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Brinker International Reports Third Quarter Fiscal 2010 EPS

DALLAS, April 20, 2010 /PRNewswire via COMTEX/ --Brinker International, Inc. (NYSE: EAT) announced third quarter fiscal 2010 earnings per diluted share from continuing operations of $0.37 compared to $0.40 for the third quarter of fiscal 2009, before special items (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share increased to $0.39 from $0.34 for the third quarter in the prior year.

Including On The Border Mexican Grill & Cantina(R), earnings per diluted share before special items was $0.42 for the third quarter fiscal 2010 (reconciliation included in Table 2). The costs associated with implementing the new Chili's menu lowered earnings by approximately $5.0 million before tax, weather negatively impacted comparable restaurant sales by approximately 90 basis points and the resolution of certain tax positions resulted in a positive impact of approximately $3.0 million to tax expense for the quarter.

In March, the company entered into a purchase agreement with OTB Acquisition LLC, an affiliate of Golden Gate Capital, to sell On The Border Mexican Grill & Cantina(R) for approximately $180 million. Therefore, On The Border has been presented as discontinued operations in the company's financial statements beginning in the third quarter of fiscal 2010. The company expects the transaction to close by the end of fiscal 2010 and anticipates recording a gain upon completion of the transaction. Earnings per diluted share from discontinued operations before special items of $0.05 was flat compared to the third quarter of the prior year (reconciliation included in Table 2). All amounts presented in this release are related to continuing operations unless otherwise stated.

Quarterly Revenues

Brinker reported revenues for the 13-week period of $713.4 million, a decrease of 7.8 percent compared with $774.1 million reported for the same period of fiscal 2009. The company experienced a 4.2 percent decrease in comparable restaurant sales (see Table 1) in the third quarter of fiscal 2010. Revenues were also negatively impacted by a net decline in capacity of 5.3 percent due to the sale of 21 restaurants to a franchisee and 19 restaurant closures since the third quarter of fiscal 2009. Royalty and franchise revenues were $16.5 million for the quarter.

    Table 1: Q3 comparable restaurant sales
    Q3 10 and Q3 09, company and two reported brands; percentage

                                 Q3 10
                              Comparable
                              Sales (2)      Q3 09     Q3 10       Q3 10
                              ----------     -----     -----       -----
                                          Comparable   Pricing
                                             Sales     Impact    Mix-Shift
                                           ----------    ------- ---------
    Brinker International (1)       (4.2)        (5.7)       0.9       (1.7)
        Chili's                     (5.0)        (5.2)       0.9       (1.7)
        Maggiano's                   1.9         (9.5)       0.4       (0.9)
        ----------                   ---         ----        ---       ----



    (1) Brinker International comparable restaurant sales exclude the
    impact of On The Border.
    (2) Brinker International comparable restaurant sales by period are
    provided on the company's web site.

Quarterly Operating Performance

Cost of sales, as a percent of revenues, increased to 28.5 percent in the third quarter of fiscal 2010 as compared to 28.2 percent in the prior year. During the quarter, cost of sales was negatively impacted by promotions and the impact of the new menu rollout at Chili's, partially offset by favorable commodity prices primarily related to beef and chicken and favorable menu price changes.

Restaurant expenses, as a percent of revenues, increased to 54.7 percent from 54.1 percent in the prior year primarily due to the impact of the new menu rollout at Chili's. Restaurant expenses were favorably impacted for the quarter by lower utilities, property taxes and changes to the blend of advertising.

Depreciation and amortization decreased $2.6 million compared to the prior year due to fully depreciated assets and restaurant closures, partially offset by investments in existing restaurants.

General and administrative expense decreased $3.2 million for the quarter primarily due to lower legal expenses and salary expense from lower headcount.

Other gains and charges primarily include $4.0 million of lease termination charges related to the company's decision in the second quarter of fiscal 2010 to close underperforming restaurants.

Interest expense decreased $1.0 million due to lower interest rates and lower average borrowings.

The effective income tax rate decreased to 19.7 percent in the current quarter as compared to 29.4 percent in the same quarter last year primarily due to the resolution of certain tax positions which resulted in a positive impact to tax expense in the current quarter.

Income from discontinued operations, before special items, decreased to $5.3 million from $5.6 million in the same quarter in the prior year.

    Special Items
    -------------
    Table 2: Reconciliation of net income, before special items (1)
    Q3 10 and Q3 09; $ millions and $ per diluted share after-tax

    Item                                   Q3 10    EPS    Q3 09     EPS
    ----                                   -----    ---    -----     ---
                                                   Q3 10            Q3 09
                                                   -----            -----
    Net Income                               40.0    0.39     35.0     0.34
        Other (Gains) and Charges             3.5    0.03     11.2     0.11
                                              ---    ----     ----     ----
    Net Income before Special Items          43.5    0.42     46.2     0.45
        On The Border before Special Items   (5.3)  (0.05)    (5.6)   (0.05)
                                             ----   -----     ----    -----
    Adjusted Net Income before Special
     Items                                   38.2    0.37     40.6     0.40
      and On The Border                      ====    ====     ====     ====




    (1)  The company believes excluding other gains and charges and On
    The Border 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.

Cash Flow and Capital Allocation

For the first nine months of fiscal 2010, cash flow from continuing operations increased to $222.6 million compared to $159.8 million in the prior year. Capital expenditures totaled $31.6 million, a reduction of $38.9 million compared to the prior year resulting from a decrease in new company-owned restaurant development. The company expects to pay $50.0 million on the outstanding term loan later this month which will reduce the balance to $200.0 million.

Guidance Policy

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

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 be broadcast live on the Brinker Web site (www.brinker.com) at 9 a.m. CDT today (April 20). 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 Web site until the end of the day May 18, 2010.

Additional financial information, including statements of income which detail our results excluding On The Border and special items and debt covenant information, is also available on the Brinker Web site under the Financial Information section of the Investor tab.

Forward Calendar

 

  • SEC Form 10-Q for third quarter fiscal 2010 filing on or before May 3, 2010; and
  • Fourth quarter earnings release, before market opens, Aug. 12, 2010.

 

Brinker, International Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, Brinker currently owns, operates, or franchises 1704 restaurants under the names Chili's(R) Grill & Bar (1,499 restaurants), On The Border Mexican Grill & Cantina(R) (160 restaurants) and Maggiano's Little Italy(R) (45 restaurants). Brinker also holds a minority investment in Romano's Macaroni Grill(R).

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, the seasonality of the company's business, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorists acts, consumer perception of food safety, changes in consumer taste, health epidemics or pandemics, changes in demographic trends, availability of employees, unfavorable publicity, the company's ability to meet its growth plan, acts of God, governmental regulations and inflation.

                  Stacey Sullivan, Media         Marie Perry, Investor
    Contacts:     Relations                      Relations
                 (800) 775-7290                 (972) 770-1276



                         BRINKER INTERNATIONAL, INC.
                      Consolidated Statements of Income
                   (In thousands, except per share amounts)
                                 (Unaudited)


                                    Thirteen Week         Thirty-Nine Week
                                    Periods Ended           Periods Ended
                                    -------------       ----------------
                                 March
                                  24,    March 25,  March 24,   March 25,
                                   2010       2009        2010        2009
                                   ----       ----        ----        ----


    Revenues                   $713,380   $774,067  $2,115,438  $2,534,254
    Operating Costs and
     Expenses:
        Cost of sales           203,242    218,406     610,452     720,119
        Restaurant expenses     390,523    418,477   1,185,962   1,437,441
        Depreciation and
         amortization            33,307     35,887     102,972     108,977
        General and
         administrative          32,079     35,246      99,535     111,066
        Other gains and
         charges (a)              4,350     15,322      25,299      95,558
                                  -----     ------      ------      ------
        Total operating costs
         and expenses           663,501    723,338   2,024,220   2,473,161
                                -------    -------   ---------   ---------

    Operating income             49,879     50,729      91,218      61,093

    Interest expense              6,498      7,452      20,258      27,444
    Other, net                     (864)      (664)     (4,523)     (2,201)
                                   ----       ----      ------      ------

    Income before tax
     expense                     44,245     43,941      75,483      35,850

    Income tax expense            8,737     12,927      14,859         781
                                  -----     ------      ------         ---

    Income from continuing
     operations                  35,508     31,014      60,624      35,069

    Income from
     discontinued
     operations,                  4,490      3,989      13,465       1,951
      net of taxes (b)            -----      -----      ------       -----

    Net income                  $39,998    $35,003     $74,089     $37,020
                                =======    =======     =======     =======


    Basic net income per
     share:
        Income from continuing
         operations               $0.35      $0.30       $0.59       $0.34
                                  =====      =====       =====       =====
        Income from
         discontinued
         operations               $0.04      $0.04       $0.13       $0.02
                                  =====      =====       =====       =====
        Net income per share      $0.39      $0.34       $0.72       $0.36
                                  =====      =====       =====       =====


    Diluted net income per
     share:
        Income from continuing
         operations               $0.35      $0.30       $0.59       $0.34
                                  =====      =====       =====       =====
        Income from
         discontinued
         operations               $0.04      $0.04       $0.13       $0.02
                                  =====      =====       =====       =====
        Net income per share      $0.39      $0.34       $0.72       $0.36
                                  =====      =====       =====       =====



    Basic weighted average
       shares outstanding       102,470    101,882     102,398     101,784
                                =======    =======     =======     =======

    Diluted weighted
     average
       shares outstanding       103,357    102,752     103,122     102,598
                                =======    =======     =======     =======



    (a)  Current year other gains and charges primarily includes $4.0
    million of lease termination charges related to the closure of
    certain underperforming restaurants. During the first six months of
    fiscal 2010, other gains and charges primarily included long-lived
    asset impairments of $20.6 million related to the closure and
    impairment of certain underperforming restaurants and $2.4 million
    of lease termination charges, partially offset by a $2.8 million
    gain on the sale of 21 restaurants to a franchisee.

        Prior year other gains and charges primarily includes lease
        termination charges of $8.0 million and severance costs of $4.9
        million.  In the first six months of fiscal 2009, other gains and
        charges consisted primarily of long-lived asset impairments of
        $35.2 million related to the decision to close certain
        underperforming restaurants and a loss on the sale of Macaroni Grill
        of $43.3 million.

    (b)  Income from discontinued operations, net of taxes, includes
    current year other gains and charges of $0.8 million, primarily due
    to lease termination charges related to the closure of certain
    underperforming restaurants. During the first six months of fiscal
    2010, other gains and charges from discontinued operations was
    primarily due to charges related to the closure and impairment of
    certain underperforming restaurants.

        For the prior year, income from discontinued operations, net of
        taxes, includes other gains and charges of $1.5 million, primarily
        due to $1.3 million of lease termination charges. For the first six
        months of fiscal 2009, other gains and charges from discontinued
        operations was primarily due to charges related to the closure and
        impairment of certain underperforming restaurants.



                  BRINKER INTERNATIONAL, INC.
             CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands)


                                               March 24,    June 24,
                                                     2010         2009
                                                     ----         ----
                                              (Unaudited)
    ASSETS
        Current assets of continuing
         operations                              $334,953     $359,181
        Assets held for sale                      162,020      170,133
        Net property and equipment (a)          1,137,538    1,247,780
        Total other assets                        205,651      171,853
                                                  -------      -------
        Total assets                           $1,840,162   $1,948,947
                                               ==========   ==========

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
        Current liabilities of continuing
         operations                              $407,798     $406,889
        Liabilities associated with assets
         held for sale                              9,658        9,798
        Long-term debt, including current
         installments                             590,174      729,262
        Other liabilities                         149,820      156,074
        Total shareholders' equity                682,712      646,924
                                                  -------      -------
        Total liabilities and shareholders'
         equity                                $1,840,162   $1,948,947
                                               ==========   ==========


    (a)  At March 24, 2010, the company owned the land and buildings for
    191 of the 871 company-owned restaurants, excluding On The Border.
    The net book values of the land and buildings associated with these
    restaurants totaled $148.1 million and $145.8 million, respectively.


                               BRINKER INTERNATIONAL, INC.
                                    RESTAURANT SUMMARY


                                                          Third Quarter
                             Total                          Closings/
                         Restaurants     Third Quarter        Sales
                                            Openings/
                                          Acquisitions
                         Dec. 23, 2009    Fiscal 2010     Fiscal 2010
                         -------------    -----------     -----------

    Company-Owned
      Restaurants:
        Chili's                    835                -               8
        On The Border              122                -               3
        Maggiano's                  44                1               1
                                   ---              ---             ---
                                 1,001                1              12
                                 =====              ===             ===

    Franchise
     Restaurants:
      Chili's                      465                3               2
      On The Border                 31                -               1
      International(a)             215                5               2
                                   ---              ---             ---
                                   711                8               5
                                   ===              ===             ===

    Total
     Restaurants:
      Chili's                    1,300                3              10
      On The Border                153                -               4
      Maggiano's                    44                1               1
      International                215                5               2
                                   ---              ---             ---
                                 1,712                9              17
                                 =====              ===             ===




                             Total      Projected
                         Restaurants    Openings
                           March 24,     Fiscal
                             2010          2010
                          ----------    -------

    Company-Owned
      Restaurants:
        Chili's                   827           -
        On The Border             119           1
        Maggiano's                 44           1
                                  ---         ---
                                  990           2
                                  ===         ===

    Franchise
     Restaurants:
      Chili's                     466       12-13
      On The Border                30         2-3
      International(a)            218       31-34
                                  ---       -----
                                  714       45-50
                                  ===       =====

    Total
     Restaurants:
      Chili's                   1,293       12-13
      On The Border               149         3-4
      Maggiano's                   44           1
      International               218       31-34
                                  ---       -----
                                1,704       47-52
                                =====       =====



    (a)  At March 24, 2010, international franchise restaurants by brand
    were 206 Chili's, 11 On The Border and one Maggiano's locations.


SOURCE Brinker International, Inc.

 

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