DALLAS, Oct. 25, 2016 /PRNewswire/ -- Brinker
International, Inc. (NYSE: EAT) today announced results for the
fiscal first quarter ended Sept. 28,
2016.
Highlights include the following:
- On a GAAP basis, earnings per diluted share decreased 22.2
percent to $0.42 compared to
$0.54 for the first quarter of fiscal
2016
- Earnings per diluted share, excluding special items, decreased
12.5 percent to $0.49 compared to
$0.56 for the first quarter of fiscal
2016 (see non-GAAP reconciliation below)
- Brinker's total revenues decreased 0.5 percent to $758.5 million compared to the first quarter of
fiscal 2016 and company sales decreased 0.4 percent to $737.4 million compared to the first quarter of
fiscal 2016
- Chili's company-owned comparable restaurant sales decreased 1.4
percent
- Maggiano's comparable restaurant sales decreased 0.6
percent
- Chili's franchise comparable restaurant sales decreased 0.6
percent, which includes a 1.6 percent decrease for U.S. franchise
restaurants, partially offset by an increase of 0.9 percent for
international franchise restaurants
- Operating income, as a percent of total
revenues, declined approximately 190 basis points to 5.5 percent
compared to 7.4 percent for the first quarter of fiscal 2016
- Restaurant operating margin, as a percent of
company sales, declined approximately 130 basis points to 13.3
percent compared to 14.6 percent for the first quarter of fiscal
2016 (see non-GAAP reconciliation below)
- For the first three months of fiscal 2017, cash flows provided
by operating activities were $66.2
million and capital expenditures totaled $27.1 million. Free cash flow was approximately
$39.1 million (see non-GAAP
reconciliation below)
- The company closed the private offering of $350 million of its 5.0% senior notes due 2024,
entered into a $300 million
accelerated share repurchase agreement ("ASR") and amended the
revolving credit agreement to increase the borrowing amount
available from $750 million to
$1 billion
- The company spent $350 million to
repurchase shares including the $300
million for the ASR. The company received an initial
delivery of approximately 4.6 million shares of common stock
pursuant to the ASR agreement and repurchased approximately
1.0 million additional shares of common stock in the open
market for a total of 5.6 million shares
"We remain optimistic about our growth plans despite a choppy
first quarter and are seeing traction with stronger comparable
restaurant sales for Chili's in October," said Wyman Roberts, chief executive officer and
president. "In the first quarter, the casual dining category was
more challenging than we anticipated, but we are gaining share and
are rolling out multiple growth platforms - craft beer taps, happy
hour, To Go, Plenti points for My Chili's Rewards loyalty program -
that we expect will build through the second half and beyond."
|
Table 1: Q1
comparable restaurant sales1
|
Company-owned,
reported brands and franchise; percentage
|
|
|
|
Q1
17
|
|
Q1
16
|
Brinker
International
|
|
(1.3)
|
|
(1.6)
|
Chili's
Company-Owned
|
|
|
|
|
Comparable Restaurant
Sales
|
|
(1.4)
|
|
(1.6)
|
Pricing
Impact2
|
|
1.2
|
|
1.4
|
Mix-Shift2,3
|
|
1.5
|
|
(1.6)
|
Traffic2
|
|
(4.1)
|
|
(1.4)
|
Maggiano's
|
|
|
|
|
Comparable Restaurant
Sales
|
|
(0.6)
|
|
(1.7)
|
Pricing
Impact2
|
|
2.3
|
|
2.8
|
Mix-Shift2,3
|
|
(1.3)
|
|
(0.9)
|
Traffic2
|
|
(1.6)
|
|
(3.6)
|
|
|
|
|
|
Chili's
Franchise4
|
|
(0.6)
|
|
2.2
|
U.S.
Comparable Restaurant Sales
|
|
(1.6)
|
|
0.8
|
International
Comparable Restaurant Sales
|
|
0.9
|
|
4.8
|
|
|
|
|
|
Chili's
Domestic5
|
|
(1.3)
|
|
(1.1)
|
System-wide6
|
|
(1.1)
|
|
(0.5)
|
|
|
|
1
|
|
Comparable restaurant
sales includes all restaurants that have been in operation for more
than 18 months.
|
2
|
|
Reclassifications
have been made between pricing impact, mix-shift and traffic in the
prior year to conform with current year classification.
|
3
|
|
Mix shift is
calculated as the year over year percentage change in company sales
resulting from the change in menu items ordered by
guests.
|
4
|
|
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.
|
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 restaurants.
|
Quarterly Operating Performance
CHILI'S first quarter
company sales decreased 0.7 percent to $648.6 million from $653.1
million in the prior year primarily due to a decline in
comparable restaurant sales, partially offset by an increase in
restaurant capacity. As compared to the prior year, Chili's
restaurant operating margin1 declined. Restaurant
expenses, as a percent of company sales, increased due to higher
advertising and repairs and maintenance expenses, partially offset
by lower workers' compensation insurance expenses. Restaurant
labor, as a percent of company sales, increased compared to the
prior year due to higher wage rates. Cost of sales, as a
percent of company sales, decreased due to increased menu pricing
and favorable commodity pricing related to poultry and burger meat,
partially offset by unfavorable menu item mix and commodity pricing
primarily related to avocados.
MAGGIANO'S first quarter company sales increased 1.6 percent to
$88.8 million from $87.4 million in the prior year primarily due to
an increase in restaurant capacity, partially offset by a decline
in comparable restaurant sales. As compared to the prior year,
Maggiano's restaurant operating margin1 improved. Cost
of sales, as a percent of company sales, was positively impacted by
increased menu pricing and favorable commodity pricing, partially
offset by unfavorable menu item mix. Restaurant labor, as a percent
of company sales, decreased compared to the prior year due to a
lower incentive bonuses, partially offset by higher wage rates.
Restaurant expenses, as a percent of company sales, were flat
compared to the prior year.
1Restaurant 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 decreased 4.5 percent to
$21.1 million for the first quarter
compared to $22.1 million in the
prior year. Brinker franchisees generated approximately
$331 million in sales2 for
the first quarter of fiscal 2017.
2Royalty revenues are recognized based on the sales
generated and reported to the company by franchisees.
Other
Depreciation and amortization expense decreased
$0.3 million for the quarter
primarily due to an increase in fully depreciated assets and
restaurant closures, partially offset by depreciation on asset
replacements and new restaurant openings.
General and administrative expense decreased approximately
$0.6 million primarily due to lower
payroll and legal expenses, partially offset by higher
performance-based compensation.
On a GAAP basis, the effective income tax rate decreased to 29.5
percent in the current quarter from 31.9 percent in the prior year
quarter. Excluding the impact of special items, the effective
income tax rate decreased to 30.9 percent in the current quarter
compared to 32.1 percent. The effective income tax rates
decreased in the current quarter primarily due to lower profits and
the impact of tax credits.
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 operating results. Non-GAAP
disclosures should not be viewed as a substitute for operating
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.
Table 2:
Reconciliation of net income excluding special items
|
Q1 17 and Q1 16; $
millions and $ per diluted share after-tax
|
|
Brinker believes
excluding special items from its financial results provides
investors with a clearer perspective of the company's ongoing
operating performance and a more relevant comparison to prior
period results. Special items in the first quarter of fiscal 2017
consist primarily of charges related to restaurant closures and
information technology restructuring.
|
|
|
|
Q1
17
|
|
EPS Q1
17
|
|
Q1
16
|
|
EPS Q1
16
|
Net Income
|
|
23.2
|
|
0.42
|
|
33.2
|
|
0.54
|
Special
items1
|
|
6.1
|
|
0.11
|
|
1.7
|
|
0.03
|
Income tax effect
related to special items
|
|
(2.3)
|
|
(0.04)
|
|
(0.7)
|
|
(0.01)
|
Special items, net of
taxes
|
|
3.8
|
|
0.07
|
|
1.0
|
|
0.02
|
Net Income excluding
special items
|
|
27.0
|
|
0.49
|
|
34.2
|
|
0.56
|
|
|
|
|
1
|
See footnote "b" to
the consolidated statements of comprehensive income for additional
details on the composition of these amounts.
|
Table 3:
Calculation of restaurant operating margin and reconciliation to
operating income
|
Q1 17 and Q1 F16;
$ millions
|
|
Brinker believes
presenting restaurant operating margin provides a useful metric by
which to evaluate restaurant-level operating efficiency and
performance.
|
|
|
|
Q1F17
|
|
Q1F16
|
Company
sales
|
|
737.4
|
|
|
740.5
|
|
Cost of
sales
|
|
192.3
|
|
|
196.6
|
|
Restaurant
labor
|
|
250.6
|
|
|
246.6
|
|
Restaurant
expenses
|
|
196.6
|
|
|
189.2
|
|
Restaurant operating
margin
|
|
97.9
|
|
|
108.1
|
|
Divided by company
sales
|
|
737.4
|
|
|
740.5
|
|
Restaurant operating
margin as a percent of company sales
|
|
13.3
|
%
|
|
14.6
|
%
|
|
|
|
|
|
Restaurant operating
margin
|
|
97.9
|
|
|
108.1
|
|
Franchise and other
revenues
|
|
21.1
|
|
|
22.1
|
|
Depreciation and
amortization
|
|
(38.9)
|
|
|
(39.2)
|
|
General and
administrative
|
|
(32.5)
|
|
|
(33.1)
|
|
Other gains and
charges
|
|
(6.1)
|
|
|
(1.7)
|
|
Operating
income
|
|
41.5
|
|
|
56.2
|
|
Divided by total
revenues
|
|
758.5
|
|
|
762.6
|
|
Operating income as a
percent of total revenues
|
|
5.5
|
%
|
|
7.4
|
%
|
Table 4:
Reconciliation of free cash flow
|
Q1 17; $
millions
|
|
Brinker believes
presenting free cash flow provides a useful measure to evaluate the
cash flow available for reinvestment after considering the capital
requirements of our business operations.
|
|
|
|
Thirteen Week
Period Ended
Sept. 28, 2016
|
Cash flows provided
by operating activities
|
|
66.2
|
Capital
expenditures
|
|
(27.1)
|
Free cash
flow
|
|
39.1
|
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.
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 Web site (www.brinker.com) at
9 a.m. CDT today (Oct. 25). 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 Web site until the end of
the day Nov. 22, 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 Brinker's Web site under the Financial
Information section of the Investor tab.
Forward Calendar
- SEC Form 10-Q for the first
quarter of fiscal 2017 filing on or before Nov. 7, 2016; and
- Second quarter earnings release, before market opens,
Jan. 25, 2017.
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 Sept. 28, 2016, Brinker owned,
operated, or franchised 1,652 restaurants under the names
Chili's® Grill & Bar (1,601 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 within the meaning of Section 27A of the Securities Act
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 are, in many
instances, beyond our control. Such risks and uncertainties
include, among other things, 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, 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
|
(In thousands,
except per share amounts)
|
(Unaudited)
|
|
|
|
Thirteen Week
Periods Ended
|
|
|
Sept. 28,
2016
|
|
Sept. 23,
2015
|
Revenues:
|
|
|
|
|
Company
sales
|
|
$
|
737,410
|
|
|
$
|
740,481
|
|
Franchise and other
revenues (a)
|
|
21,082
|
|
|
22,078
|
|
Total
revenues
|
|
758,492
|
|
|
762,559
|
|
Operating costs and
expenses:
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
Cost of
sales
|
|
192,302
|
|
|
196,603
|
|
Restaurant
labor
|
|
250,570
|
|
|
246,577
|
|
Restaurant
expenses
|
|
196,643
|
|
|
189,173
|
|
Company restaurant
expenses
|
|
639,515
|
|
|
632,353
|
|
Depreciation and
amortization
|
|
38,886
|
|
|
39,171
|
|
General and
administrative
|
|
32,537
|
|
|
33,111
|
|
Other gains and
charges (b)
|
|
6,078
|
|
|
1,677
|
|
Total operating costs
and expenses
|
|
717,016
|
|
|
706,312
|
|
Operating
income
|
|
41,476
|
|
|
56,247
|
|
Interest
expense
|
|
8,809
|
|
|
7,767
|
|
Other, net
|
|
(299)
|
|
|
(273)
|
|
Income before
provision for income taxes
|
|
32,966
|
|
|
48,753
|
|
Provision for income
taxes
|
|
9,733
|
|
|
15,546
|
|
Net income
|
|
$
|
23,233
|
|
|
$
|
33,207
|
|
|
|
|
|
|
Basic net income per
share
|
|
$
|
0.42
|
|
|
$
|
0.55
|
|
|
|
|
|
|
Diluted net income
per share
|
|
$
|
0.42
|
|
|
$
|
0.54
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
|
54,844
|
|
|
60,225
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
55,576
|
|
|
61,208
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
Foreign currency
translation adjustment (c)
|
|
$
|
(481)
|
|
|
$
|
(2,805)
|
|
Other comprehensive
loss
|
|
(481)
|
|
|
(2,805)
|
|
Comprehensive
income
|
|
$
|
22,752
|
|
|
$
|
30,402
|
|
|
|
|
|
|
(a)
|
Franchise and other
revenues primarily includes royalties, development fees, franchise
fees, Maggiano's banquet service charge income, gift card breakage
and discounts, tabletop gaming revenue, Chili's retail food product
royalties and delivery fee income.
|
(b)
|
Other gains and
charges include:
|
|
Thirteen Week
Periods Ended
|
|
Sept. 28,
2016
|
|
Sept. 23,
2015
|
Restaurant closure
charges
|
$
|
2,506
|
|
|
$
|
—
|
|
Information
technology restructuring
|
2,491
|
|
|
—
|
|
Severance
|
293
|
|
|
2,159
|
|
Acquisition
costs
|
—
|
|
|
580
|
|
Gain on the sale of
assets, net
|
—
|
|
|
(1,762)
|
|
Other
|
788
|
|
|
700
|
|
|
$
|
6,078
|
|
|
$
|
1,677
|
|
|
|
(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)
|
|
|
|
Sept. 28,
2016
|
|
June 29,
2016
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
$
|
174,453
|
|
|
$
|
176,774
|
|
Net property and
equipment (a)
|
|
1,028,108
|
|
|
1,043,152
|
|
Total other
assets
|
|
255,965
|
|
|
249,534
|
|
Total
assets
|
|
$
|
1,458,526
|
|
|
$
|
1,469,460
|
|
LIABILITIES AND
SHAREHOLDERS' DEFICIT
|
|
|
|
|
Current installments
of long-term debt
|
|
$
|
3,848
|
|
|
$
|
3,563
|
|
Other current
liabilities
|
|
421,773
|
|
|
428,880
|
|
Long-term debt, less
current installments
|
|
1,441,979
|
|
|
1,110,693
|
|
Other
liabilities
|
|
141,991
|
|
|
139,423
|
|
Total shareholders'
deficit
|
|
(551,065)
|
|
|
(213,099)
|
|
Total liabilities and
shareholders' deficit
|
|
$
|
1,458,526
|
|
|
$
|
1,469,460
|
|
|
|
(a)
|
At Sept. 28, 2016,
the company owned the land and buildings for 191 of the 1,000
company-owned restaurants. The net book values of the land totaled
$143.2 million and the buildings totaled $103.6 million associated
with these restaurants.
|
BRINKER
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Thirteen Week
Periods Ended
|
|
|
Sept. 28,
2016
|
|
Sept. 23,
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
|
Net income
|
|
$
|
23,233
|
|
|
$
|
33,207
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
38,886
|
|
|
39,171
|
|
Stock-based
compensation
|
|
4,034
|
|
|
4,189
|
|
Restructure charges
and other impairments
|
|
5,150
|
|
|
574
|
|
Net loss (gain) on
disposal of assets
|
|
481
|
|
|
(1,233)
|
|
Changes in assets and
liabilities
|
|
(5,564)
|
|
|
(30,022)
|
|
Net cash provided by
operating activities
|
|
66,220
|
|
|
45,886
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Payments for property
and equipment
|
|
(27,111)
|
|
|
(23,731)
|
|
Payment for purchase
of restaurants
|
|
—
|
|
|
(105,577)
|
|
Proceeds from sale of
assets
|
|
—
|
|
|
2,756
|
|
Net cash used in
investing activities
|
|
(27,111)
|
|
|
(126,552)
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from
issuances of long-term debt
|
|
350,000
|
|
|
—
|
|
Purchases of treasury
stock
|
|
(349,963)
|
|
|
(51,061)
|
|
Payments on revolving
credit facility
|
|
(83,000)
|
|
|
—
|
|
Borrowings on
revolving credit facility
|
|
70,000
|
|
|
155,500
|
|
Payments of
dividends
|
|
(18,298)
|
|
|
(18,076)
|
|
Payments for deferred
financing costs
|
|
(9,183)
|
|
|
—
|
|
Proceeds from
issuances of treasury stock
|
|
3,396
|
|
|
1,306
|
|
Excess tax benefits
from stock-based compensation
|
|
1,538
|
|
|
4,752
|
|
Payments on long-term
debt
|
|
(890)
|
|
|
(849)
|
|
Net cash (used in)
provided by financing activities
|
|
(36,400)
|
|
|
91,572
|
|
Net change in cash
and cash equivalents
|
|
2,709
|
|
|
10,906
|
|
Cash and cash
equivalents at beginning of period
|
|
31,446
|
|
|
55,121
|
|
Cash and cash
equivalents at end of period
|
|
$
|
34,155
|
|
|
$
|
66,027
|
|
BRINKER
INTERNATIONAL, INC.
|
RESTAURANT
SUMMARY
|
|
|
|
First Quarter
Openings
Fiscal
2017
|
|
Total Restaurants
Sept. 28,
2016
|
|
Projected
Openings
Fiscal 2017
|
Company-Owned
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
2
|
|
936
|
|
5-6
|
Chili's
International
|
|
—
|
|
13
|
|
1
|
Maggiano's
|
|
1
|
|
51
|
|
2
|
|
|
3
|
|
1,000
|
|
8-9
|
Franchise
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
1
|
|
317
|
|
5-8
|
Chili's
International
|
|
4
|
|
335
|
|
35-40
|
|
|
5
|
|
652
|
|
40-48
|
Total
Restaurants:
|
|
|
|
|
|
|
Chili's
Domestic
|
|
3
|
|
1,253
|
|
10-14
|
Chili's
International
|
|
4
|
|
348
|
|
36-41
|
Maggiano's
|
|
1
|
|
51
|
|
2
|
|
|
8
|
|
1,652
|
|
48-57
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/brinker-international-reports-first-quarter-results-300350374.html
SOURCE Brinker International