BRINKER INTERNATIONAL, INC. 
By DALLAS, Jan. 22, 2013 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 26, 2012.
Highlights include the following:
-- Earnings per diluted share, excluding special items, increased 6.4
percent to $0.50 compared to $0.47 for the second quarter of fiscal 2012
(see non-GAAP reconciliation below)
-- On a GAAP basis, earnings per diluted share increased 13.6 percent to
$0.50 compared to $0.44 for the second quarter of fiscal 2012
-- Chili's comparable restaurant sales increased 1.0 percent, representing
the seventh consecutive quarterly increase. Chili's comparable
restaurant sales increased 1.6 percent after adjusting for holiday
timing
-- Maggiano's comparable restaurant sales increased 0.6 percent,
representing the 12(th) consecutive quarterly increase. Maggiano's
comparable restaurant sales increased 1.5 percent after adjusting for
holiday timing
-- Company sales increased 1.1 percent to $669.1 million and restaurant
operating margin(1 )improved approximately 30 basis points to 15.7
percent from 15.4 percent
-- The company repurchased approximately 1.5 million shares of its common
stock for $45.1 million in the second quarter
-- The company paid a dividend of 20 cents per share in the second quarter,
an increase of 25 percent over the prior year second quarter
-- For the first six months of fiscal 2013, cash flows provided by
operating activities were $131.3 million and capital expenditures
totaled $69.8 million
"Brinker continued to take market share again this quarter, as we delivered our eighth consecutive quarter of positive sales growth, despite fewer holiday days in the quarter versus last year," said Wyman Roberts, President and Chief Executive Officer. "This demonstrates that our strategies designed to strengthen our margins, reinvest in our restaurants, and focus on differentiated food and service initiatives are working, as we continue to track to our goal of doubling EPS."
(1) Effective for the fiscal first quarter ended Sept. 26, 2012, 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.
Table 1: Monthly and Q2 comparable restaurant sales
Q2 13 and Q2 12, company-owned, reported brands and franchise; percentage
---
Oct Nov Dec Q2 13 Q2 12
--- --- --- ----- -----
Brinker
International 0.9 1.6 0.4 0.9 (1) 1.7
Chili's Company-
Owned
Comparable
Restaurant Sales 0.8 2.0 0.2 1.0 (1) 1.4
Pricing Impact 1.4 1.5 2.0 1.6 1.1
Mix-Shift 0.8 0.9 2.0 1.3 (0.8)
Traffic (1.4) (0.4) (3.8) (1.9) 1.1
Maggiano's
Comparable
Restaurant Sales 1.2 (0.7) 1.1 0.6 (1) 2.8
Pricing Impact 2.3 1.5 2.6 2.3 1.8
Mix-Shift 0.5 0.2 1.5 0.7 0.4
Traffic (1.6) (2.4) (3.0) (2.4) 0.6
Franchise(2) 2.4 2.6
Domestic Comparable
Restaurant Sales 2.2 1.7
International
Comparable
Restaurant Sales 2.7 4.8
System-wide(3) 1.5 2.0
1 Comparable restaurant sales can
be affected by the timing of
holidays as well as calendar or
trading day shifts. Christmas
occurred on Tuesday this year
and as a result, there were
fewer school and business
vacation days in the current
quarter compared to the prior
year. Adjusting for the change
in holiday timing, Brinker
comparable restaurant sales were
1.5%, Chili's comparable
restaurant sales were 1.6% and
Maggiano's comparable restaurant
sales were 1.5% for the current
quarter.
2 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.
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 second quarter company sales of $563.3 million represent a 1.2 percent increase from $556.5 million in the prior year period driven by increased menu prices and favorable mix shift. Chili's operating margin improved compared to the prior year primarily due to improved cost of sales. Cost of sales as a percentage of company sales was favorably impacted by increased menu pricing and favorable commodity pricing on produce and poultry, partially offset by unfavorable commodity pricing and product mix primarily related to beef and pork. Restaurant labor was negatively impacted by increased employee health insurance claims and increased overtime incurred to support the installation of new kitchen equipment, partially offset by sales leverage related to higher revenue and improved labor productivity from the installation of the equipment.
MAGGIANO'S second quarter company sales of $105.8 million increased 0.6 percent, primarily driven by menu pricing and mix. Restaurant operating margin improved compared to prior year primarily due to improved cost of sales. Cost of sales was favorably impacted by decreased commodity usage from efforts to reduce waste, increased menu pricing and menu item changes. Restaurant operating margin was negatively impacted by higher workers' compensation insurance expenses, partially offset by lower repair and maintenance expense, utilities expense and sales leverage on fixed costs related to higher revenue.
FRANCHISE AND OTHER revenues totaled $20.6 million for the quarter, an increase of 2.0 percent over the prior year driven primarily by an increase in royalty revenues. International franchise comparable restaurant sales increased 2.7 percent while domestic franchise comparable restaurant sales increased 2.2 percent. Brinker franchisees generated approximately $401 million in sales(1) for the second quarter of fiscal 2013.
Other
Depreciation and amortization expense increased $1.8 million for the quarter primarily due to investments in existing restaurants and asset replacements, partially offset by an increase in fully depreciated assets.
Interest expense increased $0.6 million for the quarter as a result of higher borrowing balances.
Excluding the impact of special items, the effective income tax rate increased to 32.7 percent in the current quarter from 29.7 percent in the same quarter last year. On a GAAP basis, the effective income tax rate increased to 32.7 percent in the current quarter as compared to 29.0 percent in the same quarter last year. The increase in the income tax rates was driven primarily by increased earnings and the temporary expiration of employment tax credits.
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 excluding special items
Q2 13 and Q2 12; $ millions and $ per diluted share after-tax
---
Q2 13 EPS Q2 12 EPS
Q2 13 Q2 12
----- -----
Net
Income 37.2 0.50 35.7 0.44
------ ----
Other
(Gains)
and
Charges(1) 0.1 0.00 2.5 0.03
---------- --- ---- --- ----
Net
Income
excluding
Special
Items 37.3 0.50 38.2 0.47
--------- ==== ==== ==== ----
1 Pre-tax Other gains and charges
was $0.2 million and $4.0
million in the second quarter
of fiscal 2013 and 2012,
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.
(1) Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.
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. 22). 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. 19, 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-Q for second quarter fiscal 2013 filing on or before Feb. 4,
2013; and
-- Third quarter earnings release, before market opens, April 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 1,593 restaurants under the names Chili's(®) Grill & Bar (1,549 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 Twenty-Six Week
Periods Ended Periods Ended
------------- ---------------
Dec. 26, Dec. 28, Dec. 26, Dec. 28,
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Company sales $669,129 $661,710 $1,332,797 $1,309,465
Franchise and other revenues (a) 20,635 20,194 40,474 40,841
------ ------ ------ ------
Total revenues 689,764 681,904 1,373,271 1,350,306
------- ------- --------- ---------
Operating Costs and Expenses:
Company restaurants
Cost of sales 184,591 185,189 369,286 366,807
Restaurant labor 217,177 214,317 436,043 430,262
Restaurant expenses 162,191 160,077 325,244 325,642
------- ------- ------- -------
Company restaurant expenses 563,959 559,583 1,130,573 1,122,711
Depreciation and amortization 32,979 31,153 65,608 62,336
General and administrative 31,030 31,215 68,303 64,034
Other gains and charges (b) 230 4,033 677 5,718
--- ----- --- -----
Total operating costs and expenses 628,198 625,984 1,265,161 1,254,799
------- ------- --------- ---------
Operating income 61,566 55,920 108,110 95,507
Interest expense 7,066 6,509 13,955 13,557
Other, net (726) (854) (1,523) (1,946)
---- ---- ------ ------
Income before provision for income taxes 55,226 50,265 95,678 83,896
Provision for income taxes 18,049 14,591 30,637 24,601
------ ------ ------ ------
Net income $37,177 $35,674 $65,041 $59,295
======= ======= ======= =======
Basic net income per share $0.51 $0.45 $0.89 $0.73
===== ===== ===== =====
Diluted net income per share $0.50 $0.44 $0.86 $0.72
===== ===== ===== =====
Basic weighted average shares outstanding 72,560 79,840 73,232 80,792
====== ====== ====== ======
Diluted weighted average shares outstanding 74,720 81,655 75,639 82,619
====== ====== ====== ======
(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 Twenty-Six Week
Periods Ended Periods Ended
-------------- ----------------
Dec. 26, Dec. 28, Dec. 26, Dec. 28,
2012 2011 2012 2011
---- ---- ---- ----
Restaurant
impairment
charges $661 $1,098 $661 $1,098
Restaurant
closure
charges 2,148 2,395 2,582 3,122
Gain on sale
of assets,
net (2,349) 4 (2,350) (1,340)
Other (230) 536 (216) 2,838
---- --- ---- -----
$230 $4,033 $677 $5,718
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Dec. 26, June 27,
2012 2012
---- ----
(Unaudited)
ASSETS
Current assets $262,604 $194,846
Net property and equipment (a) 1,037,976 1,043,564
Total other assets 200,626 197,662
------- -------
Total assets $1,501,206 $1,436,072
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current installments of long-term
debt $27,462 $27,334
Current liabilities 403,922 374,415
Long-term debt, less current
installments 684,171 587,890
Other liabilities 132,668 136,560
Total shareholders' equity 252,983 309,873
------- -------
Total liabilities and shareholders'
equity $1,501,206 $1,436,072
========== ==========
(a) At Dec. 26, 2012, the company
owned the land and buildings
for 189 of the 867 company-
owned restaurants. The net book
values of the land and
buildings associated with these
restaurants totaled $141.1
million and $120.0 million,
respectively.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Dec. 26, Dec. 28,
2012 2011
---- ----
Cash Flows From Operating Activities:
Net income $65,041 $59,295
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 65,608 62,336
Restructure charges and other impairments 3,027 4,898
Stock-based compensation 9,314 6,449
Net (gain) loss on disposal of assets (96) 573
Changes in assets and liabilities (11,617) (19,306)
------- -------
Net cash provided by operating activities 131,277 114,245
------- -------
Cash Flows from Investing Activities:
Payments for property and equipment (69,752) (53,475)
Proceeds from sale of assets 5,335 4,279
Investment in equity method investees - (912)
--- ----
Net cash used in investing activities (64,417) (50,108)
------- -------
Cash Flows from Financing Activities:
Purchases of treasury stock (131,445) (125,638)
Borrowings on revolving credit facility 110,000 -
Payments of dividends (27,677) (25,073)
Proceeds from issuances of treasury stock 22,515 16,649
Payments on long-term debt (13,190) (5,625)
Excess tax benefits from stock-based compensation 6,939 792
Proceeds from issuance of long-term debt - 70,000
Payments for deferred financing costs - (1,620)
--- ------
Net cash used in financing activities (32,858) (70,515)
------- -------
Net change in cash and cash equivalents 34,002 (6,378)
Cash and cash equivalents at beginning of period 59,103 81,988
------ ------
Cash and cash equivalents at end of period $93,105 $75,610
======= =======
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
Second Quarter Total Restaurants Projected Openings
Net Openings/(Closings)
Fiscal 2013 Dec. 26, 2012 Fiscal 2013
----------- ------------- -----------
Company-Owned
Restaurants:
Chili's 2 823 -
Maggiano's - 44 -
--- --- ---
2 867 -
=== === ===
Franchise
Restaurants:
Chili's (1) 452 2
International
(a) 7 274 30-35
--- --- -----
6 726 32-37
=== === =====
Total
Restaurants:
Chili's 1 1,275 2
Maggiano's - 44 -
International
(a) 7 274 30-35
--- --- -----
8 1,593 32-37
=== ===== =====
(a) At Dec. 26, 2012,
international franchise
restaurants by brand were 274
Chili's.
SOURCE Brinker International, Inc.
