BRINKER INTERNATIONAL, INC. 
By DALLAS, Jan. 24, 2012 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 28, 2011.
Highlights for the second quarter of fiscal 2012 include the following:
-- Earnings per diluted share, before special items, increased 23.7 percent
to $0.47 compared to $0.38 for the second quarter of fiscal 2011 (see
non-GAAP reconciliation below)
-- On a GAAP basis, earnings per diluted share increased 7.3 percent to
$0.44 from $0.41 in the second quarter of the prior year
-- Total revenues increased 1.5 percent to $681.9 million
-- Restaurant operating margin(1) improved 50 basis points to 17.9 percent
compared to the second quarter of fiscal 2011
-- Chili's comparable restaurant sales increased 1.4 percent and customer
traffic increased 1.1 percent, the third consecutive quarterly increase
for both metrics
-- Maggiano's comparable restaurant sales increased 2.8 percent,
representing the eighth consecutive quarterly increase, and customer
traffic increased by 0.6 percent, representing the ninth consecutive
quarterly increase
-- The company repurchased approximately 2.0 million shares of its common
stock for $47.8 million in the second quarter
-- The company paid a dividend of 16 cents per share in the second quarter,
an increase of 14.3 percent over the prior year quarter
-- For the first six months of fiscal 2012, cash flows provided by
operating activities were $114.2 million and capital expenditures
totaled $53.5 million
"Brinker delivered another strong quarter as evidenced by a 24 percent increase in our EPS. This marked Brinker's fourth consecutive quarter of comp sales and traffic growth, which demonstrates the effectiveness of our strategies, the strength of our team and the receptivity of our guests to the changes we're making to our business," said Doug Brooks, President and Chief Executive Officer. "We are confident we'll deliver on our promise to double EPS by 2015."
Table 1: Monthly and Q2 comparable restaurant sales
---------------------------------------------------
Q2 12 and Q2 11, company-owned, reported brands and franchise; percentage
-------------------------------------------------------------------------
Oct Nov Dec Q2 12 Q2 11
--- --- --- ----- -----
Brinker
International 1.4 1.4 2.1 1.7 (3.5)
-------------- --- --- --- --- ----
Chili's
Company-
Owned
---------
Comparable
Restaurant
Sales 1.4 1.4 1.5 1.4 (4.9)
---------- --- --- --- --- ----
Pricing
Impact 1.0 1.0 1.1 1.1 1.0
------- --- --- --- --- ---
Mix-
Shift (0.5) (0.5) (1.3) (0.8) 1.2
------ ---- ---- ---- ---- ---
Traffic 0.9 0.9 1.7 1.1 (7.1)
------- --- --- --- --- ----
Maggiano's
----------
Comparable
Restaurant
Sales 1.6 1.4 4.8 2.8 4.7
---------- --- --- --- --- ---
Pricing
Impact 2.1 1.9 1.5 1.8 1.0
------- --- --- --- --- ---
Mix-
Shift (0.4) 0.0 1.3 0.4 (2.0)
------ ---- --- --- --- ----
Traffic (0.1) (0.5) 2.0 0.6 5.7
------- ---- ---- --- --- ---
Franchise(1) 2.6 (4.1)
----------- --- ----
Domestic
Comparable
Restaurant
Sales 1.7 (6.5)
----------- --- ----
International
Comparable
Restaurant
Sales 4.8 2.9
------------- --- ---
System-
wide(2) 2.0 (3.7)
-------- --- ----
(1) Although franchise comparable
sales are not derived from sales
attributable to the company,
including franchise comparable
restaurant sales provides
investors information regarding
brand performance that is
relevant to current operations
and may impact future restaurant
development. The company
generates royalty revenue and
advertising fees based on
franchisee sales, where
applicable.
(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 second quarter revenues of $554.8 million represent a 1.2 percent increase from $548.3 million in the prior year period driven by increased guest traffic and menu prices. Chili's operating margin improved compared to the prior year primarily due to successful labor savings initiatives related to food preparation procedures. Restaurant expense was also positively impacted by lower repair and maintenance expense, credit card fees, workers' compensation insurance expenses and sales leverage on fixed costs related to higher revenue. Cost of sales was negatively impacted by unfavorable pricing on oils, beef, produce and dairy, partially offset by favorable pricing on poultry.
MAGGIANO'S second quarter revenues of $110.9 million increased 2.9 percent primarily driven by increased menu prices and improved traffic. Restaurant operating margin improved compared to prior year primarily due to lower workers' compensation insurance expense, credit card fees and sales leverage on fixed costs related to higher revenue.
ROYALTY AND FRANCHISE revenues totaled $16.2 million for the quarter, an increase of 2.5 percent over the prior year driven primarily by 22 international net openings since the second quarter of fiscal 2011. International comparable restaurant sales increased 4.8 percent while domestic franchise comparable restaurant sales increased 1.7 percent. Brinker franchisees generated $389 million in sales(2) for the second quarter of fiscal 2012, an increase of 4.5 percent over the prior year.
"We're pleased with the progress we made during the second quarter on our journey toward a 400 basis-point margin improvement in our business," said Guy Constant, Executive Vice President and Chief Financial Officer. "Our solid results and significant progress on what is a challenging strategic plan gives us confidence we will continue to increase shareholder value."
Other
General and administrative expense remained flat for the quarter primarily due to a decrease in performance based compensation, offset by the impact of the expiration of the transition services agreements with Macaroni Grill and On The Border.
Interest expense decreased $0.5 million for the quarter primarily due to lower interest rates.
Excluding the impact of special items, the effective income tax rate increased to 29.7 percent in the current quarter from 27.3 percent in the same quarter last year driven by increased earnings. On a GAAP basis, the effective income tax rate increased to 29.0 percent in the current quarter as compared to 17.5 percent in the same quarter last year primarily due to the positive impact of resolved tax positions in the prior year and increased earnings.
Non-GAAP Reconciliation
The company 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 before special items
----------------------------------------------------------
Q2 12 and Q2 11; $ millions and $ per diluted share after-tax
-------------------------------------------------------------
EPS EPS
--- ---
Q2 12 Q2 12 Q2 11 Q2 11
----- ----- ----- -----
Net
Income 35.7 0.44 37.5 0.41
------ ---- ---- ---- ----
Other
(Gains)
and
Charges(1) 2.5 0.03 1.7 0.02
---------- --- ---- --- ----
Adjustment
for
Tax
Items - - (4.1) (0.05)
---------- --- --- ---- -----
Net
Income
before
Special
Items 38.2 0.47 35.1 0.38
------- ---- ---- ---- ----
(1) Pre-tax Other gains and
charges was $4.0 million and
$2.8 million in the second
quarter of fiscal 2012 and
2011, 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 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 be broadcast live on the Brinker website (www.brinker.com) at 8 a.m. CST today (Jan. 24). 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. 21, 2012.
Additional financial information, including statements of income which detail operations excluding special items, franchise development and royalty fees, 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 2012 filing on or before Feb. 6,
2012; and
-- Third quarter earnings release, before market opens, April 23, 2012.
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 1,574 restaurants under the names Chili's® Grill & Bar (1,529 restaurants) and Maggiano's Little Italy® (45 restaurants). Brinker also holds a minority investment in Romano's Macaroni Grill®.
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 Twenty-Six Week
Periods Ended Periods Ended
------------- ---------------
Dec. 28, Dec. 29, Dec. 28, Dec. 29,
2011 2010 2011 2010
---- ---- ---- ----
Revenues $681,904 $671,886 $1,350,306 $1,326,779
Operating Costs and Expenses:
Cost of sales 185,189 179,298 366,807 353,778
Restaurant labor (a) 214,317 213,465 430,262 430,611
Restaurant expenses 160,077 162,050 325,642 327,199
Depreciation and amortization 31,153 32,452 62,336 65,025
General and administrative 31,215 31,387 64,034 61,431
Other gains and charges (b) 4,033 2,774 5,718 5,894
----- ----- ----- -----
Total operating costs and expenses 625,984 621,426 1,254,799 1,243,938
------- ------- --------- ---------
Operating income 55,920 50,460 95,507 82,841
Interest expense 6,509 7,034 13,557 14,230
Other, net (854) (2,000) (1,946) (3,734)
---- ------ ------ ------
Income before provision for income taxes 50,265 45,426 83,896 72,345
Provision for income taxes 14,591 7,962 24,601 13,450
------ ----- ------ ------
Net Income $35,674 $37,464 $59,295 $58,895
======= ======= ======= =======
Basic net income per share $0.45 $0.41 $0 .73 $0.61
===== ===== ====== =====
Diluted net income per share $0.44 $0.41 $0 .72 $0.61
===== ===== ====== =====
Basic weighted average shares outstanding 79,840 90,936 80,792 95,815
====== ====== ====== ======
Diluted weighted average shares outstanding 81,655 92,111 82,619 96,847
====== ====== ====== ======
(a) Restaurant labor includes all
compensation related expenses,
including benefits and incentive
compensation, for restaurant employees
at the general manager level and below.
Labor related expenses attributable to
multi-restaurant (or above-
restaurant) supervision is included in
Restaurant expenses.
(b) In the second quarter of fiscal
2012, Other gains and charges includes
long-lived asset impairments of $1.5
million related to the closure and
impairment of certain underperforming
restaurants and lease termination
charges of $1.9 million. In the first
quarter of fiscal 2012, Other gains and
charges includes litigation charges of
$2.5 million and lease termination
charges of $0.5 million, partially
offset by a $1.3 million gain related
to the sale of land. In the second
quarter of fiscal 2011, Other gains and
charges primarily includes long-lived
asset impairments of $1.7 million
related to restaurant closures and
impairments and $0.9 million of
severance costs. In the first quarter
of fiscal 2011, Other gains and charges
primarily includes $2.8 million of
severance costs.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Dec. 28, June 29,
2011 2011
---- ----
(Unaudited)
ASSETS
Current assets $252,742 $221,360
Net property and equipment (a) 1,038,698 1,056,279
Total other assets 196,770 206,929
------- -------
Total assets $1,488,210 $1,484,568
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current installments of long-term
debt $27,211 $22,091
Current liabilities 394,938 383,510
Long-term debt, less current
installments 561,482 502,572
Other liabilities 135,884 137,485
Total shareholders' equity 368,695 438,910
------- -------
Total liabilities and shareholders'
equity $1,488,210 $1,484,568
========== ==========
(a) At Dec. 28, 2011, the
company owned the land and
buildings for 188 of the 865
company-owned restaurants. The
net book values of the land and
buildings associated with these
restaurants totaled $141.8
million and $128.0 million,
respectively.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Dec. 28, Dec. 29,
2011 2010
---- ----
Cash Flows From Operating Activities:
Net income $59,295 $58,895
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 62,336 65,025
Restructure charges and other impairments 4,898 4,129
Stock-based compensation 6,449 6,455
Net loss (gain) on disposal of assets 573 (1,468)
Changes in assets and liabilities (19,306) (63,031)
------- -------
Net cash provided by operating activities 114,245 70,005
------- ------
Cash Flows from Investing Activities:
Payments for property and equipment (53,475) (31,842)
Proceeds from sale of assets 4,279 6,873
Investment in equity method investees (912) (1,556)
---- ------
Net cash used in investing activities (50,108) (26,525)
------- -------
Cash Flows from Financing Activities:
Purchases of treasury stock (125,638) (251,818)
Proceeds from issuance of long-term debt 70,000 -
Payments of dividends (25,073) (28,562)
Proceeds from issuances of treasury stock 16,649 12,165
Payments on long-term debt (5,625) (5,564)
Payments for deferred financing costs (1,620) -
Excess tax benefits from stock-based compensation 792 140
--- ---
Net cash used in financing activities (70,515) (273,639)
------- --------
Net change in cash and cash equivalents (6,378) (230,159)
Cash and cash equivalents at beginning of period 81,988 344,624
------ -------
Cash and cash equivalents at end of period $75,610 $114,465
======= ========
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
Total Restaurants Projected Openings
Second Quarter
Net Openings/(Closings)
Fiscal 2012 Dec. 28, 2011 Fiscal 2012
----------- ------------- -----------
Company-Owned
Restaurants:
Chili's (2) 821 -
Maggiano's - 44 -
--- --- ---
(2) 865 -
=== === ===
Franchise
Restaurants:
Chili's (3) 467 3
International
(a) 1 242 37-42
--- --- -----
(2) 709 40-45
=== === =====
Total
Restaurants:
Chili's (5) 1,288 3
Maggiano's - 44 -
International
(a) 1 242 37-42
--- --- -----
(4) 1,574 40-45
=== ===== =====
(a) At Dec. 28, 2011,
international franchise
restaurants by brand were 241
Chili's and one Maggiano's.
(1) Restaurant operating margin is defined as Revenues less Cost of sales, Restaurant labor and Restaurant expenses.
(2) Royalty revenues are recognized based on the sales generated and reported to the company by its franchisees.
SOURCE Brinker International, Inc.
