Brinker International Reports Increase In Year Over Year EPS

DALLAS, April 23, 2013 // PRNewswire // -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 27, 2013.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 20.0 percent to $0.72 compared to $0.60 for the third quarter of fiscal 2012 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 26.8 percent to $0.71 compared to $0.56 for the third quarter of fiscal 2012
  • Restaurant operating margin1 improved approximately 70 basis points to 17.9 percent from 17.2 percent
  • Brinker's operating income, excluding special items, improved 110 basis points from 9.8 percent to 10.9 percent primarily due to general and administrative savings in addition to the restaurant operating margin improvement mentioned above
  • Chili's comparable restaurant sales decreased 1.1 percent for the quarter consisting of a 0.4 percent and 4.3 percent decrease in January and February, respectively, offset by a 1.3 percent increase in March
  • Maggiano's comparable restaurant sales increased 0.4 percent, representing the 13th consecutive quarterly increase
  • Franchise comparable restaurant sales increased 1.3 percent driven by a 5.1 percent increase in international franchise comparable restaurant sales
  • The company repurchased approximately 1.8 million shares of its common stock for $60.4 million in the third quarter
  • The company paid a dividend of 20 cents per share in the third quarter, an increase of 25 percent over the prior year third quarter
  • For the first nine months of fiscal 2013, cash flows provided by operating activities were $222.6 million and capital expenditures totaled $98.7 million

"Brinker delivered a 20 percent increase in EPS for the quarter, despite a tough industry sales environment," said Wyman Roberts, President and Chief Executive Officer. "We've remained steadfast in executing our initiatives and are realizing the benefits of our strengthened business model. As such, we are confident we will meet our 2010 promise of doubling EPS as early as next fiscal year."

1

Effective for the fiscal first quarter ended Sept. 26, 2012, revenues are reported in two separate captions—Company sales and Franchise and other revenues. Restaurant operating margin is now defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses.

 

Table 1: Monthly and Q3 comparable restaurant sales

Q3 13 and Q3 12, company-owned, reported brands and franchise; percentage

                     
   

Jan

 

Feb

 

March

 

Q3 13

 

Q3 12

Brinker International

 

(0.1)

 

(4.2)

 

1.5

 

(0.9)

 

4.5

  Chili's Company-Owned

                   

     Comparable Restaurant Sales

 

(0.4)

 

(4.3)

 

1.3

 

(1.1)

 

4.6

     Pricing Impact

 

1.9

 

1.3

 

1.3

 

1.5

 

1.9

     Mix-Shift

 

0.5

 

0.2

 

1.3

 

0.6

 

0.9

     Traffic

 

(2.8)

 

(5.8)

 

(1.3)

 

(3.2)

 

1.8

  Maggiano's

                   

     Comparable Restaurant Sales

 

1.7

 

(3.4)

 

2.5

 

0.4

 

3.9

     Pricing Impact

 

2.5

 

1.1

 

0.7

 

1.6

 

2.2

     Mix-Shift

 

0.0

 

(1.1)

 

0.5

 

(0.2)

 

0.2

     Traffic

 

(0.8)

 

(3.4)

 

1.3

 

(1.0)

 

1.5

                     

Franchise1

             

1.3

 

3.5

  Domestic Comparable Restaurant Sales

             

(0.3)

 

3.8

  International Comparable Restaurant Sales

             

5.1

 

2.6

                     

System-wide2

             

(0.2)

 

4.2

   

1

Revenues generated by franchisees are not included in revenues on the consolidated statements of income; however, we generate royalty revenue and advertising fees based on franchisee revenues, where applicable. We believe including franchisee comparable restaurants revenues provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.

   

2

System-wide comparable restaurant sales are derived from sales generated by company-owned Chili's and Maggiano's restaurants in addition to the sales generated at franchisee operated restaurants.

Quarterly Operating Performance 

CHILI'S third quarter company sales of $632.6 million represent a 0.7 percent decrease from $637.0 million in the prior year period driven by traffic declines. As compared to the prior year, Chili's operating margin improved due to lower cost of sales. Cost of sales as a percentage of company sales was favorably impacted by mix changes related to shrimp, ribs and fajita meat coupled with increased menu pricing, partially offset by unfavorable commodity pricing primarily related to beef, pork and chicken wings. Restaurant labor was positively impacted by improved labor productivity from the installation of new kitchen equipment and lower manager bonuses, partially offset by increased health insurance claims and sales deleverage.

MAGGIANO'S third quarter company sales of $92.1 million increased 0.2 percent primarily driven by menu pricing. As compared to the prior year, Maggiano's operating margin improved primarily due to lower cost of sales. Cost of sales was favorably impacted by decreased commodity usage from efforts to reduce waste, menu item changes, favorable commodity pricing on seafood as well as increased menu pricing. Restaurant operating margin was negatively impacted by higher workers' compensation insurance expenses and increased health insurance claims, partially offset by lower repair and maintenance expense and utilities expense.

FRANCHISE AND OTHER revenues totaled $18.1 million for the quarter, an increase of 38.2 percent compared to $13.1 million in the prior year. The increase was driven primarily by a $5.2 million reduction in revenues in the prior year resulting from a change in the estimate of gift card breakage. International franchise comparable restaurant sales increased 5.1 percent while domestic franchise comparable restaurant sales decreased 0.3 percent.Brinker franchisees generated approximately $424 million in sales1 for the third quarter of fiscal 2013.

1

Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

Other

Depreciation and amortization expense increased $2.3 million for the quarter primarily due to investments in existing restaurants and asset replacements, partially offset by an increase in fully depreciated assets.

General and administrative expense decreased $6.0 million primarily due to lower performance-based compensation.

Interest expense increased $0.6 million for the quarter as a result of higher borrowing balances.

Excluding the impact of special items, the effective income tax rate remained flat at 28.9 percent in the current quarter compared to the same quarter last year as the tax impact of increased earnings in the current quarter was offset by a credit related to the prior year. On a GAAP basis, the effective income tax rate increased to 28.7 percent in the current quarter as compared to 28.2 percent in the same quarter last year due to increased earnings in the current quarter and the tax benefit resulting from higher net charges related to special items in the prior year, partially offset by a credit related to the prior year.

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.

Table 2: Reconciliation of net income excluding special items

Q3 13 and Q3 12; $ millions and $ per diluted share after-tax

                 
   

Q3 13

 

EPS Q3 13

 

Q3 12

 

EPS Q3 12

Net Income

 

52.0

 

0.71

 

44.9

 

0.56

Other (Gains) and Charges1

 

0.9

 

0.01

 

(0.1)

 

0.00

    Adjustment for Gift Card Breakage2

 

 

 

3.3

 

0.04

Net Income excluding Special Items

 

52.9

 

0.72

 

48.1

 

0.60

   

1

Pre-tax Other gains and charges was a $1.6 million charge and a $0.1 million gain in the third quarter of fiscal 2013 and 2012, respectively.

   

2

The Company recognized a pre-tax $5.2 million reduction to revenue in the third quarter of fiscal 2012 resulting from a change in the estimate of gift card breakage.

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 broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (April 23). 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 May 21, 2013.

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 Brinkerwebsite under the Financial Information section of the Investor tab.

Forward Calendar

  • SEC Form 10-Q for third quarter fiscal 2013 filing on or before May 6, 2013; and
  • Fourth quarter earnings release, before market opens, Aug. 2, 2013.

About Brinker

Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, Brinker currently owns, operates, or franchises 1,588 restaurants under the names Chili's®Grill & Bar (1,544 restaurants) and Maggiano's Little Italy® (44 restaurants).

Forward-Looking Statements

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, 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 business strategy plan, acts of God, governmental regulations and inflation.

 

 

BRINKER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 
     
   

Thirteen Week Periods Ended

 

Thirty-Nine Week Periods Ended

   

March 27, 
2013

 

March 28, 
2012

 

March 27, 
2013

 

March 28, 
2012

Revenues:

           

Company sales

 

$

724,693

 

$

728,868

 

$

2,057,490

 

$

2,038,333

Franchise and other revenues (a)

 

18,066

 

13,177

 

58,540

 

54,018

Total revenues

 

742,759

 

742,045

 

2,116,030

 

2,092,351

Operating Costs and Expenses:

       

Company restaurants

       

Cost of sales

 

198,316

 

205,155

 

567,602

 

571,962

Restaurant labor

 

231,822

 

233,806

 

667,865

 

664,068

Restaurant expenses

 

164,537

 

164,230

 

489,781

 

489,872

Company restaurant expenses

 

594,675

 

603,191

 

1,725,248

 

1,725,902

Depreciation and amortization

 

33,222

 

30,929

 

98,830

 

93,265

General and administrative

 

33,986

 

40,006

 

102,289

 

104,040

Other gains and charges (b)

 

1,550

 

(104)

 

2,227

 

5,614

Total operating costs and expenses

 

663,433

 

674,022

 

1,928,594

 

1,928,821

Operating income

 

79,326

 

68,023

 

187,436

 

163,530

Interest expense

 

7,085

 

6,530

 

21,040

 

20,087

Other, net

 

(573)

 

(1,072)

 

(2,096)

 

(3,018)

Income before provision for income taxes

 

72,814

 

62,565

 

168,492

 

146,461

Provision for income taxes

 

20,863

 

17,632

 

51,500

 

42,233

Net income

 

$

51,951

 

$

44,933

 

$

116,992

 

$

104,228

         

Basic net income per share

 

$

0.73

 

$

0.58

 

$

1.61

 

$

1.31

         

Diluted net income per share

 

$

0.71

 

$

0.56

 

$

1.56

 

$

1.28

         

Basic weighted average shares outstanding

 

71,067

 

77,582

 

72,511

 

79,722

         

Diluted weighted average shares outstanding

 

73,341

 

79,735

 

74,873

 

81,658

 

 

(a)     Franchise and other revenues includes royalties, development fees and franchise fees, banquet service charge income, and gift card activity (breakage and discounts).

(b)     Other gains and charges includes:

 

   

Thirteen Week Periods Ended

 

Thirty-Nine Week Periods Ended

   

March 27,

2013

 

March 28,

2012

 

March 27,

2013

 

March 28,

2012

Restaurant impairment charges

 

$

   

$

   

$

661

   

$

1,098

 

Restaurant closure charges

 

305

   

1,032

   

2,887

   

4,154

 

Severance and other benefits

 

1,269

   

   

1,269

   

100

 

Gain on sale of assets, net

 

(81)

   

(25)

   

(2,430)

   

(1,365)

 

Other

 

57

   

(1,111)

   

(160)

   

1,627

 
   

$

1,550

   

$

(104)

   

$

2,227

   

$

5,614

 

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
   

March 27,

2013

 

June 27,

2012

   

(Unaudited)

   

ASSETS

       

Current assets

 

$

214,897

   

$

194,846

 

Net property and equipment (a)

 

1,029,921

   

1,043,564

 

Total other assets

 

201,044

   

197,662

 

Total assets

 

$

1,445,862

   

$

1,436,072

 

LIABILITIES AND SHAREHOLDERS' EQUITY

       

Current installments of long-term debt

 

$

27,528

   

$

27,334

 

Current liabilities

 

363,107

   

374,415

 

Long-term debt, less current installments

 

677,309

   

587,890

 

Other liabilities

 

132,709

   

136,560

 

          Total shareholders' equity

 

245,209

   

309,873

 

Total liabilities and shareholders' equity

 

$

1,445,862

   

$

1,436,072

 
 

(a)    

At March 27, 2013, the company owned the land and buildings for 189 of the 865 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.4 million and $119.2 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
   

Thirty-Nine Week Periods Ended

   

March 27,

2013

 

March 28,

2012

Cash Flows From Operating Activities:

       

Net income

 

$

116,992

 

$

104,228

Adjustments to reconcile net income to net cash provided by operating activities:

       

Depreciation and amortization

 

98,830

 

93,265

Restructure charges and other impairments

 

3,792

 

5,042

Stock-based compensation

 

12,909

 

10,393

Net loss on disposal of assets

 

1,115

 

1,541

Changes in assets and liabilities

 

(11,002)

 

19,341

Net cash provided by operating activities

 

222,636

 

233,810

Cash Flows from Investing Activities:

       

Payments for property and equipment

 

(98,690)

 

(85,177)

Proceeds from sale of assets

 

6,535

 

4,344

Investment in equity method investees

 

 

(1,083)

Net cash used in investing activities

 

(92,155)

 

(81,916)

Cash Flows from Financing Activities:

       

Purchases of treasury stock

 

(191,799)

 

(208,347)

Borrowings on revolving credit facility

 

110,000

 

Payments of dividends

 

(42,161)

 

(37,850)

Proceeds from issuances of treasury stock

 

32,042

 

27,946

Payments on long-term debt

 

(19,785)

 

(12,187)

Excess tax benefits from stock-based compensation

 

7,811

 

924

Proceeds from issuance of long-term debt

 

 

70,000

Payments for deferred financing costs

 

 

(1,620)

Net cash used in financing activities

 

(103,892)

 

(161,134)

Net change in cash and cash equivalents

 

26,589

 

(9,240)

Cash and cash equivalents at beginning of period

 

59,103

 

81,988

Cash and cash equivalents at end of period

 

$

85,692

 

$

72,748

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 
   

Third Quarter

Net  Openings/(Closings)

Fiscal 2013

 

Total Restaurants

March 27, 2013

 

Projected Openings

Fiscal 2013

             

Company-Owned Restaurants:

           

Chili's

 

(2)

 

821

 

Maggiano's

 

 

44

 

   

(2)

 

865

 

             

Franchise Restaurants:

           

Chili's

 

(5)

 

447

 

2

International (a)

 

2

 

276

 

30-35

   

(3)

 

723

 

32-37

             

Total Restaurants:

           

Chili's

 

(7)

 

1,268

 

2

Maggiano's

 

 

44

 

International (a)

 

2

 

276

 

30-35

   

(5)

 

1,588

 

32-37

   

(a)    

At March 27, 2013, there were 276 Chili's international franchise restaurants.

SOURCE Brinker International, Inc.

Contacts:

Stacey Sullivan
Media Relations
Tony Laday
Investor Relations
(800) 775-7290
(972) 770-8890


###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

The Joint Corp.
The Joint® Chiropractic is reinventing chiropractic care. Our vision is to become the largest, most respected provider of chiropractic services...
BrightStar Care
A small Investment that can Pay Big Dividends! Brightstar Care Franchise is a low overhead, quick to break-even, fast ramp-up, repeat customers.
Midas
Midas, a recognized brand throughout the world and highly renowned name in complete car care, is proud to be one of North America's original...
Waxing The City
Franchise ownership with Waxing the City is a smooth move. From the creators of Anytime Fitness comes the next great personal care franchise. Join...
Jersey Mike's Subs
Jersey Mike's, a fast-casual sub sandwich franchise with more than 1,500 locations open and under development nationwide, believes that making a sub...

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)