-----
Brinker International (1) (3.1) (4.5)
Chili's (3.2) (4.2)
On The Border (4.7) (3.7)
Maggiano's (1.6) (6.9)




Q2 10 Q2 10
Pricing Mix-Shift
Impact ---------
------
Brinker International (1) 1.2 (1.7)
Chili's 1.2 (1.3)
On The Border 2.3 (4.3)
Maggiano's 0.5 (2.2)


(1) Brinker International comparable restaurant sales exclude the
impact of Macaroni Grill.
(2) Brinker International comparable restaurant sales by period are
provided on the company's web site.

Quarterly Operating Performance

Cost of sales, as a percent of revenues, increased from 28.2 percent in the prior year to 28.9 percent in the second quarter of fiscal 2010. During the quarter, cost of sales was negatively impacted by recent promotions and unfavorable commodity prices primarily related to chicken, produce and dairy, partially offset by favorable menu price changes.

Restaurant expenses, as a percent of revenues, decreased to 56.0 percent from 58.0 percent in the prior year primarily due to reduced labor costs, utility expenses and the receipt of a $3.3 million credit card class action lawsuit settlement.

Depreciation and amortization decreased $2.4 million compared to the prior year due to fully depreciated assets and restaurant closures, partially offset by investments in existing restaurants.

General and administrative expense decreased $6.0 million for the quarter primarily due to reduced salary and training expenses as well as income related to transitional services provided to Macaroni Grill.

Other gains and charges primarily includes long-lived asset impairments of $21.4 million related to the closure and impairment of certain underperforming restaurants, partially offset by a $2.8 million gain on the sale of 21 restaurants to a franchisee.

Interest expense decreased $3.7 million due to lower interest rates and lower average borrowings.

The effective income tax rate increased to a provision of 19.6 percent in the current quarter as compared to a benefit of 51.1 percent due to the loss on the sale of Macaroni Grill and long-lived asset impairment charges in the prior year. The effective income tax rate before special items and excluding Macaroni Grill increased to 27.6 percent as compared to 22.4 percent in the second quarter of fiscal 2009, primarily due to increased income and lower tax credits.


Special Items
-------------
Table 2: Reconciliation of net income, before special items (1)
Q2 10 and Q2 09; $ millions and $ per diluted share after-tax

Item EPS
Q2 10 Q2 10
Net Income (Loss) $18.3 $0.18
Other (Gains) and Charges 11.8 0.11
---- ----
Net Income before Special Items 30.1 0.29
Macaroni Grill before Special
Items - -
--- ---
Adjusted Net Income before Special
Items and Macaroni Grill $30.1 $0.29
===== =====




Item EPS
Q2 09
Q2 09
Net Income (Loss) $(21.8) $(0.21)
Other (Gains) and Charges 53.5 0.52
---- ----
Net Income before Special Items 31.7 0.31
Macaroni Grill before Special
Items (3.8) (0.04)
---- -----
Adjusted Net Income before Special
Items and Macaroni Grill $27.9 $0.27
===== =====



(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

Cash flow from operations for the first six months of fiscal 2010 increased to $156.3 million compared to $94.8 million in the prior year. Capital expenditures totaled $25.0 million, a reduction of $34.6 million compared to the prior year resulting from a decrease in new company-owned restaurant development. Due to strong cash flows, the company made payments of $140.0 million on the outstanding term loan during the quarter which reduced the balance to $250.0 million.

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.

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 be broadcast live on the Brinker web site at 9 a.m. CST today (Jan. 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 web site until the end of the day on Feb. 17, 2010.

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

Forward Calendar

  • SEC Form 10-Q for second quarter fiscal 2010 filing on or before Feb. 1, 2010; and
  • Third quarter earnings release, before market opens, on April 20, 2010.

At the end of the second quarter fiscal year 2010, Brinker International either owned, operated, or franchised 1,712 restaurants under the names Chili's(R) Grill & Bar (1,504 restaurants), On The Border Mexican Grill & Cantina(R) (163 restaurants) and Maggiano's Little Italy(R) (45 restaurants). Brinker also holds a minority investment in Romano's Macaroni Grill(R).

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
-------------------- ------------------
Dec. 23, Dec. 24, Dec. 23, Dec. 24,
2009 2008 2009 2008
---- ---- ---- ----
Revenues $781,853 $949,425 $1,559,934 $1,933,832
Operating Costs and Expenses:
Cost of sales 225,854 268,001 445,331 546,968
Restaurant expenses 437,947 550,696 893,029 1,129,823
Depreciation and
amortization 38,227 40,647 77,096 81,803
General and administrative 33,093 39,088 69,017 78,852
Other gains and charges (a)
18,830 85,149 21,617 90,102
------ ------ ------ ------
Total operating costs and
expenses 753,951 983,581 1,506,090 1,927,548
------- ------- --------- ---------

Operating income (loss) 27,902 (34,156) 53,844 6,284

Interest expense 6,812 10,535 13,760 19,992
Other, net (1,692) (193) (4,034) (1,565)
------ ---- ------ ------

Income (loss) before tax
expense (benefit) 22,782 (44,498) 44,118 (12,143)

Income tax expense (benefit) 4,458 (22,734) 10,027 (14,160)
----- ------- ------ -------

Net income (loss) $18,324 $(21,764) $34,091 $2,017
======= ======== ======= ======

Basic net income (loss) per
share $0.18 $(0.21) $0.33 $0.02
===== ====== ===== =====

Diluted net income (loss) per
share $0.18 $(0.21) $0.33 $0.02
===== ====== ===== =====

Basic weighted average shares
outstanding 102,481 101,841 102,362 101,735
======= ======= ======= =======
Diluted weighted average shares
outstanding 102,994 102,278 103,005 102,520
======= ======= ======= =======

(a) Current year other gains and charges primarily includes long-lived
asset impairments of $21.4 million related to the closure and
impairment of certain underperforming restaurants, partially offset by
a $2.8 million gain on the sale of 21 restaurants to a franchisee. In
the first quarter of fiscal 2010, other gains and charges primarily
included lease termination costs of $2.0 million and severance costs
of $0.5 million.

Prior 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.


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

Dec. 23, June 24,
2009 2009
---- ----
(Unaudited)
ASSETS
Current assets $325,075 $369,215
Net property and equipment (a) 1,309,167 1,400,352
Total other assets 226,125 179,380
------- -------
Total assets $1,860,367 $1,948,947
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $441,593 $407,067
Long-term debt, including current
installments 590,543 729,262
Other liabilities 163,828 165,694
Total shareholders' equity 664,403 646,924
------- -------
Total liabilities and shareholders'
equity $1,860,367 $1,948,947
========== ==========

(a) At December 23, 2009, the company owned the land and buildings for 220
of the 1,001 company-owned restaurants. The net book values of the
land and buildings associated with these restaurants totaled $175.8
million and $172.8 million, respectively.


BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY

Second Second
Quarter Quarter
Total Openings/ Closings/ Total Projected
Restaurants Acquisitions Sales Restaurants Openings
Sept. 23, Fiscal Fiscal Dec. 23, Fiscal
2009 2010 2010 2009 2010
---- ---- ---- ---- ----
Company-Owned
Restaurants:
Chili's 857 - 22 835 -
On The Border 122 1 1 122 1
Maggiano's 44 - - 44 1
--- --- --- --- ---
1,023 1 23 1,001 2
===== === === ===== ===

Franchise
Restaurants:
Chili's 439 26 - 465 11-14
On The Border 31 - - 31 1-3
International(a) 206 10 1 215 30-35
--- --- --- --- -----
676 36 1 711 42-52
=== === === === =====

Total Restaurants:
Chili's 1,296 26 22 1,300 11-14
On The Border 153 1 1 153 2-4
Maggiano's 44 - - 44 1
International 206 10 1 215 30-35
--- --- --- --- -----
1,699 37 24 1,712 44-54
===== === === ===== =====


(a) At December 23, 2009, international franchise restaurants by brand
were 204 Chili's, 10 On The Borders and one Maggiano's.

###

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