Brinker International Reports Year-Over-Year Increases In Fourth Quarter And Full Fiscal Year EPS

DALLAS - Aug. 2, 2013 // PRNewswire // - Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal fourth quarter and year ended June 26, 2013.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 26.2 percent to $0.77 compared to $0.61 for the fourth quarter of fiscal 2012 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 4.9 percent to $0.64 compared to $0.61 for the fourth quarter of fiscal 2012
  • Brinker's operating income, excluding special items, improved 180 basis points from 9.8 percent to 11.6 percent driven by a 60 basis point restaurant operating margin1 improvement in addition to reduced general and administrative expenses
  • Chili's domestic comparable restaurant sales2 decreased 0.3 percent for the quarter consisting of a 0.6 percent decrease for company-owned restaurants, partially offset by a 0.5 percent increase for franchised restaurants. Chili's international franchise comparable restaurant sales increased 2.3 percent
  • Maggiano's comparable restaurant sales increased 0.2 percent, representing the 14th consecutive quarterly increase
  • Cash flows provided by operating activities were $290.7 million and capital expenditures totaled $131.5 million for fiscal 2013
  • The company repurchased approximately 3.5 million shares of its common stock for $141.6 million in the fourth quarter
  • The company paid a dividend of 20 cents per share in the fourth quarter, an increase of 25 percent over the prior year fourth quarter
  • On June 1, 2013, the company completed the acquisition of 11 Chili's restaurants located in Alberta, Canada
  • On May 8, 2013, the company completed a public offering of $550 million in notes consisting of two tranches, $250 million due 2018 and $300 million due 2023

"We are confident we will achieve our previously stated goal of doubling of our fiscal 2010 earnings per share next fiscal year, a full year ahead of schedule," said Wyman Roberts, Chief Executive Officer and President.

1

 

Effective for the first quarter of fiscal 2013, 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.

     

2

 

Chili's Domestic comparable restaurant sales is a new presentation item beginning in the fourth quarter of fiscal 2013 and is defined as comparable restaurant sales generated from company-owned and franchise operated Chili's restaurants in the United States.

Table 1: Monthly, Q4 and FY comparable restaurant sales

Company-owned, reported brands and franchise; percentage

 
   

April

 

May

 

June

 

Q4 13

 

Q4 12

 

FY 13

 

FY 12

Brinker International

 

(0.6)

 

(0.2)

 

(0.7)

 

(0.5)

 

2.1

 

0.5

 

2.6

  Chili's Company-Owned

                           

     Comparable Restaurant Sales

 

(0.7)

 

(0.3)

 

(0.8)

 

(0.6)

 

2.2

 

0.5

 

2.5

     Pricing Impact

 

1.3

 

1.3

 

1.3

 

1.3

 

1.3

 

1.4

 

1.4

     Mix-Shift

 

0.5

 

0.4

 

(0.4)

 

0.2

 

(0.3)

 

0.9

 

(0.4)

     Traffic

 

(2.5)

 

(2.0)

 

(1.7)

 

(2.1)

 

1.2

 

(1.8)

 

1.5

  Maggiano's

                           

     Comparable Restaurant Sales

 

0.1

 

0.8

 

(0.3)

 

0.2

 

1.9

 

0.5

 

3.0

     Pricing Impact

 

0.6

 

0.3

 

0.5

 

0.5

 

2.6

 

1.8

 

2.2

     Mix-Shift

 

0.7

 

1.2

 

1.4

 

1.1

 

0.1

 

0.5

 

0.0

     Traffic

 

(1.2)

 

(0.7)

 

(2.2)

 

(1.4)

 

(0.8)

 

(1.8)

 

0.8

                             

Franchise1

             

1.0

 

2.1

 

1.9

 

2.9

  U.S. Comparable Restaurant Sales

             

0.5

 

2.4

 

1.6

 

2.4

  International Comparable Restaurant Sales

             

2.3

 

1.3

 

2.7

 

4.2

                         

Domestic2

             

(0.3)

 

2.2

 

0.8

 

2.5

System-wide3

             

0.0

 

2.1

 

1.0

 

2.7

     

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

 

Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States.

     

3

 

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 fourth quarter company sales of $615.7 million represent a 0.2 percent decrease from $616.8 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 and restaurant labor. Cost of sales as a percentage of company sales was favorably impacted by mix changes related to the introduction of new menu items, improved waste control and menu pricing, partially offset by unfavorable commodity pricing primarily related to alcohol and chicken wings. Restaurant labor was positively impacted by improved labor productivity from the installation of new kitchen equipment. Restaurant expense was negatively impacted by higher workers' compensation insurance expenses.

Maggiano's fourth quarter company sales of $93.4 million increased 0.1 percent primarily driven by favorable mix and menu pricing. As compared to the prior year, Maggiano's operating margin improved primarily due to lower cost of sales. Cost of sales as a percentage of company sales was positively impacted by favorable commodity pricing on seafood and meat, decreased commodity usage from efforts to reduce waste, menu item changes, as well as increased menu pricing. Restaurant operating margin was negatively impacted by higher long-term incentive compensation expenses.

Franchise and other revenues totaled $20.9 million for the quarter, an increase of 14.8 percent compared to $18.2 million in the prior year. The increase was driven primarily by a one-time development fee refund in the prior year. International and U.S. franchise comparable restaurant sales increased 2.3 percent and 0.5 percent, respectively. Brinker franchisees generated approximately $415 million in sales1 for the fourth quarter of fiscal 2013.

1Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

Other

Depreciation and amortization expense increased $0.9 million for the quarter primarily due to Chili's reimage, kitchen equipment and software investments in existing restaurants, partially offset by an increase in fully depreciated assets.

General and administrative expense decreased $7.1 million primarily due to lower performance-based compensation and professional fees.

Interest expense increased $1.4 million for the quarter as a result of higher borrowing balances which occurred prior to the retirement of the 5.75% notes.

Excluding the impact of special items, the effective income tax rate remained flat for the current quarter at 28.3 percent as the tax impact of increased earnings and lower tax credits was offset by prior year state tax adjustments and deductions related to increased stock option exercises. On a GAAP basis, the effective income tax rate increased to 25.0 percent in the current quarter compared to 24.6 percent last year due to lower tax credits and the positive impact of resolved tax positions in the prior year, partially offset by the increased tax benefit resulting from higher special item charges in the current 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.

Special items in the fourth quarter of fiscal 2013 consist primarily of the loss associated with the retirement of the 5.75% notes, with other offsetting items related to the gain on the sale of the company's minority interest in Romano's Macaroni Grill and losses associated with the impairment of restaurants and other fixed assets, including the company-owned restaurant in Brazil.

Table 2: Reconciliation of net income excluding special items

Q4 13 and Q4 12; $ millions and $ per diluted share after-tax

   
   

Q4 13

 

EPS Q4 13

 

Q4 12

 

EPS Q4 12

Net Income

 

46.4

 

0.64

 

47.0

 

0.61

Other (Gains) and Charges, net of taxes1

 

9.3

 

0.13

 

2.1

 

0.03

Adjustment for Tax Items

 

(0.6)

 

0.00

 

(2.0)

 

(0.03)

Net Income excluding Special Items

 

55.1

 

0.77

 

47.1

 

0.61

Table 3: Reconciliation of net income excluding special items

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

 
   

FY 13

 

EPS FY 13

 

FY 12

 

EPS FY 12

Net Income

 

163.4

 

2.20

 

151.2

 

1.87

Other (Gains) and Charges, net of taxes1

 

10.7

 

0.14

 

5.5

 

0.07

Adjustment for Tax Items

 

(0.6)

 

0.00

 

(2.0)

 

(0.02)

Adjustment for Gift Card Breakage2

 

 

 

3.3

 

0.04

Net Income excluding Special Items

 

173.5

 

2.34

 

158.0

 

1.96

     

1

 

Pre-tax Other gains and charges was $15.1 million and $3.4 million in the fourth quarter of fiscal 2013 and 2012, respectively. Pre-tax Other gains and charges was $17.3 million and $9.0 million year to date for 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.

Fiscal 2014 Outlook 

The company anticipates earnings per diluted share, excluding special items, to increase 15 to 22 percent in the range of $2.70 to $2.85. Earnings are based on the following expectations:

  • Comparable sales are expected to increase one to two percent
  • Company-owned new restaurant development combined with the recent acquisition of restaurants in Canada is expected to add year-over-year capacity growth of about two percent
  • Restaurant operating margin is expected to improve 50 to 75 basis points year-over-year
  • Depreciation expense is expected to increase slightly on a dollar basis, assuming capital expenditures of $150 to $160 million
  • General and administrative expense is expected to be slightly higher on a dollar basis due to the fact that incentive compensation is planned at target
  • Interest expense is expected to be essentially flat driven by lower rates despite higher borrowing balances
  • Excluding the impact of special items, the effective income tax rate is projected to be approximately 32 percent
  • Free cash flow will be $180 to $190 million
  • Diluted weighted average shares outstanding will be 66 to 68 million

The company believes providing fiscal 2014 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, 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 (Aug. 2). 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 Aug. 30, 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 Brinker website under the Financial Information section of the Investor tab.

Forward Calendar

 

-

SEC Form 10-K for fiscal 2013 filing on or before Aug. 26, 2013; and

     
 

-

First quarter earnings release, before market opens, Oct. 23, 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 1,591 restaurants under the names Chili's® Grill & Bar (1,547 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

 

Fifty-Two Week Periods Ended

   

June 26,

2013

 

June 27,

2012

 

June 26,

2013

 

June 27,

2012

Revenues:

           

Company sales

 

$

709,128

 

$

710,129

 

$

2,766,618

 

$

2,748,462

Franchise and other revenues (a)

 

20,940

 

18,242

 

79,480

 

72,260

     Total revenues

 

730,068

 

728,371

 

2,846,098

 

2,820,722

Operating Costs and Expenses:

           

Company restaurants

           

     Cost of sales

 

190,775

 

197,767

 

758,377

 

769,729

     Restaurant labor

 

224,548

 

227,842

 

892,413

 

891,910

     Restaurant expenses

 

165,433

 

159,958

 

655,214

 

649,830

Company restaurant expenses

 

580,756

 

585,567

 

2,306,004

 

2,311,469

Depreciation and amortization

 

32,651

 

31,789

 

131,481

 

125,054

General and administrative

 

32,249

 

39,348

 

134,538

 

143,388

Other gains and charges (b)

 

15,073

 

3,360

 

17,300

 

8,974

     Total operating costs and expenses

 

660,729

 

660,064

 

2,589,323

 

2,588,885

Operating income

 

69,339

 

68,307

 

256,775

 

231,837

Interest expense

 

8,078

 

6,713

 

29,118

 

26,800

Other, net

 

(562)

 

(754)

 

(2,658)

 

(3,772)

Income before provision for income taxes

 

61,823

 

62,348

 

230,315

 

208,809

Provision for income taxes

 

15,456

 

15,344

 

66,956

 

57,577

     Net income

 

$

46,367

 

$

47,004

 

$

163,359

 

$

151,232

             

Basic net income per share

 

$

0.67

 

$

0.63

 

$

2.28

 

$

1.93

             

Diluted net income per share

 

$

0.64

 

$

0.61

 

$

2.20

 

$

1.87

             

Basic weighted average shares outstanding

 

69,607

 

75,070

 

71,788

 

78,559

             

Diluted weighted average shares outstanding

 

71,999

 

77,682

 

74,158

 

80,664

   

(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

 

Fifty-Two Week Periods Ended

   

June 26,

2013

 

June 27,

2012

 

June 26,

2013

 

June 27,

2012

Loss on extinguishment of debt

 

$

15,768

   

$

0

   

$

15,768

   

$

0

 

Gain on sale of assets, net

 

(8,798)

   

(1,941)

   

(11,228)

   

(3,306)

 

Restaurant impairment charges

 

4,615

   

2,041

   

5,276

   

3,139

 

Restaurant closure charges

 

750

   

501

   

3,637

   

4,655

 

Impairment of liquor licenses

 

170

   

2,641

   

170

   

2,641

 

Severance and other benefits

 

966

   

0

   

2,235

   

0

 

Other

 

1,602

   

118

   

1,442

   

1,845

 
   

$

15,073

   

$

3,360

   

$

17,300

   

$

8,974

 

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
   

June 26, 2013

 

June 27, 2012 (a)

   

(Unaudited)

   

ASSETS

       

Current assets

 

$

198,591

   

$

198,182

 

Net property and equipment (b)

 

1,035,815

   

1,043,564

 

Total other assets

 

218,197

   

197,662

 

     Total assets

 

$

1,452,603

   

$

1,439,408

 

LIABILITIES AND SHAREHOLDERS' EQUITY

       

Current installments of long-term debt

 

$

27,596

   

$

27,334

 

Current liabilities

 

362,615

   

374,415

 

Long-term debt, less current installments

 

780,121

   

587,890

 

Other liabilities

 

132,914

   

139,896

 

Total shareholders' equity

 

149,357

   

309,873

 

     Total liabilities and shareholders' equity

 

$

1,452,603

   

$

1,439,408

 
   

(a)

Certain prior year amounts have been reclassified to conform to the fiscal 2013 presentation. These reclassifications have no effect on the company's net income or financial position as previously reported.

(b)

At June 26, 2013, the company owned the land and buildings for 189 of the 877 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.5 million and $118.3 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

   
   

Fifty-Two Week Periods Ended

   

June 26,

2013

 

June 27,

2012

Cash Flows From Operating Activities:

       

Net income

 

$

163,359

   

$

151,232

 

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

       

     Depreciation and amortization

 

131,481

   

125,054

 

     Stock-based compensation

 

15,909

   

13,461

 

     Restructure charges and other impairments

 

11,425

   

10,396

 

     Net (gain) loss on disposal of assets

 

(6,905)

   

490

 

     Changes in assets and liabilities

 

(24,581)

   

2,805

 

Net cash provided by operating activities

 

290,688

   

303,438

 

Cash Flows from Investing Activities:

       

Payments for property and equipment

 

(131,531)

   

(125,226)

 

Payments for purchase of restaurants

 

(24,622)

   

(3,120)

 

Proceeds from sale of assets

 

17,157

   

8,112

 

Insurance recoveries

 

1,152

   

 

Investment in equity method investees

 

   

(3,170)

 

Net cash used in investing activities

 

(137,844)

   

(123,404)

 

Cash Flows from Financing Activities:

       

Proceeds from issuance of long-term debt

 

549,528

   

70,000

 

Purchases of treasury stock

 

(333,384)

   

(287,291)

 

Payments on long-term debt

 

(316,380)

   

(18,749)

 

Payments on revolving credit facility

 

(150,000)

   

 

Borrowings on revolving credit facility

 

110,000

   

40,000

 

Payments of dividends

 

(56,343)

   

(50,081)

 

Proceeds from issuances of treasury stock

 

41,190

   

43,416

 

Excess tax benefits from stock-based compensation

 

8,778

   

1,406

 

Payments for deferred financing costs

 

(5,969)

   

(1,620)

 

Net cash used in financing activities

 

(152,580)

   

(202,919)

 

Net change in cash and cash equivalents

 

264

   

(22,885)

 

Cash and cash equivalents at beginning of period

 

59,103

   

81,988

 

Cash and cash equivalents at end of period

 

$

59,367

   

$

59,103

 

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 
   

Fourth Quarter

Net  Openings/(Closings)

Fiscal 2013

 

Total Restaurants

June 26, 2013

 

Net Openings/(Closings) Fiscal 2013

Company-Owned Restaurants:

           

Chili's Domestic

 

1

 

822

 

1

Chili's International (a)

 

11

 

11

 

11

Maggiano's

 

 

44

 

   

12

 

877

 

12

Franchise Restaurants:

           

Chili's Domestic

 

(4)

 

443

 

(15)

Chili's International (a)

 

(5)

 

271

 

13

   

(9)

 

714

 

(2)

Total Restaurants:

           

Chili's Domestic

 

(3)

 

1,265

 

(14)

Maggiano's

 

 

44

 

Chili's International (a)

 

6

 

282

 

24

   

3

 

1,591

 

10

   

(a)

During the fourth quarter of fiscal 2013, the company acquired 11 Chili's restaurants in Canada from a franchisee.

SOURCE Brinker International

Contacts:

Stacey Sullivan
Media Relations
(800) 775-7290

Chris Bremer
Investor Relations
(972) 980-9917

###

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