Brinker International Reports Increases In Third Quarter Fiscal 2014 EPS And Comparable Restaurant Sales

DALLAS - April 23, 2014 // PRNewswire // - Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 26, 2014.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 16.7 percent to $0.84 compared to $0.72 for the third quarter of fiscal 2013 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 15.5 percent to $0.82 compared to $0.71 for the third quarter of fiscal 2013
  • Company sales increased 2.0 percent to $739.2 million and restaurant operating margin1 improved approximately 80 basis points to 18.7 percent compared to 17.9 percent for the third quarter of fiscal 2013
  • Brinker International comparable restaurant sales at company-owned restaurants increased 0.7 percent
  • Chili's domestic comparable restaurant sales2 includes a 0.7 percent increase for company-owned restaurants and a 0.1 percent increase for franchise operated restaurants
  • Chili's international franchise comparable restaurant sales increased 0.6 percent, representing the 17th consecutive quarterly increase
  • Maggiano's comparable restaurant sales increased 0.2 percent, representing the 17th consecutive quarterly increase
  • For the first nine months of fiscal 2014, cash flows provided by operating activities were $277.1 million and capital expenditures totaled $114.0 million
  • The company repurchased approximately 1.9 million shares of its common stock for $98.7 million in the third quarter and a total of approximately 4.1 million shares for $191.8 million year-to-date
  • The company paid a dividend of 24 cents per share in the third quarter, an increase of 20 percent over the prior year third quarter

"Brinker delivered another solid quarter of results," said Wyman Roberts, Chief Executive Officer and President. "The effectiveness of our strategies enabled us to deliver double digit EPS growth, positive comp sales, and improved operating margins."

Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses as a percent of Company sales.

Chili's domestic comparable restaurant sales is defined as comparable restaurant sales generated from company-owned and franchise operated Chili's restaurants in the United States.

 

Table 1: Monthly and Q3 comparable restaurant sales

Q3 14 and Q3 13, company-owned, reported brands and franchise; percentage

 
   

Jan

   

Feb

   

March

   

Q3 14

   

Q3 13

Brinker International

 

0.1

 

1.3

 

0.7

 

0.7

 

(0.9)

  Chili's Company-Owned1

                   

     Comparable Restaurant Sales

 

0.0

 

1.5

 

0.9

 

0.7

 

(1.1)

     Pricing Impact

 

1.1

 

1.2

 

1.2

 

1.1

 

1.5

     Mix-Shift

 

0.0

 

1.5

 

1.1

 

0.8

 

0.6

     Traffic

 

(1.1)

 

(1.2)

 

(1.4)

 

(1.2)

 

(3.2)

  Maggiano's

                   

     Comparable Restaurant Sales

 

0.8

 

0.3

 

(0.8)

 

0.2

 

0.4

     Pricing Impact

 

1.6

 

1.3

 

1.5

 

1.5

 

1.6

     Mix-Shift

 

0.4

 

0.1

 

(2.2)

 

(0.4)

 

(0.2)

     Traffic

 

(1.2)

 

(1.1)

 

(0.1)

 

(0.9)

 

(1.0)

                     

Franchise2

             

0.2

 

1.3

  U.S. Comparable Restaurant Sales

             

0.1

 

(0.3)

  International Comparable Restaurant Sales

             

0.6

 

5.1

                     

Domestic3

             

0.5

 

(0.8)

System-wide4

             

0.5

 

(0.2)

 

   

1

Chili's company-owned comparable restaurant sales do not include sales generated by the 11 restaurants acquired in Canada in June 2013. Acquired or newly opened restaurants are not included in this calculation until 18 months of operations are completed.

   

2

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

   

3

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

   

4

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 franchise operated restaurants.

Quarterly Operating Performance

CHILI'S third quarter company sales increased to $645.8 million from $632.6 million in the prior year primarily due to the acquisition of 11 restaurants in Canada, as well as increases in domestic restaurant capacity and comparable restaurant sales. As compared to the prior year, Chili's operating margin improved. Cost of sales, as a percent of company sales, was favorably impacted by the introduction of new menu items, improved waste control, efficiency gains related to new kitchen equipment and menu pricing. Commodity pricing was flat with higher meat and seafood costs offset by other items. Restaurant labor, as a percent of company sales, was positively impacted by favorable health insurance expenses coupled with leverage related to higher revenue, partially offset by higher restaurant manager salaries and bonuses. Restaurant expenses, as a percent of company sales, were negatively impacted by higher advertising and utilities expense.

MAGGIANO'S third quarter company sales of $93.4 million increased 1.4 percent primarily driven by increases in restaurant capacity and menu pricing. As compared to the prior year, Maggiano's restaurant operating margin improved slightly. Cost of sales, as a percent of company sales, was positively impacted by favorable commodity pricing and increased menu pricing, partially offset by unfavorable mix changes. Restaurant labor, as a percent of company sales, was positively impacted by lower performance based compensation. Restaurant expenses, as a percent of company sales, were negatively impacted by higher advertising and facilities costs.

FRANCHISE AND OTHER revenues totaled $19.2 million for the third quarter, an increase of 6.1 percent compared to $18.1 million in the prior year driven primarily by other revenues. International comparable restaurant sales increased 0.6 percent and U.S. franchise comparable restaurant sales increased 0.1 percent. Brinker franchisees generated approximately $414 million in sales1 for the third quarter of fiscal 2014.

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

Depreciation and amortization expense increased $1.0 million for the quarter primarily due to investments in the Chili's reimage program, kitchen equipment, as well as the acquisition of 11 restaurants in Canada, partially offset by an increase in fully depreciated assets.

On a GAAP basis, the effective income tax rate increased to 30.4 percent in the current quarter from 28.7 percent in the prior year. Excluding the impact of special items, the effective income tax rate increased to 30.6 percent in the current quarter compared to 28.9 percent in the prior year. The increase in the effective tax rates was primarily due to increased earnings and lower tax credits as the impact of tax benefits related to special items was equivalent for each quarter.

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 third quarter of fiscal 2014 consist primarily of charges associated with closed restaurants.

Table 2: Reconciliation of net income excluding special items

Q3 14 and Q3 13; $ millions and $ per diluted share after-tax

 
   

Q3 14

   

EPS Q3 14

   

Q3 13

   

EPS Q3 13

Net Income

 

56.3

 

0.82

 

52.0

 

0.71

Other (Gains) and Charges, net of taxes1

 

1.3

 

0.02

 

0.9

 

0.01

Net Income excluding Special Items

 

57.6

 

0.84

 

52.9

 

0.72

   

1

Pre-tax Other gains and charges were $2.1 million and $1.6 million in the third quarter of fiscal 2014 and 2013, respectively.

Guidance Policy

Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the comprehensive 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, 2014.

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-Q for third quarter fiscal 2014 filing on or before May 5, 2014; and
  • Fourth quarter earnings release, before market opens, Aug. 7, 2014.

About Brinker

Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, as of March 26, 2014, Brinker owned, operated, or franchised 1,608 restaurants under the names Chili's® Grill & Bar (1,563 restaurants) and Maggiano's Little Italy® (45 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, terrorist 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 COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 
   

Thirteen Week Periods Ended

 

Thirty-Nine Week Periods Ended

   

March 26, 2014

    

March 27, 2013

    

March 26, 2014

    

March 27, 2013

Revenues:

               

Company sales

 

$

739,200

 

$

724,693

 

$

2,088,087

 

$

2,057,490

Franchise and other revenues (a)

 

19,208

 

18,066

 

58,640

 

58,540

Total revenues

 

758,408

 

742,759

 

2,146,727

 

2,116,030

Operating costs and expenses:

               

Company restaurants (excluding depreciation and amortization)

               

Cost of sales

 

195,439

 

198,316

 

561,276

 

567,602

Restaurant labor

 

233,890

 

231,822

 

672,525

 

667,865

Restaurant expenses

 

171,574

 

164,537

 

508,405

 

489,781

Company restaurant expenses

 

600,903

 

594,675

 

1,742,206

 

1,725,248

Depreciation and amortization

 

34,218

 

33,222

 

100,912

 

98,830

General and administrative

 

34,009

 

33,986

 

98,792

 

102,289

Other gains and charges (c)

 

2,088

 

1,550

 

4,315

 

2,227

Total operating costs and expenses

 

671,218

 

663,433

 

1,946,225

 

1,928,594

Operating income

 

87,190

 

79,326

 

200,502

 

187,436

Interest expense

 

7,068

 

7,085

 

21,128

 

21,040

Other, net

 

(693)

 

(573)

 

(1,736)

 

(2,096)

Income before provision for income taxes

 

80,815

 

72,814

 

181,110

 

168,492

Provision for income taxes

 

24,552

 

20,863

 

55,891

 

51,500

Net income

 

$

56,263

 

$

51,951

 

$

125,219

 

$

116,992

                 

Basic net income per share

 

$

0.85

 

$

0.73

 

$

1.88

 

$

1.61

                 

Diluted net income per share

 

$

0.82

 

$

0.71

 

$

1.83

 

$

1.56

                 

Basic weighted average shares outstanding

 

66,479

 

71,067

 

66,661

 

72,511

                 

Diluted weighted average shares outstanding

 

68,342

 

73,341

 

68,591

 

74,873

                 
                 
                 

Other comprehensive income (loss), net of tax:

               

Foreign currency translation adjustment (b)

 

$

(1,108)

 

$

 

$

(1,862)

 

$

Other comprehensive loss

 

(1,108)

 

 

(1,862)

 

Comprehensive income

 

$

55,155

 

$

51,951

 

$

123,357

 

$

116,992

   

(a)

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

(b)

The company's Canadian operation uses the Canadian dollar as its functional currency. The foreign currency translation adjustment included in the company's comprehensive income represents the unrealized impact of translating the financial statements of the Canadian entity to U.S. dollars. This amount is not included in net income and would only be realized upon disposition of the business.

(c)

Other gains and charges include:

   
 
 

Thirteen Week Periods Ended

 

Thirty-Nine Week Periods Ended

 

March 26, 2014

    

March 27, 2013

    

March 26, 2014

    

March 27, 2013

Restaurant impairment charges

$

 

$

 

$

1,285

 

$

661

Restaurant closure charges

1,224

 

305

 

2,330

 

2,887

Severance and other benefits

717

 

1,269

 

1,110

 

1,269

Gains on the sale of assets, net

 

(81)

 

(579)

 

(2,430)

Other

147

 

57

 

169

 

(160)

 

$

2,088

 

$

1,550

 

$

4,315

 

$

2,227

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
   

March 26, 2014

    

June 26, 2013

         

ASSETS

       

Current assets

 

$

195,156

 

$

198,591

Net property and equipment (a)

 

1,037,409

 

1,035,815

Total other assets

 

217,513

 

218,197

Total assets

 

$

1,450,078

 

$

1,452,603

LIABILITIES AND SHAREHOLDERS' EQUITY

       

Current installments of long-term debt

 

$

27,810

 

$

27,596

Current liabilities

 

388,484

 

362,615

Long-term debt, less current installments

 

817,259

 

780,121

Other liabilities

 

128,419

 

132,914

Total shareholders' equity

 

88,106

 

149,357

Total liabilities and shareholders' equity

 

$

1,450,078

 

$

1,452,603

   

(a)

At March 26, 2014, the company owned the land and buildings for 190 of the 880 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $142.9 million and $118.2 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
   

Thirty-Nine Week Periods Ended

   

March 26, 2014

    

March 27, 2013

Cash Flows From Operating Activities:

       

Net income

 

$

125,219

 

$

116,992

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

       

Depreciation and amortization

 

100,912

 

98,830

Stock-based compensation

 

12,990

 

12,909

Restructure charges and other impairments

 

3,836

 

3,792

Net loss on disposal of assets

 

3,208

 

1,115

Changes in assets and liabilities

 

30,935

 

(11,002)

Net cash provided by operating activities

 

277,100

 

222,636

Cash Flows from Investing Activities:

       

Payments for property and equipment

 

(113,980)

 

(98,690)

Proceeds from sale of assets

 

833

 

6,535

Net cash used in investing activities

 

(113,147)

 

(92,155)

Cash Flows from Financing Activities:

       

Purchases of treasury stock

 

(191,811)

 

(191,799)

Borrowings on revolving credit facility

 

98,000

 

110,000

Payments on revolving credit facility

 

(40,000)

 

Payments of dividends

 

(47,556)

 

(42,161)

Excess tax benefits from stock-based compensation

 

17,972

 

7,811

Payments on long-term debt

 

(19,890)

 

(19,785)

Proceeds from issuances of treasury stock

 

24,574

 

32,042

Net cash used in financing activities

 

(158,711)

 

(103,892)

Net change in cash and cash equivalents

 

5,242

 

26,589

Cash and cash equivalents at beginning of period

 

59,367

 

59,103

Cash and cash equivalents at end of period

 

$

64,609

 

$

85,692

 

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 
   

Third Quarter

Openings

Fiscal 2014

    

Total Restaurants

March 26, 2014

    

Projected Openings Fiscal
2014

Company-Owned Restaurants:

           

Chili's Domestic

 

2

 

823

 

6-8

Chili's International

 

 

12

 

2-4

Maggiano's

 

 

45

 

1-2

   

2

 

880

 

9-14

Franchise Restaurants:

           

Chili's Domestic

 

 

441

 

3

Chili's International

 

10

 

287

 

31-33

   

10

 

728

 

34-36

Total Restaurants:

           

Chili's Domestic

 

2

 

1,264

 

9-11

Chili's International

 

10

 

299

 

33-37

Maggiano's

 

 

45

 

1-2

   

12

 

1,608

 

43-50


SOURCE Brinker International

Contact:

Maureen Locus
Media Relations
(800) 775-7290
Chris Bremer
Investor Relations
(972) 980-9917

 

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

Elements Massage
When simplicity is the essence of your business model, clients and owners benefit. Clients want a predictably wonderful experience with every visit....
WineStyles Tasting Station
Turn your passion for wine, craft beer and gourmet food into a rewarding business opportunity. WineStyles Tasting Station is the largest wine...
Gigi's Cupcakes
Gigi's offers a low-cost, low-risk and scalable bakery franchise that features gourmet cupcakes and bakery treats
Learning Express
Learning Express is the nation's leading specialty toy store franchise - dedicated to providing toys that encourage learning through play, a...
HYPOXI
Operated in studios across the globe, HYPOXI is proven not only to be an effective weight loss solution for men and women, but is also a popular...

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)