DALLAS, April 19, 2016 /PRNewswire/ -- Brinker
International, Inc. (NYSE: EAT) today announced results for the
fiscal third quarter ended March 23,
2016.
Highlights include the following:
- Earnings per diluted share, excluding special items, increased
6.4 percent to $1.00 compared to
$0.94 for the third quarter of fiscal
2015
- On a GAAP basis, earnings per diluted share decreased 2.0
percent to $1.00 compared to
$1.02 for the third quarter of fiscal
2015
- Brinker International total revenues increased 5.2 percent to
$824.6 million and company sales
increased 5.7 percent to $805.1
million, primarily attributable to the 103 restaurants
acquired with the Pepper Dining transaction in the first quarter of
fiscal 2016
- Chili's company-owned comparable restaurant sales decreased 4.1
percent
- Maggiano's comparable restaurant sales increased 0.2
percent
- Chili's franchise comparable restaurant sales decreased 1.7
percent which includes a 2.2 percent and 0.7 percent decrease for
U.S. and international franchise restaurants, respectively
- Restaurant operating margin,1 as a percent of
company sales, declined approximately 150 basis points to 17.4
percent compared to 18.9 percent for the third quarter of fiscal
2015
- For the first nine months of fiscal 2016, cash flows provided
by operating activities were $299.6
million and capital expenditures totaled $76.1 million. Free cash flow2 was
approximately $223.5 million
- The company repurchased approximately 2.6 million shares
of its common stock for $126.1
million in the third quarter and a total of approximately
5.4 million shares for $266.2 million
year-to-date
- The company declared a dividend of 32
cents per share to be paid in the fourth quarter,
representing a 14.3% increase over the prior year
"While we continue to deliver strong cash flow and positive
earnings growth through the year, we are disappointed in our recent
sales performance," said Wyman
Roberts, chief executive officer and president. "Our focus
going forward is to more aggressively invest in our brands to grow
comp sales and capture market share."
1 Restaurant operating margin is defined as Company
sales less Cost of sales, Restaurant Labor and Restaurant expenses.
Restaurant operating margin is widely regarded in the restaurant
industry as a useful metric by which to evaluate restaurant-level
operating efficiency and performance. Restaurant operating margin
is not a measurement determined in accordance with GAAP and should
not be considered in isolation, or as an alternative, to operating
income or other similarly titled measures of other companies.
2 Free cash flow is defined as cash flows provided by
operating activities less capital expenditures.
|
Table 1: Q3
comparable restaurant sales
Company-owned,
reported brands and franchise; percentage
|
|
|
|
Q3
16
|
|
Q3
15
|
Brinker
International
|
|
(3.6)
|
|
1.7
|
Chili's
Company-Owned1
|
|
|
|
|
Comparable Restaurant
Sales
|
|
(4.1)
|
|
1.9
|
Pricing
Impact2
|
|
1.1
|
|
0.8
|
Mix-Shift2
|
|
(0.3)
|
|
1.5
|
Traffic2
|
|
(4.9)
|
|
(0.4)
|
Maggiano's
|
|
|
|
|
Comparable Restaurant
Sales
|
|
0.2
|
|
0.1
|
Pricing
Impact2
|
|
1.5
|
|
2.4
|
Mix-Shift2
|
|
(2.4)
|
|
(1.2)
|
Traffic2
|
|
1.1
|
|
(1.1)
|
|
|
|
|
|
Chili's
Franchise3
|
|
(1.7)
|
|
2.5
|
U.S.
Comparable Restaurant Sales
|
|
(2.2)
|
|
3.1
|
International
Comparable Restaurant Sales
|
|
(0.7)
|
|
1.2
|
|
|
|
|
|
Chili's
Domestic4
|
|
(3.6)
|
|
2.2
|
System-wide5
|
|
(3.1)
|
|
2.0
|
|
|
|
1
|
|
Chili's company-owned
comparable restaurant sales includes 103 Chili's restaurants
acquired from a franchisee in the first quarter of fiscal
2016.
|
2
|
|
Reclassifications
have been made between pricing impact, mix-shift and traffic in the
prior year to conform with current year classification.
|
3
|
|
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.
|
4
|
|
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.
|
5
|
|
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 6.1 percent to $703.5 million from $662.9
million in the prior year primarily due to an increase in
restaurant capacity resulting from the acquisition of 103 Chili's
restaurants on June 25, 2015,
partially offset by a decline in comparable restaurant sales. As
compared to the prior year, Chili's restaurant operating
margin1 declined. Restaurant labor, as a percent of
company sales, increased compared to the prior year due to higher
wage rates, health insurance expenses and sales deleverage,
partially offset by lower incentive bonus. Restaurant expenses, as
a percent of company sales, increased due to sales deleverage and
higher repairs and maintenance and rent expenses. Cost of
sales, as a percent of company sales, increased slightly due to
unfavorable menu item mix and commodity pricing primarily related
to steak, produce and chicken, partially offset by increased menu
pricing and favorable commodity pricing related to burger meat,
cheese and seafood.
MAGGIANO'S third quarter company sales increased 2.8 percent to
$101.6 million from $98.8 million in the prior year primarily due to
an increase in restaurant capacity. As compared to the prior year,
Maggiano's restaurant operating margin1 improved.
Restaurant expenses, as a percent of company sales, decreased
compared to prior year due to lower advertising and utilities
expenses, partially offset by higher preopening expenses. Cost of
sales, as a percent of company sales, was positively impacted by
increased menu pricing, favorable commodity pricing and menu item
changes. Restaurant labor, as a percent of company sales, increased
compared to prior year due to higher wage rates and health
insurance expense.
1 Restaurant operating margin is defined as Company
sales less Cost of sales, Restaurant labor and Restaurant
expenses. Restaurant operating margin is widely regarded in
the restaurant industry as a useful metric by which to evaluate
restaurant-level operating efficiency and performance. Restaurant
operating margin is not a measurement determined in accordance with
GAAP and should not be considered in isolation, or as an
alternative, to operating income or other similarly titled measures
of other companies.
FRANCHISE AND OTHER revenues decreased 13.3 percent to
$19.5 million for the third quarter
compared to $22.5 million in the
prior year driven primarily by a decrease in royalty revenues
resulting from the acquisition of 103 Chili's restaurants from a
former franchisee. Brinker franchisees generated approximately
$346 million in sales2 for
the third quarter of fiscal 2016.
2Royalty 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 depreciation on acquired restaurants, asset
replacements and new restaurant openings, partially offset by an
increase in fully depreciated assets.
General and administrative expense decreased approximately
$5.0 million primarily due to lower
performance-based compensation.
On a GAAP basis, the effective income tax rate decreased to 26.4
percent in the current quarter from 32.1 percent in the prior year
quarter. The effective income tax rate decreased primarily
due to lower profits and the benefits associated with the release
of the valuation allowance for state tax net operating losses and
the resolution of certain tax positions. Excluding the impact of
special items, the effective income tax rate decreased to 30.1
percent in the current quarter compared to 31.5 percent in the
prior year quarter primarily due to lower profits.
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.
|
Table 2:
Reconciliation of net income excluding special items
Q3 16 and Q3 15; $
millions and $ per diluted share after-tax
|
|
|
|
Q3
16
|
|
EPS Q3
16
|
|
Q3
15
|
|
EPS Q3
15
|
Net Income
|
|
57.5
|
|
1.00
|
|
65.4
|
|
1.02
|
Other (Gains) and
Charges, net of taxes1
|
|
2.4
|
|
0.04
|
|
(5.2)
|
|
(0.08)
|
Adjustment for tax
items2
|
|
(2.6)
|
|
(0.04)
|
|
—
|
|
—
|
Net Income excluding
Special Items
|
|
57.3
|
|
1.00
|
|
60.2
|
|
0.94
|
|
|
|
1
|
|
Pre-tax Other gains
and charges includes a charge of $3.9 million and a gain of $8.5
million in the third quarter of fiscal 2016 and 2015, respectively.
See footnote "b" to the consolidated statements of comprehensive
income for additional details.
|
2
|
|
Discrete tax items
result from the benefit associated with the release of the
valuation allowance for state net operating losses as well as the
resolution of certain tax positions which directly impacts tax
expense.
|
Guidance Policy
Brinker provides annual guidance as
it relates to comparable restaurant sales, earnings per diluted
share, excluding special items, and other key line items in the
statement of comprehensive income 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 19). 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 17, 2016.
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 the third
quarter of fiscal 2016 filing on or before May 2, 2016; and
- Fourth quarter earnings release, before market opens,
Aug. 11, 2016.
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 23, 2016, Brinker owned,
operated, or franchised 1,647 restaurants under the names
Chili's® Grill & Bar (1,596 restaurants) and
Maggiano's Little Italy® (51 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
|
|
Thirty-Nine Week
Periods Ended
|
|
|
March 23,
2016
|
|
March 25,
2015
|
|
March 23,
2016
|
|
March 25,
2015
|
Revenues:
|
|
|
|
|
|
|
|
|
Company
sales
|
|
$
|
805,145
|
|
|
$
|
761,736
|
|
|
$
|
2,311,298
|
|
|
$
|
2,166,368
|
|
Franchise and other
revenues (a)
|
|
19,494
|
|
|
22,479
|
|
|
64,510
|
|
|
71,763
|
|
Total
revenues
|
|
824,639
|
|
|
784,215
|
|
|
2,375,808
|
|
|
2,238,131
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
215,362
|
|
|
203,960
|
|
|
615,764
|
|
|
582,507
|
|
Restaurant
labor
|
|
262,701
|
|
|
240,105
|
|
|
756,874
|
|
|
695,114
|
|
Restaurant
expenses
|
|
187,216
|
|
|
173,611
|
|
|
567,049
|
|
|
528,047
|
|
Company restaurant
expenses
|
|
665,279
|
|
|
617,676
|
|
|
1,939,687
|
|
|
1,805,668
|
|
Depreciation and
amortization
|
|
39,050
|
|
|
36,599
|
|
|
117,335
|
|
|
108,213
|
|
General and
administrative
|
|
30,170
|
|
|
35,194
|
|
|
95,190
|
|
|
100,488
|
|
Other gains and
charges (b)
|
|
3,864
|
|
|
(8,477)
|
|
|
5,454
|
|
|
747
|
|
Total operating costs
and expenses
|
|
738,363
|
|
|
680,992
|
|
|
2,157,666
|
|
|
2,015,116
|
|
Operating
income
|
|
86,276
|
|
|
103,223
|
|
|
218,142
|
|
|
223,015
|
|
Interest
expense
|
|
8,403
|
|
|
7,361
|
|
|
24,077
|
|
|
21,709
|
|
Other, net
|
|
(277)
|
|
|
(454)
|
|
|
(1,110)
|
|
|
(1,568)
|
|
Income before
provision for income taxes
|
|
78,150
|
|
|
96,316
|
|
|
195,175
|
|
|
202,874
|
|
Provision for income
taxes
|
|
20,648
|
|
|
30,889
|
|
|
56,772
|
|
|
63,403
|
|
Net income
|
|
$
|
57,502
|
|
|
$
|
65,427
|
|
|
$
|
138,403
|
|
|
$
|
139,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share
|
|
$
|
1.01
|
|
|
$
|
1.04
|
|
|
$
|
2.36
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share
|
|
$
|
1.00
|
|
|
$
|
1.02
|
|
|
$
|
2.33
|
|
|
$
|
2.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
|
56,673
|
|
|
62,891
|
|
|
58,699
|
|
|
63,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
57,407
|
|
|
64,091
|
|
|
59,505
|
|
|
65,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment (c)
|
|
$
|
(29)
|
|
|
$
|
(2,847)
|
|
|
$
|
(3,294)
|
|
|
$
|
(7,183)
|
|
Other comprehensive
loss
|
|
(29)
|
|
|
(2,847)
|
|
|
(3,294)
|
|
|
(7,183)
|
|
Comprehensive
income
|
|
$
|
57,473
|
|
|
$
|
62,580
|
|
|
$
|
135,109
|
|
|
$
|
132,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Franchise and other
revenues primarily includes royalties, development fees, 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.
|
|
|
(b)
|
Other gains and
charges include:
|
|
Thirteen Week
Periods Ended
|
|
Thirty-Nine Week
Periods Ended
|
|
March 23,
2016
|
|
March 25,
2015
|
|
March 23,
2016
|
|
March 25,
2015
|
Restaurant impairment
charges
|
$
|
3,413
|
|
|
$
|
—
|
|
|
$
|
3,937
|
|
|
$
|
747
|
|
(Gain) Loss on the
sale of assets, net
|
(1,096)
|
|
|
—
|
|
|
(2,858)
|
|
|
1,093
|
|
Impairment of
investment
|
1,000
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
Acquisition
costs
|
120
|
|
|
—
|
|
|
700
|
|
|
—
|
|
Restaurant closure
charges
|
89
|
|
|
76
|
|
|
89
|
|
|
1,457
|
|
Litigation
|
—
|
|
|
(8,553)
|
|
|
(2,032)
|
|
|
(2,753)
|
|
Severance
|
—
|
|
|
—
|
|
|
2,368
|
|
|
—
|
|
Impairment of liquor
licenses
|
—
|
|
|
—
|
|
|
—
|
|
|
175
|
|
Other
|
338
|
|
|
—
|
|
|
2,250
|
|
|
28
|
|
|
$
|
3,864
|
|
|
$
|
(8,477)
|
|
|
$
|
5,454
|
|
|
$
|
747
|
|
(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)
|
|
|
|
March 23,
2016
|
|
June 24,
2015
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
$
|
196,724
|
|
|
$
|
187,224
|
|
Net property and
equipment (a)
|
|
1,053,024
|
|
|
1,032,044
|
|
Total other
assets
|
|
239,440
|
|
|
216,605
|
|
Total
assets
|
|
$
|
1,489,188
|
|
|
$
|
1,435,873
|
|
LIABILITIES AND
SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
Current installments
of long-term debt
|
|
$
|
3,605
|
|
|
$
|
3,439
|
|
Other current
liabilities
|
|
418,686
|
|
|
415,036
|
|
Long-term debt, less
current installments
|
|
1,174,660
|
|
|
970,825
|
|
Other
liabilities
|
|
135,899
|
|
|
125,033
|
|
Total shareholders'
deficit
|
|
(243,662)
|
|
|
(78,460)
|
|
Total liabilities and
shareholders' deficit
|
|
$
|
1,489,188
|
|
|
$
|
1,435,873
|
|
(a)
|
At March 23, 2016,
the company owned the land and buildings for 191 of the 997
company-owned restaurants. The net book values of the land and
buildings associated with these restaurants totaled $141.7 million
and $108.2 million, respectively.
|
|
BRINKER
INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
|
|
|
Thirty-Nine Week
Periods Ended
|
|
|
March 23,
2016
|
|
March 25,
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
138,403
|
|
|
$
|
139,471
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
117,335
|
|
|
108,213
|
|
Stock-based
compensation
|
|
12,095
|
|
|
11,587
|
|
Restructure charges
and other impairments
|
|
5,937
|
|
|
8,402
|
|
Net (gain) loss on
disposal of assets
|
|
(633)
|
|
|
3,819
|
|
Changes in assets and
liabilities
|
|
26,444
|
|
|
3,415
|
|
Net cash provided by
operating activities
|
|
299,581
|
|
|
274,907
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
Payments for property
and equipment
|
|
(76,090)
|
|
|
(107,108)
|
|
Payment for purchase
of restaurants
|
|
(105,577)
|
|
|
—
|
|
Proceeds from sale of
assets
|
|
4,256
|
|
|
1,950
|
|
Net cash used in
investing activities
|
|
(177,411)
|
|
|
(105,158)
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
Purchases of treasury
stock
|
|
(266,157)
|
|
|
(217,019)
|
|
Borrowings on
revolving credit facility
|
|
256,500
|
|
|
442,750
|
|
Payments of
dividends
|
|
(56,192)
|
|
|
(53,248)
|
|
Payments on revolving
credit facility
|
|
(50,000)
|
|
|
(177,000)
|
|
Excess tax benefits
from stock-based compensation
|
|
5,365
|
|
|
16,920
|
|
Payments on long-term
debt
|
|
(2,547)
|
|
|
(188,758)
|
|
Proceeds from
issuances of treasury stock
|
|
4,725
|
|
|
14,965
|
|
Payments for deferred
financing costs
|
|
—
|
|
|
(2,501)
|
|
Net cash used in
financing activities
|
|
(108,306)
|
|
|
(163,891)
|
|
Net change in cash
and cash equivalents
|
|
13,864
|
|
|
5,858
|
|
Cash and cash
equivalents at beginning of period
|
|
55,121
|
|
|
57,685
|
|
Cash and cash
equivalents at end of period
|
|
$
|
68,985
|
|
|
$
|
63,543
|
|
|
BRINKER
INTERNATIONAL, INC.
RESTAURANT
SUMMARY
|
|
|
|
Third Quarter
Openings
Fiscal
2016
|
|
Total Restaurants
March 23,
2016
|
|
Projected Openings
Fiscal 2016
|
Company-Owned
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
—
|
|
933
|
|
11-13
|
Chili's
International
|
|
—
|
|
13
|
|
—
|
Maggiano's
|
|
—
|
|
51
|
|
2
|
|
|
—
|
|
997
|
|
13-15
|
Franchise
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
4
|
|
325
|
|
8-10
|
Chili's
International
|
|
7
|
|
325
|
|
25-30
|
|
|
11
|
|
650
|
|
33-40
|
Total
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
4
|
|
1,258
|
|
19-23
|
Chili's
International
|
|
7
|
|
338
|
|
25-30
|
Maggiano's
|
|
—
|
|
51
|
|
2
|
|
|
11
|
|
1,647
|
|
46-55
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/brinker-international-reports-third-quarter-results-300253561.html
SOURCE Brinker International, Inc.