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

By: Brinker International |  0 Shares     62 Reads

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."

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

2 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

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