Brinker International Reports Increases In Second Quarter Fiscal 2015 EPS, Comparable Restaurant Sales And Traffic

DALLAS - Jan. 28, 2015 // PRNewswire // - Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 24, 2014.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 20.3 percent to $0.71 compared to$0.59 for the second quarter of fiscal 2014
  • On a GAAP basis, earnings per diluted share increased 10.3 percent to $0.64 compared to $0.58for the second quarter of fiscal 2014
  • Brinker International company sales increased 4.9 percent to $717.8 million and comparable restaurant sales at company-owned restaurants increased 3.7 percent including the positive impact to each brand of approximately 1.1 percent from Christmas Day moving to the third quarter
  • Chili's company-owned comparable restaurant sales increased 4.0 percent and traffic increased 2.1 percent
  • Maggiano's comparable restaurant sales increased 2.3 percent, representing the 20th consecutive quarterly increase, and traffic increased 1.6 percent
  • Chili's franchise comparable restaurant sales increase of 3.2 percent includes a 4.9 percent increase for U.S. franchise restaurants, partially offset by a 0.5 percent decrease for international franchise restaurants
  • Restaurant operating margin,as a percent of company sales, improved approximately 60 basis points to 16.4 percent compared to 15.8 percent for the second quarter of fiscal 2014. Brinker'soperating income, excluding special items,2 as a percentage of total revenues improved 70 basis points from 9.3 percent to 10.0 percent
  • For the first six months of fiscal 2015, cash flows provided by operating activities were $162.5 million and capital expenditures totaled $79.5 million
  • The company repurchased approximately 1.1 million shares of its common stock for $59.5 million in the second quarter and a total of approximately 2.2 million shares for $112.8 million year-to-date
  • The company paid a dividend of 28 cents per share in the second quarter, an increase of 17 percent over the prior year second quarter, and declared a dividend of 28 cents per share to be paid in the third quarter

"Brinker delivered another solid quarter of double digit EPS growth," said Wyman Roberts, Chief Executive Officer and President. "We've seen our sales and traffic driving strategies take hold, which gives us a great deal of optimism about continuing our positive momentum."

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

Operating income, excluding special items, is defined as Operating income excluding Other gains and charges.

Table 1: Q2 comparable restaurant sales
Q2 F15 and Q2 F14, company-owned, reported brands and franchise; percentage

   

Q2 15

 

Q2 14

Brinker International

 

3.7

   

0.8

 

  Chili's Company-Owned

           

     Comparable Restaurant Sales

 

4.0

   

0.7

 

     Pricing Impact

 

1.4

   

1.5

 

     Mix-Shift

 

0.5

   

1.1

 

     Traffic

 

2.1

   

(1.9)

 

  Maggiano's

           

     Comparable Restaurant Sales

 

2.3

   

0.9

 

     Pricing Impact

 

2.2

   

1.5

 

     Mix-Shift

 

(1.5)

   

(0.5)

 

     Traffic

 

1.6

   

(0.1)

 
             

Chili's Franchise1

 

3.2

   

0.0

 

  U.S. Comparable Restaurant Sales

 

4.9

   

(0.7)

 

  International Comparable Restaurant Sales

 

(0.5)

   

1.4

 
             

Chili's Domestic2

 

4.2

   

0.3

 

System-wide3

 

3.5

   

0.5

 

 

1

 

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 franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.

     

2

 

Chili's 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 franchise operated restaurants.

Quarterly Operating Performance

CHILI'S second quarter company sales increased 4.4 percent to $602.0 million from $576.7 million in the prior year primarily due to increases in comparable restaurant sales and restaurant capacity. As compared to the prior year, Chili's restaurant operating margin1,2 improved. Restaurant labor, as a percent of company sales, was favorably impacted by leverage related to higher company sales coupled with lower health insurance expenses, partially offset by increased wage rates. Cost of sales, as a percent of company sales, was favorably impacted by menu pricing, menu item changes and efficiency gains related to new fryer equipment, partially offset by unfavorable commodity pricing primarily related to burger meat, cheese and avocados which are market based, as well as unfavorable pricing related to salmon. Restaurant expenses, as a percent of company sales, increased due to higher credit card fees, equipment charges associated with tabletop devices,2 and new restaurant development, partially offset by leverage related to higher company sales.

MAGGIANO'S second quarter company sales increased 7.5 percent to $115.8 million from $107.7 million primarily due to increases in comparable restaurant sales and restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin1 improved. Restaurant expenses, as a percent of company sales, were positively impacted by lower supplies expense coupled with leverage related to higher company sales, partially offset by higher utilities expense and new restaurant development. Restaurant labor, as a percent of company sales, was favorably impacted by leverage related to higher company sales, partially offset by higher performance-based compensation. Cost of sales, as a percent of company sales, was negatively impacted by commodity pricing on beef, seafood, cheese and produce, partially offset by increased menu pricing and menu item changes.

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

2As compared to the prior year, the Chili's restaurant operating margin metric was negatively impacted by the classification of revenues and expenses associated with tabletop devices. The revenues associated with tabletop devices are included in Franchise and other revenues while the associated equipment charges are included in Restaurant expenses, a component of the restaurant operating margin calculation.

FRANCHISE AND OTHER revenues increased 18.1 percent to $25.1 million for the second quarter compared to $21.3 million in the prior year driven primarily by the revenues associated with tabletop devices, royalty revenues related to Chili's new retail food products, and higher royalty income driven by an increase in U.S. franchise comparable restaurant sales as well as international franchise restaurant openings. U.S. franchise comparable restaurant sales increased 4.9 percent, while international comparable restaurant sales decreased 0.5 percent. Brinker franchisees generated approximately $406 million in sales3 for the second quarter of fiscal 2015.

3Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

Other

Depreciation and amortization expense increased $2.5 million for the quarter primarily due to investments in the Chili's reimage program, new restaurant openings and new fryer equipment, partially offset by an increase in fully depreciated assets.

General and administrative expense increased $2.3 million primarily due to higher performance-based compensation.

On a GAAP basis, the effective income tax rate decreased to 29.7 percent in the current quarter from 31.1 percent in the prior year quarter primarily due to an increase in the FICA Tip Credit, partially offset by increased earnings. Excluding the impact of special items, the effective income tax rate decreased to 30.7 percent in the current quarter compared to 31.3 percent in the prior year primarily due to an increase in the FICA Tip Credit, partially offset by increased earnings.

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 second quarter of fiscal 2015 consist primarily of charges related to litigation reserves, a loss on the sale of assets and the impairment of restaurants.

Table 2: Reconciliation of net income excluding special items
Q2 15 and Q2 14; $ millions and $ per diluted share after-tax

   

Q2 15

 

EPS Q2 15

 

Q2 14

 

EPS Q2 14

Net Income

 

41.3

   

0.64

   

39.7

   

0.58

 

Other (Gains) and Charges, net of taxes1

 

5.1

   

0.07

   

0.8

   

0.01

 

Net Income excluding Special Items

 

46.4

   

0.71

   

40.5

   

0.59

 

 

1

 

Pre-tax Other gains and charges were $8.3 million and $1.2 million in the second quarter of fiscal 2015 and 2014, respectively. See footnote "b" to the consolidated statements of comprehensive income for additional details.

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. CST today (Jan. 28). 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 Feb. 25, 2015.

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 second quarter fiscal 2015 filing on or before Feb. 2, 2015; and
-  Third quarter earnings release, before market opens, April 21, 2015.

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 Dec. 24, 2014, Brinker owned, operated, or franchised 1,634 restaurants under the names Chili's® Grill & Bar (1,585 restaurants) and Maggiano's Little Italy® (49 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, increased minimum wages, increased health care costs, 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, inflation, technology failures, and failure to protect the security of data of our guests and teammates.

BRINKER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)

 
   

Thirteen Week Periods Ended

 

Twenty-Six Week Periods Ended

   

Dec. 24, 2014

    

Dec. 25, 2013

    

Dec. 24, 2014

    

Dec. 25, 2013

Revenues:

                       

Company sales

 

$

717,768

   

$

684,385

   

$

1,404,632

   

$

1,348,887

 

Franchise and other revenues (a)

 

25,130

   

21,277

   

49,284

   

41,435

 

Total revenues

 

742,898

   

705,662

   

1,453,916

   

1,390,322

 

Operating costs and expenses:

                       

Company restaurants (excluding depreciation and amortization)

                       

Cost of sales

 

193,762

   

185,179

   

378,547

   

365,837

 

Restaurant labor

 

227,733

   

219,919

   

455,009

   

438,635

 

Restaurant expenses

 

178,898

   

171,144

   

354,436

   

338,834

 

Company restaurant expenses

 

600,393

   

576,242

   

1,187,992

   

1,143,306

 

Depreciation and amortization

 

36,072

   

33,538

   

71,614

   

66,694

 

General and administrative

 

32,660

   

30,362

   

65,294

   

64,783

 

Other gains and charges (b)

 

8,291

   

1,221

   

9,224

   

2,227

 

Total operating costs and expenses

 

677,416

   

641,363

   

1,334,124

   

1,277,010

 

Operating income

 

65,482

   

64,299

   

119,792

   

113,312

 

Interest expense

 

7,349

   

7,047

   

14,348

   

14,060

 

Other, net

 

(611)

   

(461)

   

(1,114)

   

(1,043)

 

Income before provision for income taxes

 

58,744

   

57,713

   

106,558

   

100,295

 

Provision for income taxes

 

17,438

   

17,969

   

32,514

   

31,339

 

Net income

 

$

41,306

   

$

39,744

   

$

74,044

   

$

68,956

 
                         

Basic net income per share

 

$

0.65

   

$

0.59

   

$

1.15

   

$

1.03

 
                         

Diluted net income per share

 

$

0.64

   

$

0.58

   

$

1.13

   

$

1.00

 
                         

Basic weighted average shares outstanding

 

63,590

   

66,811

   

64,129

   

66,752

 
                         

Diluted weighted average shares outstanding

 

64,963

   

68,628

   

65,613

   

68,715

 
                         

Other comprehensive loss:

                       

Foreign currency translation adjustment (c)

 

$

(3,529)

   

$

(819)

   

$

(4,336)

   

$

(754)

 

Other comprehensive loss

 

(3,529)

   

(819)

   

(4,336)

   

(754)

 

Comprehensive income

 

$

37,777

   

$

38,925

   

$

69,708

   

$

68,202

 
                         

 

(a)

Franchise and other revenues primarily includes royalties, development fees and franchise fees, banquet service charge income, gift card activity (breakage and discounts), tabletop device revenue, Chili's retail food product royalties and delivery fee income. Beginning in fiscal 2015, income primarily related to Maggiano's delivery is included in Franchise and other revenues on the consolidated statement of comprehensive income. This income was previously included in Restaurant expenses. The prior year consolidated statement of comprehensive income has been adjusted to conform to the fiscal 2015 presentation. This adjustment has no effect on net income previously reported. 

   

(b)

Other gains and charges include:

 

 

Thirteen Week Periods Ended

 

Twenty-Six Week Periods Ended

 

Dec. 24, 2014

    

Dec. 25, 2013

    

Dec. 24, 2014

    

Dec. 25, 2013

Litigation

$

5,800

   

$

   

$

5,800

   

$

 

Restaurant impairment charges

747

   

1,285

   

747

   

1,285

 

Restaurant closure charges

509

   

265

   

1,381

   

1,107

 

Loss (Gain) on the sale of assets, net

1,069

   

(579)

   

1,093

   

(579)

 

Impairment of liquor licenses

175

   

   

175

   

 

Other

(9)

   

250

   

28

   

414

 
 

$

8,291

   

$

1,221

   

$

9,224

   

$

2,227

 

 

(c)

The foreign currency translation adjustment included in comprehensive income on the consolidated statements of comprehensive income represents the unrealized impact of translating the financial statements of the Canadian restaurants and the Mexican joint venture from their respective functional currencies to U.S. dollars. This amount is not included in net income and would only be realized upon disposition of the businesses.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
   

Dec. 24, 2014

    

June 25, 2014

             

ASSETS

           

Current assets

 

$

285,453

   

$

210,854

 

Net property and equipment (a)

 

1,045,447

   

1,056,454

 

Total other assets

 

218,931

   

223,296

 

Total assets

 

$

1,549,831

   

$

1,490,604

 

LIABILITIES AND SHAREHOLDERS' EQUITY

           

Current installments of long-term debt

 

$

28,036

   

$

27,884

 

Current liabilities

 

483,073

   

438,226

 

Long-term debt, less current installments

 

901,241

   

832,302

 

Other liabilities

 

132,540

   

129,098

 

Total shareholders' equity

 

4,941

   

63,094

 

Total liabilities and shareholders' equity

 

$

1,549,831

   

$

1,490,604

 

 

(a)

At Dec. 24, 2014, the company owned the land and buildings for 189 of the 888 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $142.2 million and $120.1 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
   

Twenty-Six Week Periods Ended

   

Dec. 24, 2014

    

Dec. 25, 2013

Cash Flows From Operating Activities:

           

Net income

 

$

74,044

   

$

68,956

 

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

           

Depreciation and amortization

 

71,614

   

66,694

 

Stock-based compensation

 

6,992

   

8,196

 

Restructure charges and other impairments

 

8,326

   

2,091

 

Net loss on disposal of assets

 

2,974

   

2,051

 

Changes in assets and liabilities

 

(1,485)

   

(667)

 

Net cash provided by operating activities

 

162,465

   

147,321

 

Cash Flows from Investing Activities:

           

Payments for property and equipment

 

(79,481)

   

(69,692)

 

Proceeds from sale of assets

 

1,950

   

833

 

Net cash used in investing activities

 

(77,531)

   

(68,859)

 

Cash Flows from Financing Activities:

           

Purchases of treasury stock

 

(112,789)

   

(93,101)

 

Borrowings on revolving credit facility

 

83,000

   

80,000

 

Payments of dividends

 

(35,409)

   

(31,345)

 

Excess tax benefits from stock-based compensation

 

10,351

   

14,569

 

Payments on long-term debt

 

(13,338)

   

(13,260)

 

Proceeds from issuances of treasury stock

 

3,975

   

7,963

 

Payments on revolving credit facility

 

   

(40,000)

 

Net cash used in financing activities

 

(64,210)

   

(75,174)

 

Net change in cash and cash equivalents

 

20,724

   

3,288

 

Cash and cash equivalents at beginning of period

 

57,685

   

59,367

 

Cash and cash equivalents at end of period

 

$

78,409

   

$

62,655

 

 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY

 
   

Second Quarter

Openings

Fiscal 2015

    

Total Restaurants

Dec. 24, 2014

    

Projected Openings Fiscal 2015

Company-Owned Restaurants:

               

Chili's Domestic

 

3

   

826

   

8-10

Chili's International

 

1

   

13

   

1

Maggiano's

 

1

   

49

   

3

   

5

   

888

   

12-14

Franchise Restaurants:

               

Chili's Domestic

 

1

   

440

   

5

Chili's International

 

9

   

306

   

34-38

   

10

   

746

   

39-43

Total Restaurants:

               

Chili's Domestic

 

4

   

1,266

   

13-15

Chili's International

 

10

   

319

   

35-39

Maggiano's

 

1

   

49

   

3

   

15

   

1,634

   

51-57

SOURCE Brinker International, Inc.

Contacts:

Ashley Johnson
Media Relations
(800) 775-7290

Jill Cuthbertson
Investor Relations
(972) 980-9917
6820 LBJ Freeway, Dallas, Texas 75240

###

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