News Releases

Brinker International Reports Year-Over-Year Increases In Fourth Quarter And Full Fiscal Year EPS

DALLAS, Aug. 6, 2015 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal fourth quarter ended June 24, 2015.

Highlights include the following:

  • Earnings per diluted share, excluding special items, increased 10.6 percent to $0.94 compared to $0.85 for the fourth quarter of fiscal 2014. Earnings per diluted share, excluding special items, increased 14.0 percent to $3.09 compared to $2.71 for the full year fiscal 2014 (see non-GAAP reconciliation below)
  • On a GAAP basis, earnings per diluted share increased 114.0 percent to $0.92 compared to $0.43 for the fourth quarter of fiscal 2014 driven primarily by pre-tax charges of $39.5 million recorded in the prior year related to litigation reserves. On a GAAP basis, earnings per diluted share increased to $3.05, compared to $2.26 for the full year fiscal 2014
  • Brinker International company sales increased 0.5 percent to $738.4 million
  • Chili's company-owned comparable restaurant sales decreased 0.8 percent
  • Maggiano's comparable restaurant sales decreased 0.1 percent
  • Chili's franchise comparable restaurant sales increased 1.9 percent which includes a 2.1 percent increase for U.S. franchise restaurants and a 1.2 percent increase for international franchise restaurants
  • Restaurant operating margin,1 as a percent of company sales, improved approximately 80 basis points to 18.5 percent compared to 17.7 percent for the fourth quarter of fiscal 2014
  • For fiscal 2015, cash flows provided by operating activities were $368.6 million and capital expenditures totaled $140.3 million. Free cash flow2 was approximately $228.3 million
  • The company repurchased approximately 1.5 million shares of its common stock for $89.2 million in the fourth quarter and a total of approximately 5.4 million shares for $306.3 million year-to-date
  • The company paid a dividend of 28 cents per share in the fourth quarter, an increase of 17 percent over the prior year fourth quarter, and declared a dividend of 28 cents per share to be paid in the first quarter of fiscal 2016

"We delivered solid sales and earnings performance for fiscal 2015, and we improved margins for both the fourth quarter and fiscal year," said Wyman Roberts, Chief Executive Officer and President.  "We experienced some comp sales challenges during the quarter, which we're already taking steps to address," he added.

"Looking ahead to fiscal 2016, we're excited about our new My Chili's Rewards program and have signed up 2.6 million members in just over two months since the national launch.  We're also focused on implementing our differentiated culinary point of view and enhancing our digital guest experience, which are key components of our plan to drive fiscal 2016 sales and traffic.  We remain confident in our long-term strategy to deliver top line growth and increased shareholder value," Wyman concluded.

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: Q4 and FY comparable restaurant sales

Company-owned, reported brands and franchise; percentage




Q4 15


Q4 14


FY 15


FY 14

Brinker International


(0.7)



2.3



1.7



0.6


  Chili's Company-Owned









     Comparable Restaurant Sales


(0.8)



2.5



1.9



0.6


     Pricing Impact


1.5



1.2



1.4



1.2


     Mix-Shift


(1.8)



1.9



0.3



1.2


     Traffic


(0.5)



(0.6)



0.2



(1.8)


  Maggiano's









     Comparable Restaurant Sales


(0.1)



0.9



0.8



0.6


     Pricing Impact


2.8



2.2



2.3



1.5


     Mix-Shift


(1.0)



(2.5)



(1.4)



(0.7)


     Traffic


(1.9)



1.2



(0.1)



(0.2)











Chili's Franchise1


1.9



1.2



2.2



0.2


  U.S. Comparable Restaurant Sales


2.1



1.4



2.9



(0.3)


  International Comparable Restaurant Sales


1.2



0.8



0.4



1.6











Chili's Domestic2


0.1



2.1



2.2



0.3


System-wide3


0.2



1.9



1.9



0.5



1

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.



2

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.



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 franchise operated restaurants.

 

Quarterly Operating Performance

CHILI'S fourth quarter company sales decreased 0.3 percent to $638.2 million from $639.8 million in the prior year primarily due to decreases in comparable restaurant sales, partially offset by increases in restaurant capacity. As compared to the prior year, Chili's restaurant operating margin1 improved.  Cost of sales, as a percent of company sales, was positively impacted by favorable menu pricing and commodity pricing related to cheese, avocados, limes and oil, partially offset by unfavorable menu item mix and commodity pricing primarily related to fajita meat. Restaurant expenses, as a percent of company sales, decreased slightly due to lower asset retirements, favorable utilities and the timing of restaurant opening expenses, partially offset by expenses associated with the launch of My Chili's Rewards. Restaurant labor, as a percent of company sales, was flat compared to the prior year, as the benefit of lower employee health insurance expense was offset by higher wage rates.

MAGGIANO'S fourth quarter company sales increased 5.3 percent to $100.2 million from $95.2 million in the prior year primarily due to increases in restaurant capacity. 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 menu item changes and increased menu pricing, partially offset by unfavorable commodity pricing on beef and seafood. Restaurant expenses, as a percent of company sales, were positively impacted by leverage related to higher company sales, the timing of restaurant opening expenses, and favorable utilities and workers' compensation insurance expense, partially offset by higher advertising costs. Restaurant labor, as a percent of company sales, was flat.

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 increased 3.5 percent to $25.8 million for the fourth quarter compared to $24.9 million in the prior year driven primarily by royalty revenues related to Chili's new retail food products, higher revenues associated with tabletop devices, and higher royalty income primarily driven by international franchise restaurant openings. U.S. franchise comparable restaurant sales increased 2.1 percent and international comparable restaurant sales increased 1.2 percent. Brinker franchisees generated approximately $426 million in sales2 for the fourth quarter of fiscal 2015.

2 Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

"For the fourth quarter, our overall restaurant operating margin improved 80 basis points," said Tom Edwards, Executive Vice President and Chief Financial Officer. "On an annual basis, we delivered our fifth consecutive year of double-digit earnings per share growth and are on target to achieve our $4.00 dollar EPS goal by Fiscal 2017."

Other

Depreciation and amortization expense increased $1.9 million for the quarter primarily due to investments in the Chili's reimage program, new restaurant openings and asset replacements, partially offset by an increase in fully depreciated assets.

General and administrative expense decreased $0.3 million primarily due to cost management and lower performance-based compensation.

On a GAAP basis, the effective income tax rate increased to 29.7 percent in the current quarter from 18.1 percent in the prior year quarter primarily due to the impact of tax benefits related to special items in the prior year quarter. Excluding the impact of special items, the effective income tax rate increased to 31.2 percent in the current quarter compared to 29.4 percent in the prior year primarily due to increased earnings.

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. Special items in the fourth quarter of fiscal 2015 consist primarily of the impairment of restaurants, acquisition-related costs and severance charges.

Table 2: Reconciliation of net income excluding special items

Q4 15 and Q4 14; $ millions and $ per diluted share after-tax




Q4 15


EPS Q4 15


Q4 14


EPS Q4 14

Net Income


57.2



0.92



28.8



0.43


Other (Gains) and Charges, net of taxes1


2.7



0.04



27.8



0.42


Adjustment for tax items


(1.1)



(0.02)






Net Income excluding Special Items


58.8



0.94



56.6



0.85


 

Table 3: Reconciliation of net income excluding special items

FY 15 and FY 14; $ millions and $ per diluted share after-tax




FY 15


EPS FY 15


FY 14


EPS FY 14

Net Income


196.7



3.05



154.0



2.26


Other (Gains) and Charges, net of taxes1


3.1



0.05



30.4



0.45


Adjustment for tax items


(1.1)



(0.01)






Net Income excluding Special Items


198.7



3.09



184.4



2.71



1

Pre-tax Other gains and charges were $4.0 million and $44.9 million in the fourth quarter of fiscal 2015 and 2014, respectively, and $4.8 million and $49.2 million in fiscal 2015 and 2014, respectively. The charges in the fiscal 2014 periods include approximately $39.5 million of charges related to litigation reserves.

 

Fiscal 2016 Outlook

Fiscal 2016 includes a 53rd week versus 52 weeks in fiscal 2015. The company anticipates earnings per diluted share, excluding special items, to increase 16 to 19 percent in the range of $3.55 to $3.65. Earnings are based on the following expectations, including the impact of the recently acquired Chili's restaurants from Pepper Dining:

  • Revenues are expected to increase approximately 12 to 14 percent including the 53rd week
  • Comparable restaurant sales are expected to increase one and a half to two percent
  • Company-owned new restaurant development is expected to add year-over-year capacity growth of about one percent before the addition of the recently acquired Chili's restaurants
  • Restaurant operating margin is expected to be flat to down 25 basis points year-over-year. Excluding the impact of the recently acquired Chili's restaurants, restaurant operating margin is expected to increase 25 to 50 basis points year-over-year
  • Depreciation expense is expected to increase $12 to $15 million, assuming capital expenditures of $110 to $120 million
  • General and administrative expense is expected to be $10 to $12 million higher on a dollar basis due to information technology expenses related to sales driving initiatives, the impact of the 53rd week as well as planning incentive compensation at target
  • Interest expense is expected to increase $4 million to $6 million due to a higher debt balance in fiscal 2016
  • Excluding the impact of special items, the effective income tax rate is projected to be approximately 31 to 32 percent
  • Free cash flow is expected to be $250 to $260 million
  • Diluted weighted average shares outstanding is expected to be 60 to 62 million

The company believes providing fiscal 2016 earnings per diluted share guidance provides investors the appropriate insight into the company's ongoing operating performance.

Guidance Policy

Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the comprehensive income statement and will only provide updates if there is a material change versus the original guidance. Consistent with prior practice, management will not discuss intra-period sales or other key operating results not yet reported as the limited data may not accurately reflect the final results of the period or quarter referenced.

Webcast Information

Investors and interested parties are invited to listen to today's conference call, as management will provide further details of the quarter. The call will broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (Aug. 6). 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 Sept. 3, 2015.

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-K for fiscal 2015 filing on or before Aug. 24, 2015; and
-  First quarter earnings release, before market opens, Oct. 20, 2015.

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 June 24, 2015, Brinker owned, operated, or franchised 1,629 restaurants under the names Chili's® Grill & Bar (1,580 restaurants) and Maggiano's Little Italy® (49 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


Fifty-Two Week Periods Ended



June 24, 2015


June 25, 2014


June 24, 2015


June 25, 2014

Revenues:









Company sales


$

738,378



$

734,982



$

2,904,746



$

2,823,069


Franchise and other revenues (a)


25,769



24,898



97,532



86,426


Total revenues


764,147



759,880



3,002,278



2,909,495


Operating costs and expenses:









Company restaurants (excluding depreciation and amortization)









Cost of sales


192,556



196,752



775,063



758,028


Restaurant labor


234,092



233,064



929,206



905,589


Restaurant expenses


175,287



175,021



703,334



686,314


Company restaurant expenses


601,935



604,837



2,407,603



2,349,931


Depreciation and amortization


37,029



35,169



145,242



136,081


General and administrative


32,979



33,302



133,467



132,094


Other gains and charges (b)


4,017



44,909



4,764



49,224


Total operating costs and expenses


675,960



718,217



2,691,076



2,667,330


Operating income


88,187



41,663



311,202



242,165


Interest expense


7,297



6,963



29,006



28,091


Other, net


(513)



(478)



(2,081)



(2,214)


Income before provision for income taxes


81,403



35,178



284,277



216,288


Provision for income taxes


24,180



6,358



87,583



62,249


Net income


$

57,223



$

28,820



$

196,694



$

154,039











Basic net income per share


$

0.94



$

0.44



$

3.12



$

2.33











Diluted net income per share


$

0.92



$

0.43



$

3.05



$

2.26











Basic weighted average shares outstanding


61,132



65,009



63,072



66,251











Diluted weighted average shares outstanding


62,294



66,824



64,404



68,152











Other comprehensive income (loss):









Foreign currency translation adjustment (c)


$

(507)



$

922



$

(7,690)



$

(940)


Other comprehensive income (loss)


(507)



922



(7,690)



(940)


Comprehensive income


$

56,716



$

29,742



$

189,004



$

153,099











(a)

Franchise and other revenues primarily includes royalties, development fees and 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. Beginning in fiscal 2015, income primarily related to Maggiano's delivery is included in Franchise and other revenues on the consolidated statements of comprehensive income. This income was previously included in Restaurant expenses. The prior year consolidated statements of comprehensive income has been adjusted to conform to the fiscal 2015 presentation. This adjustment has no effect on net income previously reported.



(b)

Other gains and charges include:




Thirteen Week Periods Ended


Fifty-Two Week Periods Ended


June 24, 2015


June 25, 2014


June 24, 2015


June 25, 2014

Litigation

$



$

39,500



$

(2,753)



$

39,500


Restaurant impairment charges

1,508



3,217



2,255



4,502


Restaurant closure charges

279



1,083



1,736



3,413


Severance and other benefits

894



1,030



1,182



2,140


Acquisition costs

1,100





1,100




(Gain) loss on the sale of assets, net



(29)



1,093



(608)


Impairment of franchise rights

440





440




Impairment of liquor licenses

30





205




Other

(234)



108



(494)



277



$

4,017



$

44,909



$

4,764



$

49,224



(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)




June 24, 2015


June 25, 2014






ASSETS





Current assets


$

189,717



$

210,854


Net property and equipment (a)


1,032,044



1,056,454


Total other assets


214,112



223,296


Total assets


$

1,435,873



$

1,490,604


LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY





Current installments of long-term debt


$

3,439



$

27,884


Other current liabilities


415,036



438,226


Long-term debt, less current installments


970,825



832,302


Other liabilities


125,033



129,098


Total shareholders' (deficit) equity


(78,460)



63,094


Total liabilities and shareholders' (deficit) equity


$

1,435,873



$

1,490,604



(a)

At June 24, 2015, the company owned the land and buildings for 188 of the 888 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.9 million and $113.4 million, respectively.

 

BRINKER INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




Fifty-Two Week Periods Ended



June 24, 2015


June 25, 2014

Cash Flows From Operating Activities:





Net income


$

196,694



$

154,039


Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization


145,242



136,081


Stock-based compensation


14,802



16,074


Restructure charges and other impairments


11,436



48,033


Net loss on disposal of assets


4,523



5,161


Changes in assets and liabilities


(4,086)



454


Net cash provided by operating activities


368,611



359,842


Cash Flows from Investing Activities:





Payments for property and equipment


(140,262)



(161,066)


Proceeds from sale of assets


1,950



888


Net cash used in investing activities


(138,312)



(160,178)


Cash Flows from Financing Activities:





Borrowings on revolving credit facility


480,750



120,000


Purchases of treasury stock


(306,255)



(239,597)


Payments on long-term debt


(189,177)



(26,521)


Payments on revolving credit facility


(177,000)



(40,000)


Payments of dividends


(70,832)



(63,395)


Excess tax benefits from stock-based compensation


15,893



18,872


Proceeds from issuances of treasury stock


16,259



29,295


Payments for deferred financing costs


(2,501)




Net cash used in financing activities


(232,863)



(201,346)


Net change in cash and cash equivalents


(2,564)



(1,682)


Cash and cash equivalents at beginning of period


57,685



59,367


Cash and cash equivalents at end of period


$

55,121



$

57,685


 

BRINKER INTERNATIONAL, INC.

RESTAURANT SUMMARY




Fourth Quarter Openings Fiscal 2015


Total Restaurants June 24, 2015


Openings Fiscal 2015


Projected Openings Fiscal 2016

Company-Owned Restaurants:









Chili's Domestic


3


826


9


11-13

Chili's International



13


1


Maggiano's



49


3


3



3


888


13


14-16

Franchise Restaurants:









Chili's Domestic



433


5


8-10

Chili's International


5


308


22


25-30



5


741


27


33-40

Total Restaurants:









Chili's Domestic


3


1,259


14


19-23

Chili's International


5


321


23


25-30

Maggiano's



49


3


3



8


1,629


40


47-56

 

SOURCE Brinker International, Inc.

For further information: JOE TAYLOR, INVESTOR RELATIONS, (972) 770-9040, ASHLEY JOHNSON, MEDIA RELATIONS, (800) 775-7290, 6820 LBJ FREEWAY, DALLAS, TEXAS 75240
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