DALLAS, Aug. 13, 2019 /PRNewswire/ -- Brinker
International, Inc. (NYSE: EAT) today announced results for the
fiscal fourth quarter and year ended June 26, 2019.
Highlights include the following:
- Earnings per diluted share, on a GAAP basis, in the fourth
quarter of fiscal 2019 increased 20.8% to $1.22 compared to $1.01 in the fourth quarter of fiscal 2018.
Earnings per diluted share, on a GAAP basis, in fiscal 2019
increased 45.6% to $3.96 compared to
$2.72 in fiscal 2018
- Earnings per diluted share, excluding special items, in the
fourth quarter of fiscal 2019 increased 14.3% to $1.36 compared to $1.19 in the fourth quarter of fiscal 2018.
Earnings per diluted share, excluding special items, in fiscal 2019
increased 12.3% to $3.93 compared to
$3.50 in fiscal 2018 (see non-GAAP
reconciliation below)
- Brinker International's Company sales in the fourth quarter of
fiscal 2019 increased 1.7% to $804.8
million compared to the fourth quarter of fiscal 2018. Total
revenues in the fourth quarter of fiscal 2019 increased 2.1% to
$834.1 million compared to the fourth
quarter of fiscal 2018
- Chili's company-owned comparable restaurant sales increased
1.5% in the fourth quarter of fiscal 2019 compared to the fourth
quarter of fiscal 2018. Chili's company-owned comparable restaurant
sales increased 2.3% in fiscal 2019 compared to fiscal 2018.
Chili's U.S. franchise comparable restaurant sales increased 0.9%
in the fourth quarter of fiscal 2019 compared to the fourth quarter
of fiscal 2018
- Maggiano's company-owned comparable restaurant sales decreased
0.2% in the fourth quarter of fiscal 2019 compared to the fourth
quarter of fiscal 2018. Maggiano's company-owned comparable
restaurant sales increased 0.6% in fiscal 2019 compared to fiscal
2018
- Chili's international franchise comparable restaurant sales
decreased 0.5% in the fourth quarter of fiscal 2019 compared to the
fourth quarter of fiscal 2018
- Operating income, as a percentage of Total revenues, was 7.7%
in the fourth quarter of fiscal 2019 compared to 8.6% in the fourth
quarter of fiscal 2018 representing a decrease of approximately 90
basis points
- Restaurant operating margin, as a percentage of Company sales,
was 14.9% in the fourth quarter of fiscal 2019 which included the
impact of the sale leaseback transactions and adopting the new
revenue accounting standard ("ASC 606"), compared to 15.9% in the
fourth quarter of fiscal 2018 (see non-GAAP reconciliation below).
Excluding the impact of the sale leaseback transactions and ASC
606, Restaurant operating margin in the fourth quarter of fiscal
2019 would have increased to 16.5% (see non-GAAP reconciliation
below)
- Cash flows provided by operating activities in the fifty-two
week period ended June 26, 2019 was
$212.7 million and capital
expenditures totaled $167.6 million
resulting in free cash flow of $45.1
million (see non-GAAP reconciliation below) which was
reduced by $78.6 million in cash tax
payments related to the gain on the sale leaseback transactions.
Proceeds from sale leaseback transactions of $485.9 million are included in Cash flows
provided by investing activities
- The Company's Board of Directors approved a quarterly dividend
of $0.38 per share on the common
stock of the Company. The dividend will be payable September 26, 2019 to shareholders of record as
of September 6, 2019
"The fourth quarter marked our 5th consecutive
quarter of positive same store sales and our sixth consecutive
quarter to out-perform the category in traffic", said Wyman Roberts, CEO and President. "Our continued
focus on improving the guest experience and providing everyday
value is a long term strategy that continues to deliver solid
results."
QUARTERLY OPERATING PERFORMANCE
Company Sales and Company Restaurant Expenses
Chili's Company sales in the fourth quarter of fiscal 2019
increased 2.0% to $701.9 million from
$688.2 million in the fourth quarter
of fiscal 2018 primarily due to an increase in comparable
restaurant sales driven by an increase in To Go sales. As compared
to the fourth quarter of fiscal 2018, Chili's restaurant operating
margin(1) declined. This was primarily driven by Chili's
Restaurant expenses, as a percentage of Company sales, which
increased compared to the fourth quarter of fiscal 2018 primarily
due to higher rent expenses associated with the new operating
leases entered into during fiscal 2019 as part of the sale
leaseback transactions and the impact of adopting ASC 606,
partially offset by sales leverage. Cost of sales, as a percentage
of Company sales, increased compared to the fourth quarter of
fiscal 2018 primarily due to unfavorable menu item mix and produce
commodity pricing, partially offset by increased menu pricing.
These increases were partially offset by Restaurant labor, as a
percentage of Company sales, which decreased compared to the fourth
quarter of fiscal 2018 due to lower manager expenses, lower
employee health insurance expenses and sales leverage impact,
partially offset by higher wage rates.
Maggiano's Company sales in the fourth quarter of fiscal 2019
decreased 0.3% to $102.9 million from
$103.2 million in the fourth quarter
of fiscal 2018 primarily due to a decrease in comparable restaurant
sales. As compared to the fourth quarter of fiscal 2018, Maggiano's
restaurant operating margin(1) declined. This was
primarily driven by Cost of sales, as a percentage of Company
sales, which increased compared to the fourth quarter of fiscal
2018 primarily due to unfavorable menu item mix and commodity
pricing, partially offset by increased menu pricing. These
increases were partially offset by a decrease in Restaurant labor,
as a percentage of Company sales, primarily due to lower manager
expenses, partially offset by sales deleverage. Restaurant
expenses, as a percentage of Company sales remained flat compared
to the fourth quarter of fiscal 2018.
(1)
|
Restaurant operating
margin is defined as Company sales less Cost of sales, Restaurant
labor and Restaurant expenses and excludes Depreciation and
amortization expenses (see non-GAAP reconciliation
below).
|
Franchise and Other Revenues
Franchise and other revenues in the fourth quarter of fiscal
2019 increased 14.0% to $29.3 million
from $25.7 million in the fourth
quarter of fiscal 2018 primarily due to the adoption of ASC 606
during fiscal 2019. Please refer to "REVENUE RECOGNITION UPDATE"
section below for more details on the new revenue standard. Brinker
franchisees generated approximately $331.7
million in sales(2) in the fourth quarter of
fiscal 2019.
(2)
|
Royalty revenues are
recognized based on the sales generated and reported to the Company
by franchisees.
|
Other
Depreciation and amortization expenses in the fourth quarter of
fiscal 2019 increased $0.4 million
compared to the fourth quarter of fiscal 2018 primarily due to
additions for existing restaurants primarily related to Chili's
remodels, an increase in capital leases, and new restaurants
additions, partially offset by an increase in fully depreciated
assets, the reduction of restaurants assets sold as part of the
sale leaseback transactions and restaurant closures.
General and administrative expenses in the fourth quarter of
fiscal 2019 increased $5.2 million
compared to the fourth quarter of fiscal 2018 primarily due to
higher performance-based compensation expenses and increased rent
expenses related to the new corporate headquarters.
Income Taxes
On a GAAP basis, the effective income tax rate in the fourth
quarter of fiscal 2019 decreased to 5.1% compared to 20.4% in the
fourth quarter of fiscal 2018. This decrease was driven primarily
by the positive impact of the lower statutory tax rate due to the
Tax Cuts and Jobs Act of 2017 (the "Tax Act") that was enacted
during fiscal 2018. The Tax Act lowered the federal statutory tax
rate from 35.0% to 21.0% effective January
1, 2018. The decrease was also driven by an increase in the
FICA tax credit and foreign tax deduction. Excluding the impact of
special items (see non-GAAP reconciliation below for details), the
effective income rate decreased to 10.1% in the fourth quarter of
fiscal 2019 compared to 19.8% in the fourth quarter of fiscal
2018.
FISCAL 2020 OUTLOOK
We estimate earnings per diluted share, excluding special items,
will be in the range of $4.15 to
$4.35. We believe providing estimated
guidance for fiscal 2020 earnings per diluted share, excluding
special items, provides investors the appropriate insight into our
ongoing operating performance. Estimated earnings are based on the
following:
- We expect to acquire 116 Chili's restaurants in the first
quarter of fiscal 2020 from our franchisee, ERJ Dining. The impact
of this acquisition has been included within the fiscal 2020
guidance provided
- Revenues are expected to be up approximately 9.0% to 10.0%
primarily due to the acquisition of the 116 Chili's
restaurants
- Comparable restaurant sales are expected to be up 1.75% to
2.50%
- Restaurant operating margin is expected to be down
approximately 20 basis points to flat
- Capital expenditures are expected to be $140.0 million to $150.0
million
- General and administrative expense is expected to remain
flat
- Excluding the impact of special items, the effective income tax
rate is expected to be approximately 10.5% to 11.5%
- Free cash flow is expected to be $160.0
million to $175.0 million
- Effective fiscal 2020, we have adopted the new US GAAP leasing
standard (Topic 842) using the cumulative effect transition method
and therefore no prior periods will be restated. We do not expect
the new leasing standard to have a significant impact on earnings.
The impact of the new leasing standard has been included within the
fiscal 2020 guidance provided
We are unable to reliably forecast special items such as
restaurant impairments, restaurant closures, reorganization charges
and legal settlements without unreasonable effort. As such, we do
not present a reconciliation of forecasted non-GAAP measures to the
corresponding GAAP measures. If special items are reported during
fiscal 2020, reconciliations to the appropriate GAAP measures will
be provided.
COMPARABLE RESTAURANT SALES
The tables below present the percentage change in company-owned
and franchise comparable restaurant sales in the quarter and
year-to-date comparative periods as described below:
Q4 19 and Q4
18
|
|
Comparable
Sales(1)
|
|
Price
Impact
|
|
Mix-Shift(2)
|
|
Traffic
|
|
Q4: 19 vs
18
|
|
Q4: 18 vs
17
|
|
Q4: 19 vs
18
|
|
Q4: 18 vs
17
|
|
Q4: 19 vs
18
|
|
Q4: 18 vs
17
|
|
Q4: 19 vs
18
|
|
Q4: 18 vs
17
|
Company-owned
|
1.2
|
%
|
|
0.6
|
%
|
|
3.6
|
%
|
|
(0.7)
|
%
|
|
(1.8)
|
%
|
|
0.6
|
%
|
|
(0.6)
|
%
|
|
0.7
|
%
|
Chili's
|
1.5
|
%
|
|
0.6
|
%
|
|
3.9
|
%
|
|
(1.0)
|
%
|
|
(1.9)
|
%
|
|
0.8
|
%
|
|
(0.5)
|
%
|
|
0.8
|
%
|
Maggiano's
|
(0.2)
|
%
|
|
0.3
|
%
|
|
1.6
|
%
|
|
1.7
|
%
|
|
(0.5)
|
%
|
|
0.2
|
%
|
|
(1.3)
|
%
|
|
(1.6)
|
%
|
Chili's
franchise(3)
|
0.4
|
%
|
|
(1.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.(4)
|
0.9
|
%
|
|
(0.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
(0.5)
|
%
|
|
(2.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chili's
domestic(4)(5)
|
1.3
|
%
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide(6)
|
1.0
|
%
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 19 and FY
18
|
|
Comparable
Sales(1)
|
|
Price
Impact
|
|
Mix-Shift(2)
|
|
Traffic
|
|
FY: 19 vs
18
|
|
FY: 18 vs
17
|
|
FY: 19 vs
18
|
|
FY: 18 vs
17
|
|
FY: 19 vs
18
|
|
FY: 18 vs
17
|
|
FY: 19 vs
18
|
|
FY: 18 vs
17
|
Company-owned
|
2.1
|
%
|
|
(1.0)
|
%
|
|
1.7
|
%
|
|
1.3
|
%
|
|
(1.7)
|
%
|
|
1.1
|
%
|
|
2.1
|
%
|
|
(3.4)
|
%
|
Chili's
|
2.3
|
%
|
|
(1.1)
|
%
|
|
1.7
|
%
|
|
1.3
|
%
|
|
(1.7)
|
%
|
|
1.2
|
%
|
|
2.3
|
%
|
|
(3.6)
|
%
|
Maggiano's
|
0.6
|
%
|
|
0.1
|
%
|
|
1.5
|
%
|
|
1.1
|
%
|
|
(0.5)
|
%
|
|
0.6
|
%
|
|
(0.4)
|
%
|
|
(1.6)
|
%
|
Chili's
franchise(3)(4)
|
0.1
|
%
|
|
(2.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
2.0
|
%
|
|
(1.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
(3.0)
|
%
|
|
(2.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chili's
domestic(5)
|
2.2
|
%
|
|
(1.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide(6)
|
1.5
|
%
|
|
(1.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Comparable restaurant
sales include all restaurants that have been in operation for more
than 18 months. Amounts are calculated based on comparable current
period versus same period a year ago.
|
|
|
(2)
|
Mix-shift is
calculated as the year-over-year percentage change in Company sales
resulting from the change in menu items ordered by
guests.
|
|
|
(3)
|
Chili's franchise
sales generated by franchisees are not included in revenues in the
Consolidated Statements of Comprehensive Income; however, we
generate royalty revenues 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.
|
|
|
(4)
|
Chili's franchise
U.S. comparable sales and Chili's domestic comparable sales for the
Q4: 18 vs 17 period were restated due to a change in franchise
reported sales. System-wide comparable sales for the Q4: 18 vs 17
period were not affected by this restatement. Chili's franchise
sales for the FY: 18 vs 17 period were restated due to a change in
franchise reported sales. Chili's domestic and System-wide
comparable sales for the FY: 18 vs 17 period were not affected by
this restatement.
|
|
|
(5)
|
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.
|
|
|
(6)
|
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 Chili's
restaurants.
|
NON-GAAP MEASURES
Brinker management uses certain non-GAAP measures in analyzing
operating performance and believes that the presentation of these
measures in this release provides investors with information that
is beneficial to gaining an understanding of the Company's
financial results. Non-GAAP disclosures should not be viewed as a
substitute for financial results determined in accordance with
GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies. Reconciliations
of these non-GAAP measures are included in the tables below.
Reconciliation of Net Income and Earnings Per Share Excluding
Special Items
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. The following reconciliations
are presented in millions, except per diluted share amounts.
Q4 19 and Q4
18
|
|
Q4
19
|
|
EPS Q4
19
|
|
Q4
18
|
|
EPS Q4
18
|
Net income
|
$
|
46.7
|
|
|
$
|
1.22
|
|
|
$
|
43.8
|
|
|
$
|
1.01
|
|
Special items
(1)
|
8.7
|
|
|
0.22
|
|
|
9.3
|
|
|
0.21
|
|
Income tax effect
related to special items (2)
|
(2.1)
|
|
|
(0.05)
|
|
|
(2.9)
|
|
|
(0.06)
|
|
Special items, net of
taxes
|
6.6
|
|
|
0.17
|
|
|
6.4
|
|
|
0.15
|
|
Adjustment for
special tax items (3)
|
(1.2)
|
|
|
(0.03)
|
|
|
1.4
|
|
|
0.03
|
|
Net income excluding
special items
|
$
|
52.1
|
|
|
$
|
1.36
|
|
|
$
|
51.6
|
|
|
$
|
1.19
|
|
|
FY 19 and FY
18
|
|
FY
19
|
|
EPS FY
19
|
|
FY
18
|
|
EPS FY
18
|
Net income
|
$
|
154.9
|
|
|
$
|
3.96
|
|
|
$
|
125.9
|
|
|
$
|
2.72
|
|
Special items
(1)
|
(1.1)
|
|
|
(0.03)
|
|
|
34.5
|
|
|
0.74
|
|
Income tax effect
related to special items (2)
|
0.3
|
|
|
0.01
|
|
|
(10.4)
|
|
|
(0.22)
|
|
Special items, net of
taxes
|
(0.8)
|
|
|
(0.02)
|
|
|
24.1
|
|
|
0.52
|
|
Adjustment for
special tax items (3)
|
(0.6)
|
|
|
(0.01)
|
|
|
12.1
|
|
|
0.26
|
|
Net income excluding
special items
|
$
|
153.5
|
|
|
$
|
3.93
|
|
|
$
|
162.1
|
|
|
$
|
3.50
|
|
|
|
(1)
|
Special items in the
fourth quarter of fiscal 2019 consist of a $7.9 million charge in
Other (gains) and charges, and a $0.8 million of incremental
depreciation expenses associated with a change in estimated useful
life of certain restaurant-level long-lived assets. Special items
in the fourth quarter of fiscal 2018 consist of a $9.3 million
charge in Other (gains) and charges.
|
|
|
|
Special items in
fiscal 2019 consist of a $4.5 million gain in Other (gains) and
charges, partially offset by $3.4 million of incremental
depreciation expenses associated with a change in estimated useful
life of certain restaurant-level long-lived assets. Special items
in fiscal 2018 consist of a $34.5 million charge in Other (gains)
and charges.
|
|
|
|
Footnote "(2)" to the
Consolidated Statements of Comprehensive Income contains additional
details on the composition of Other (gains) and charges for each
period presented.
|
|
|
(2)
|
Income tax effect
related to special items is based on the statutory tax rate in
effect at the end of each period presented.
|
|
|
(3)
|
Adjustment for
special tax items in the fourth quarter of fiscal 2019 primarily
relates to favorable resolution of liabilities established for
uncertain tax positions and realization of tax benefits not
previously recognized. Adjustment for special tax items in the
fourth quarter of fiscal 2018 primarily relates to the tax impact
from the Tax Act re-measurement of deferred taxes resulting from
the tax rate decrease from 35.0% to 21.0% and the tax impact from
IRS settlements and excess tax shortfalls associated with
stock-based compensation.
|
|
|
|
Adjustment for
special tax items in fiscal 2019 primarily relates to favorable
resolution of liabilities established for uncertain tax positions,
realization of tax benefits not previously recognized and tax
shortfalls associated with stock based compensation. Adjustment for
special tax items in fiscal 2018 primarily relates to the tax
impact from the Tax Reform re-measurement of deferred taxes
resulting from the tax rate decrease from 35.0% to 21.0% and the
tax impact from IRS settlements and excess tax shortfalls
associated with stock-based compensation.
|
Reconciliation of Restaurant Operating Margin
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 as an indicator of financial
performance. Restaurant operating margin is widely regarded in the
restaurant industry as a useful metric by which to evaluate
restaurant-level operating efficiency and performance of ongoing
restaurant-level operations. This non-GAAP measure is not
indicative of overall company performance and profitability in that
this measure does not directly accrue benefit to the shareholders
due to the nature of costs excluded. We define Restaurant operating
margin as Company sales less Company restaurant expenses, including
Cost of sales, Restaurant labor and Restaurant expenses. We believe
this metric provides a more useful comparison between periods and
enables investors to focus on the performance of restaurant-level
operations by excluding revenues not related to food and beverage
sales at company-owned restaurants, corporate General and
administrative expenses, Depreciation and amortization, and Other
(gains) and charges.
Restaurant operating margin excludes Franchise and other
revenues which are earned primarily from franchise royalties and
other non-food and beverage revenue streams such as banquet service
charges, digital entertainment revenues and gift card breakage.
Depreciation and amortization expenses, substantially all of which
is related to restaurant-level assets, is excluded because such
expenses represent historical costs which do not reflect current
cash outlays for the restaurants. General and administrative
expenses include primarily non-restaurant-level costs associated
with support of the restaurants and other activities at our
corporate offices and are therefore excluded. We believe that
excluding special items, included within Other (gains) and charges,
from Restaurant operating margin provides investors with a clearer
perspective of the Company's ongoing operating performance and a
more useful comparison to prior period results. Restaurant
operating margin as presented may not be comparable to other
similarly titled measures of other companies in our industry.
The adoption of the new revenue standard, ASC 606, in fiscal
2019 changed the presentation and recording of certain items
contained within Franchise and other revenues, Operating income,
and Restaurant operating margin. The adoption did not have a
significant impact. For more details about the impact of adopting
the new revenue standard please refer to the "REVENUE RECOGNITION
UPDATE" section below. The following reconciliations are presented
in millions, except percentages.
Q4 19 and Q4
18
|
|
Q4
19
|
|
Adjustments
(1)
|
|
Q4 19
Adjusted
|
|
Q4
18
|
Operating income -
GAAP
|
$
|
64.0
|
|
|
$
|
—
|
|
|
$
|
64.0
|
|
|
$
|
70.4
|
|
Operating income as a
percentage of Total revenues
|
7.7
|
%
|
|
—
|
%
|
|
7.7
|
%
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
Operating income -
GAAP
|
$
|
64.0
|
|
|
$
|
6.3
|
|
|
$
|
70.3
|
|
|
$
|
70.4
|
|
Less: Franchise
and other revenues
|
(29.3)
|
|
|
6.9
|
|
|
(22.4)
|
|
|
(25.7)
|
|
Plus:
Depreciation and amortization
|
38.1
|
|
|
—
|
|
|
38.1
|
|
|
37.7
|
|
General and
administrative
|
39.1
|
|
|
—
|
|
|
39.1
|
|
|
33.9
|
|
Other (gains) and
charges
|
7.9
|
|
|
—
|
|
|
7.9
|
|
|
9.3
|
|
Restaurant operating
margin - non-GAAP
|
$
|
119.8
|
|
|
$
|
13.2
|
|
|
$
|
133.0
|
|
|
$
|
125.6
|
|
Restaurant operating
margin as a percentage of Company sales
|
14.9
|
%
|
|
1.6
|
%
|
|
16.5
|
%
|
|
15.9
|
%
|
|
FY 19 and FY
18
|
|
FY
19
|
|
Adjustments
(1)
|
|
FY 19
Adjusted
|
|
FY
18
|
Operating income -
GAAP
|
$
|
230.7
|
|
|
$
|
—
|
|
|
$
|
230.7
|
|
|
$
|
226.1
|
|
Operating income as a
percentage of Total revenues
|
7.2
|
%
|
|
—
|
%
|
|
7.2
|
%
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
Operating income -
GAAP
|
$
|
230.7
|
|
|
$
|
26.1
|
|
|
$
|
256.8
|
|
|
$
|
226.1
|
|
Less: Franchise
and other revenues
|
(111.7)
|
|
|
24.6
|
|
|
(87.1)
|
|
|
(93.9)
|
|
Plus:
Depreciation and amortization
|
147.6
|
|
|
—
|
|
|
147.6
|
|
|
151.4
|
|
General and
administrative
|
149.1
|
|
|
—
|
|
|
149.1
|
|
|
136.0
|
|
Other (gains) and
charges
|
(4.5)
|
|
|
—
|
|
|
(4.5)
|
|
|
34.5
|
|
Restaurant operating
margin - non-GAAP
|
$
|
411.2
|
|
|
$
|
50.7
|
|
|
$
|
461.9
|
|
|
$
|
454.1
|
|
Restaurant operating
margin as a percentage of Company sales
|
13.2
|
%
|
|
1.7
|
%
|
|
14.9
|
%
|
|
14.9
|
%
|
|
|
(1)
|
Adjustments include
the impact of the Q4 19 and FY 19 additional rent expense
associated with the sale leaseback transactions, and the impact of
adopting ASC 606.
|
Reconciliation of Free Cash Flow
FY 19
Brinker believes presenting free cash flow provides a useful
measure to evaluate the cash flow available for reinvestment after
considering the capital requirements and expenditures of our
business operations (in millions).
|
Fifty-Two Week
Period Ended
June 26, 2019
|
Cash flows provided
by operating activities - GAAP
|
$
|
212.7
|
|
Capital
expenditures
|
(167.6)
|
|
Free cash flow -
non-GAAP
|
$
|
45.1
|
|
During the fifty-two week period ended June 26, 2019, Cash flows provided by operating
activities - GAAP included a reduction of $78.6 million cash tax payments related to the
gain on the sale leaseback transactions. The cash proceeds received
from the sale leaseback transactions of $485.9 million are recorded in Cash flows
provided by investing activities during the fifty-two week period
ended June 26, 2019.
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 Brinker's website
today, August 13, 2019 at 9 a.m.
CDT:
http://investors.brinker.com/events/event-details/q4-2019-brinker-international-earnings-conference-call
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 Brinker's website until the end of the day August
27, 2019.
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 Brinker's website under the Financial Information
section of the Investor tab.
FORWARD CALENDAR
- SEC Form 10-K for fiscal 2019 filing on or before August 26, 2019; and
- First quarter earnings release on October 30, 2019.
ABOUT BRINKER
Brinker International, Inc. is one of the world's leading casual
dining restaurant companies. Based in Dallas, Texas, as of June 26, 2019,
Brinker owned, operated, or franchised 1,665 restaurants under the
names Chili's® Grill & Bar (1,612 restaurants) and
Maggiano's Little Italy® (53 restaurants).
FORWARD-LOOKING STATEMENTS
The statements and tables contained in this release that are not
historical facts are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are
based on our current plans and expectations and involve risks and
uncertainties which could cause actual results to differ materially
from our historical results or from those projected in
forward-looking statements. The forward-looking statements in the
press release are based on information available to us as of the
date any such statements are made and we assume no obligation to
update these forward-looking statements except as required by law.
These risks and uncertainties are, in many instances, beyond our
control. Such risks and uncertainties include, among other things,
the impact of competition, changes in consumer preferences,
consumer perception of food safety, reduced disposable income,
unfavorable publicity, increased minimum wages, governmental
regulations, the impact of mergers, acquisitions, divestitures and
other strategic transactions, the Company's ability to meet its
business strategy plan, loss of key management personnel, failure
to hire and retain high-quality restaurant management, the impact
of social media, failure to protect the security of data of our
guests and team members, product availability, regional business
and economic conditions, litigation, franchisee success, inflation,
changes in the retail industry, technology failures, failure to
protect our intellectual property, outsourcing, impairment of
goodwill or assets, failure to maintain effective internal control
over financial reporting, actions of activist shareholders, adverse
weather conditions, terrorist acts, health epidemics or pandemics,
and tax reform, as well as the risks described under the caption
"Risk Factors" in our Annual Report on Form 10-K and future filings
with the Securities and Exchange Commission.
BRINKER
INTERNATIONAL, INC.
Consolidated
Statements of Comprehensive Income (Unaudited)
(In millions,
except per share amounts)
|
|
|
Thirteen Week
Periods Ended
|
|
Fifty-Two Week
Periods Ended
|
|
June 26,
2019
|
|
June 27,
2018
|
|
June 26,
2019
|
|
June 27,
2018
|
Revenues
|
|
|
|
|
|
|
|
Company
sales
|
$
|
804.8
|
|
|
$
|
791.4
|
|
|
$
|
3,106.2
|
|
|
$
|
3,041.5
|
|
Franchise and other
revenues (1)
|
29.3
|
|
|
25.7
|
|
|
111.7
|
|
|
93.9
|
|
Total
revenues
|
834.1
|
|
|
817.1
|
|
|
3,217.9
|
|
|
3,135.4
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
Cost of
sales
|
213.5
|
|
|
208.2
|
|
|
823.0
|
|
|
796.0
|
|
Restaurant
labor
|
268.6
|
|
|
267.0
|
|
|
1,059.7
|
|
|
1,033.9
|
|
Restaurant expenses
(1)
|
202.9
|
|
|
190.6
|
|
|
812.3
|
|
|
757.5
|
|
Company restaurant
expenses
|
685.0
|
|
|
665.8
|
|
|
2,695.0
|
|
|
2,587.4
|
|
Depreciation and
amortization
|
38.1
|
|
|
37.7
|
|
|
147.6
|
|
|
151.4
|
|
General and
administrative
|
39.1
|
|
|
33.9
|
|
|
149.1
|
|
|
136.0
|
|
Other (gains) and
charges (2)
|
7.9
|
|
|
9.3
|
|
|
(4.5)
|
|
|
34.5
|
|
Total
operating costs and expenses
|
770.1
|
|
|
746.7
|
|
|
2,987.2
|
|
|
2,909.3
|
|
Operating
income
|
64.0
|
|
|
70.4
|
|
|
230.7
|
|
|
226.1
|
|
Interest
expense
|
15.3
|
|
|
16.2
|
|
|
61.6
|
|
|
59.0
|
|
Other (income),
net
|
(0.5)
|
|
|
(0.8)
|
|
|
(2.7)
|
|
|
(3.1)
|
|
Income before
provision for income taxes
|
49.2
|
|
|
55.0
|
|
|
171.8
|
|
|
170.2
|
|
Provision for income
taxes
|
2.5
|
|
|
11.2
|
|
|
16.9
|
|
|
44.3
|
|
Net income
|
$
|
46.7
|
|
|
$
|
43.8
|
|
|
$
|
154.9
|
|
|
$
|
125.9
|
|
|
|
|
|
|
|
|
|
Basic net income per
share
|
$
|
1.25
|
|
|
$
|
1.03
|
|
|
$
|
4.04
|
|
|
$
|
2.75
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share
|
$
|
1.22
|
|
|
$
|
1.01
|
|
|
$
|
3.96
|
|
|
$
|
2.72
|
|
|
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
37.5
|
|
|
42.6
|
|
|
38.3
|
|
|
45.7
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
38.3
|
|
|
43.5
|
|
|
39.1
|
|
|
46.3
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments (3)
|
$
|
0.3
|
|
|
$
|
(0.4)
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Other comprehensive
income (loss)
|
0.3
|
|
|
(0.4)
|
|
|
0.2
|
|
|
0.2
|
|
Comprehensive
income
|
$
|
47.0
|
|
|
$
|
43.4
|
|
|
$
|
155.1
|
|
|
$
|
126.1
|
|
|
|
(1)
|
Franchise and other
revenues and Restaurant expenses in the thirteen and fifty-two week
periods ended June 26, 2019 includes the impact from adoption
of ASC 606, whereas the thirteen and fifty-two week periods ended
June 27, 2018 was not restated. Please see "REVENUE RECOGNITION
UPDATE" section below for further details. Franchise and other
revenues include royalties, advertising fees (effective fiscal
2019), Maggiano's banquet service charge income, gift card
breakage, digital entertainment revenues, gift card equalization,
delivery fee income, franchise and development fees, retail royalty
revenues, merchandise income, and gift card discount costs from
third-party gift card sales.
|
|
|
(2)
|
Other (gains) and
charges included in the Consolidated Statements of Comprehensive
Income include (in millions):
|
|
Thirteen Week
Periods Ended
|
|
Fifty-Two Week
Periods Ended
|
|
June 26,
2019
|
|
June 27,
2018
|
|
June 26,
2019
|
|
June 27,
2018
|
Restaurant impairment
charges
|
$
|
9.8
|
|
|
$
|
1.7
|
|
|
$
|
10.8
|
|
|
$
|
10.9
|
|
Remodel-related
costs
|
2.9
|
|
|
1.5
|
|
|
7.7
|
|
|
1.5
|
|
Severance and other
benefit charges
|
0.7
|
|
|
0.3
|
|
|
0.9
|
|
|
0.3
|
|
Restaurant closure
charges
|
0.3
|
|
|
0.2
|
|
|
4.3
|
|
|
7.5
|
|
Corporate
headquarters relocation charges
|
0.1
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
Sale leaseback
(gain), net of transaction charges
|
(5.3)
|
|
|
2.0
|
|
|
(27.3)
|
|
|
2.0
|
|
Lease guarantee
charges (credits)
|
(0.4)
|
|
|
—
|
|
|
(0.4)
|
|
|
1.9
|
|
Property damages, net
of (insurance recoveries)
|
(0.2)
|
|
|
(0.3)
|
|
|
(0.7)
|
|
|
5.1
|
|
(Gain) on sale of
assets, net
|
(0.1)
|
|
|
—
|
|
|
(6.9)
|
|
|
(0.3)
|
|
Foreign currency
transaction (gain) loss
|
(0.2)
|
|
|
1.3
|
|
|
(0.7)
|
|
|
1.2
|
|
Accelerated
depreciation
|
—
|
|
|
0.4
|
|
|
1.0
|
|
|
1.9
|
|
Cyber security
incident charges
|
—
|
|
|
2.0
|
|
|
0.4
|
|
|
2.0
|
|
Other
|
0.3
|
|
|
0.2
|
|
|
1.1
|
|
|
0.5
|
|
Total
|
$
|
7.9
|
|
|
$
|
9.3
|
|
|
$
|
(4.5)
|
|
|
$
|
34.5
|
|
|
|
(3)
|
Foreign currency
translation adjustment included within Comprehensive income in the
Consolidated Statements of Comprehensive Income represents the
unrealized impact of translating the financial statements of the
Canadian restaurants and the Mexican joint venture (prior to
divestiture in the second quarter of fiscal 2018) 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.
|
REVENUE RECOGNITION UPDATE
Effective fiscal 2019, we adopted ASC 606 and did not elect to
restate the prior year financial statements to reflect the
application of the standard. The primary impact of the adoption is
the change in presentation of advertising fees received from
franchisees and the timing of recognition for franchise related
revenues and gift card breakage.
Under ASC 606, advertising fees are now presented on a gross
basis as a component of Franchise and other revenues. Under the
previous revenue accounting guidance ("Legacy GAAP"), the
advertising fees were recorded as a reduction to advertising
expenses within Restaurant expenses in the Consolidated Statements
of Comprehensive Income. The recognition timing change for
franchise related fees and gift card breakage, both recorded in
Franchise and other revenues, did not have a significant impact to
our results of operations in the fourth quarter and fiscal year
ended June 26, 2019.
The following table presents a comparative view of the thirteen
and fifty-two week period ended June 26,
2019 results prepared in accordance with ASC 606 versus
Legacy GAAP.
|
Thirteen Week
Period Ended
|
|
Fifty-Two Week
Period Ended
|
|
June 26,
2019
|
|
June 26,
2019
|
|
ASC 606
Amounts
|
|
Adjustments
|
|
Legacy
GAAP
Amounts
|
|
ASC 606
Amounts
|
|
Adjustments
|
|
Legacy
GAAP
Amounts
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
$
|
804.8
|
|
|
$
|
—
|
|
|
$
|
804.8
|
|
|
$
|
3,106.2
|
|
|
$
|
—
|
|
|
$
|
3,106.2
|
|
Franchise and other
revenues
|
29.3
|
|
|
(6.9)
|
|
|
22.4
|
|
|
111.7
|
|
|
(24.6)
|
|
|
87.1
|
|
Total
revenues
|
834.1
|
|
|
(6.9)
|
|
|
827.2
|
|
|
3,217.9
|
|
|
(24.6)
|
|
|
3,193.3
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
213.5
|
|
|
—
|
|
|
213.5
|
|
|
823.0
|
|
|
—
|
|
|
823.0
|
|
Restaurant
labor
|
268.6
|
|
|
—
|
|
|
268.6
|
|
|
1,059.7
|
|
|
—
|
|
|
1,059.7
|
|
Restaurant
expenses
|
202.9
|
|
|
(4.5)
|
|
|
198.4
|
|
|
812.3
|
|
|
(20.3)
|
|
|
792.0
|
|
Company restaurant
expenses
|
685.0
|
|
|
(4.5)
|
|
|
680.5
|
|
|
2,695.0
|
|
|
(20.3)
|
|
|
2,674.7
|
|
Depreciation and
amortization
|
38.1
|
|
|
—
|
|
|
38.1
|
|
|
147.6
|
|
|
—
|
|
|
147.6
|
|
General and
administrative
|
39.1
|
|
|
—
|
|
|
39.1
|
|
|
149.1
|
|
|
—
|
|
|
149.1
|
|
Other (gains) and
charges
|
7.9
|
|
|
—
|
|
|
7.9
|
|
|
(4.5)
|
|
|
—
|
|
|
(4.5)
|
|
Total
operating costs and expenses
|
770.1
|
|
|
(4.5)
|
|
|
765.6
|
|
|
2,987.2
|
|
|
(20.3)
|
|
|
2,966.9
|
|
Operating
income
|
64.0
|
|
|
(2.4)
|
|
|
61.6
|
|
|
230.7
|
|
|
(4.3)
|
|
|
226.4
|
|
Operating income as a
percentage of Total revenues
|
7.7
|
%
|
|
(0.3)
|
%
|
|
7.4
|
%
|
|
7.2
|
%
|
|
(0.1)
|
%
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
15.3
|
|
|
—
|
|
|
15.3
|
|
|
61.6
|
|
|
—
|
|
|
61.6
|
|
Other (income),
net
|
(0.5)
|
|
|
—
|
|
|
(0.5)
|
|
|
(2.7)
|
|
|
—
|
|
|
(2.7)
|
|
Income before
provision for income taxes
|
49.2
|
|
|
(2.4)
|
|
|
46.8
|
|
|
171.8
|
|
|
(4.3)
|
|
|
167.5
|
|
Provision for income
taxes
|
2.5
|
|
|
(0.6)
|
|
|
1.9
|
|
|
16.9
|
|
|
(1.1)
|
|
|
15.8
|
|
Net income
|
$
|
46.7
|
|
|
$
|
(1.8)
|
|
|
$
|
44.9
|
|
|
$
|
154.9
|
|
|
$
|
(3.2)
|
|
|
$
|
151.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share
|
$
|
1.25
|
|
|
$
|
(0.05)
|
|
|
$
|
1.20
|
|
|
$
|
4.04
|
|
|
$
|
(0.08)
|
|
|
$
|
3.96
|
|
Diluted net income
per share
|
$
|
1.22
|
|
|
$
|
(0.04)
|
|
|
$
|
1.18
|
|
|
$
|
3.96
|
|
|
$
|
(0.08)
|
|
|
$
|
3.88
|
|
BRINKER
INTERNATIONAL, INC.
Condensed
Consolidated Balance Sheets (Unaudited)
(In
millions)
|
|
|
June 26,
2019
|
|
June 27,
2018
|
ASSETS
|
|
|
|
Current
assets
|
$
|
177.0
|
|
|
$
|
156.3
|
|
Net property and
equipment (1)
|
755.1
|
|
|
938.9
|
|
Deferred income
taxes, net (1)
|
112.0
|
|
|
33.6
|
|
Total other
assets
|
214.2
|
|
|
218.5
|
|
Total
assets
|
$
|
1,258.3
|
|
|
$
|
1,347.3
|
|
LIABILITIES AND
SHAREHOLDERS' DEFICIT
|
|
|
|
Current installments
of long-term debt
|
$
|
9.7
|
|
|
$
|
7.1
|
|
Other current
liabilities (1)
|
411.9
|
|
|
427.2
|
|
Long-term debt, less
current installments
|
1,206.6
|
|
|
1,499.6
|
|
Deferred gain on sale
leaseback transactions (1)
|
255.3
|
|
|
—
|
|
Other
liabilities
|
153.0
|
|
|
131.7
|
|
Total shareholders'
deficit
|
(778.2)
|
|
|
(718.3)
|
|
Total liabilities and
shareholders' deficit
|
$
|
1,258.3
|
|
|
$
|
1,347.3
|
|
|
|
(1)
|
We executed sale
leaseback transactions during the fifty-two week period ended June
26, 2019 for gross consideration of $495.0 million, and
removed the related Net property and equipment totaling $185.3
million from our Consolidated Balance Sheets, resulting in a net
gain. Of the gain, as of June 26, 2019, $274.6 million remains
deferred and is included within Other current liabilities and
Deferred gain on sale leaseback transactions. The total gain is
immediately taxable, resulting in $78.6 million of tax on the gain,
all of which was paid during the fifty-two week period ended June
26, 2019.
|
|
|
|
Of the 1,001
company-owned restaurants locations, at June 26, 2019, we
continue to own both building and land for 41 restaurant locations.
The related book value of the land totaled $32.5 million and the
net book value of buildings totaled $16.1 million for these
locations.
|
BRINKER
INTERNATIONAL, INC.
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(In
millions)
|
|
|
Fifty-Two Week
Periods Ended
|
|
June 26,
2019
|
|
June 27,
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
154.9
|
|
|
$
|
125.9
|
|
Adjustments to
reconcile Net income to Net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
147.6
|
|
|
151.4
|
|
Stock-based
compensation
|
16.4
|
|
|
14.2
|
|
Restructure charges
and other impairments
|
26.5
|
|
|
21.7
|
|
Net (gain) loss on
disposal of assets
|
(33.1)
|
|
|
1.6
|
|
Changes in assets and
liabilities
|
(99.6)
|
|
|
(30.3)
|
|
Net cash provided by
operating activities
|
212.7
|
|
|
284.5
|
|
Cash flows from
investing activities
|
|
|
|
Payments for property
and equipment
|
(167.6)
|
|
|
(101.3)
|
|
Payments for
franchise restaurant acquisitions
|
(3.1)
|
|
|
—
|
|
Proceeds from sale of
assets
|
1.6
|
|
|
19.9
|
|
Proceeds from note
receivable
|
2.8
|
|
|
1.9
|
|
Insurance
recoveries
|
1.7
|
|
|
1.7
|
|
Proceeds from sale
leaseback transactions, net of related expenses
|
485.9
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
321.3
|
|
|
(77.8)
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings on
revolving credit facility
|
853.0
|
|
|
1,016.0
|
|
Payments on revolving
credit facility
|
(1,150.0)
|
|
|
(588.0)
|
|
Purchases of treasury
stock
|
(167.7)
|
|
|
(303.2)
|
|
Payments of
dividends
|
(60.3)
|
|
|
(70.0)
|
|
Payments on long-term
debt
|
(9.5)
|
|
|
(260.3)
|
|
Proceeds from
issuances of treasury stock
|
3.0
|
|
|
2.3
|
|
Payments for debt
issuance costs
|
—
|
|
|
(1.6)
|
|
Net cash used in
financing activities
|
(531.5)
|
|
|
(204.8)
|
|
Net change in cash
and cash equivalents
|
2.5
|
|
|
1.9
|
|
Cash and cash
equivalents at beginning of period
|
10.9
|
|
|
9.0
|
|
Cash and cash
equivalents at end of period
|
$
|
13.4
|
|
|
$
|
10.9
|
|
BRINKER
INTERNATIONAL, INC.
Restaurant
Summary
|
|
|
Fiscal
2019
|
|
Fiscal
2020
|
|
Fourth Quarter
Openings
|
|
Fiscal Year
Openings
|
|
Total
Restaurants
Open at June 26,
2019
|
|
Full Year
Projected
Openings
|
New
Openings
|
|
|
|
|
|
|
|
Company-owned
restaurants
|
|
|
|
|
|
|
|
Chili's domestic
(1)
|
2
|
|
|
4
|
|
|
944
|
|
|
9-11
|
|
Chili's
international
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Maggiano's
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
Total
company-owned
|
2
|
|
|
4
|
|
|
1,001
|
|
|
9-11
|
|
|
|
|
|
|
|
|
|
Franchise
restaurants
|
|
|
|
|
|
|
|
Chili's domestic
(1)
|
—
|
|
|
4
|
|
|
298
|
|
|
3
|
|
Chili's
international
|
4
|
|
|
18
|
|
|
365
|
|
|
27-32
|
|
Maggiano's
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Total
franchise
|
4
|
|
|
23
|
|
|
664
|
|
|
31-36
|
|
|
|
|
|
|
|
|
|
Total company-owned
and franchise restaurants
|
|
|
|
|
|
|
|
Chili's
domestic
|
2
|
|
|
8
|
|
|
1,242
|
|
|
12-14
|
|
Chili's
international
|
4
|
|
|
18
|
|
|
370
|
|
|
27-32
|
|
Maggiano's
|
—
|
|
|
1
|
|
|
53
|
|
|
1
|
|
New openings
total
|
6
|
|
|
27
|
|
|
1,665
|
|
|
40-47
|
|
|
|
|
|
|
|
|
|
Relocation
Openings
|
|
|
|
|
|
|
|
Chili's domestic
company-owned relocations
|
—
|
|
|
5
|
|
|
|
|
0-2
|
|
|
|
(1)
|
During fiscal 2019,
we acquired 3 domestic Chili's restaurants previously owned by
franchise partners. The acquisition of restaurants previously owned
by franchisees is not reflected in the openings as they are
existing restaurant locations transitioning ownership, however
these acquired restaurants are included in the Total Restaurants
Open at June 26, 2019 within the Company-owned restaurants row, and
have been removed from the Chili's domestic franchise restaurants
row. Additionally, during fiscal 2020, we plan to acquire 116
Chili's restaurants located throughout the Midwest United States
owned by the franchisee ERJ Dining. These restaurants are not
included in the fiscal 2020 Full Year Projected Openings as they
are existing restaurant locations transitioning
ownership.
|
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SOURCE Brinker International, Inc.