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Brinker International Announces Second Quarter Fiscal 2009 Results

DALLASJan. 22 /PRNewswire-FirstCall/ -- Brinker International, Inc. (NYSE: EAT) announced a second quarter fiscal 2009 loss per diluted share of $0.21 compared to earnings per diluted share of $0.52 in the prior year. Before special items and excluding Macaroni Grill, earnings per diluted share decreased to$0.27 from $0.31 in the prior year (reconciliation included in Table 2).

On Dec. 18, 2008, the company completed the sale of Romano's Macaroni Grill to Mac Acquisition LLC, an affiliate of San Francisco-based Golden Gate Capital, for $88 million while retaining a 19.9 percent continuing ownership interest. Cash attributable to the transaction of approximately $130 million either has been or will be used to pay down outstanding bank debt. The information presented below includes Macaroni Grill unless otherwise noted.

Quarterly Revenues

Brinker reported revenues for the 13-week period of $949.4 million, a decrease of 7.8 percent compared with $1,029.8 million reported for the same period of fiscal 2008. The company experienced a 5.4 percent decrease in comparable restaurant sales (see Table 1) in the second quarter of fiscal 2009 due to decreases across all brands. Revenues were also negatively impacted by a net decline in capacity of 3.3 percent due to 47 restaurant closures (26 of which were Macaroni Grills) and the sale of 198 restaurants since the second quarter of fiscal 2008 (189 of which were Macaroni Grills). Capacity was also impacted by the sale of 76 restaurants to a franchisee during the second quarter of the prior year. Royalty revenues from franchisees increased 9.7 percent to $15.8 million from $14.4 million in the prior year. Franchise and development fees decreased to $1.3 million in the current year from $6.5 million primarily due to the sale of 76 restaurants to a franchisee in the prior year.

    Table 1: Q2 comparable restaurant sales
    Q2 09 and Q2 08, company and four reported brands; percentage

                                   Q2 09       Q2 08       Q2 09     Q2 09
                                 Comparable  Comparable   Pricing    Mix-
                                   Sales       Sales      Impact     Shift
    Brinker Excluding Macaroni
     Grill                         (4.5)       (2.1)        2.9      (1.7)

    Brinker International          (5.4)       (2.4)        2.9      (1.7)
      Chili's                      (4.2)       (2.4)        3.3      (1.7)
      On The Border                (3.7)       (4.3)        2.6      (1.5)
      Maggiano's                   (6.9)        1.7         1.6      (2.3)
      Macaroni Grill              (10.6)       (4.0)        2.7      (1.0)

Quarterly Operating Performance

Cost of sales, as a percent of revenues, decreased from 28.3 percent in the prior year to 28.2 percent in the second quarter of fiscal 2009. During the quarter, favorable menu price changes more than offset the negative impact on cost of sales of unfavorable commodity prices primarily related to chicken, produce and oils and sauces.

Restaurant expenses, as a percent of revenues, increased to 58.0 percent from 56.8 percent in the prior year primarily driven by sales deleverage on fixed costs and increased utility and labor costs, partially offset by lower pre-opening expenses.

Depreciation and amortization increased $1.6 million primarily driven by additional depreciation on new restaurants and investments in Chili's reimage program, partially offset by restaurant closures and fully depreciated assets.

Compared to the prior year, general and administrative expense decreased $2.3 million for the quarter due to reduced salary expense.

Other gains and charges resulted in $85.1 million of charges in the second quarter of fiscal 2009 primarily due to $44.2 million of long-lived asset impairment charges related to the decision to close 35 underperforming restaurants, a $43.3 million loss on the sale of Macaroni Grill and $3.6 million of gains on sales of other assets.

Interest expense decreased $1.9 million primarily due to lower interest rates and lower average borrowings as compared to the same quarter last year.

The effective income tax rate decreased from a provision of 30.2 percent in the second quarter of fiscal 2008 to a benefit of 51.1 percent in the current quarter. The change in the tax rate was primarily due to the loss on the sale of Macaroni Grill and long-lived asset impairment charges.

Cash Flow and Capital Allocation

Cash flow from operations for the first six months of fiscal 2009 decreased to approximately $94.8 millioncompared to $241.1 million in the prior year due primarily to a decline in operating profitability, a reduction in gift card sales and the timing of income tax payments as well as operational payments and receipts. Capital expenditures for the first six months of fiscal year 2009 totaled $59.6 million, a reduction of $99.6 million compared to the prior year resulting from a decrease in new company-owned restaurant development.

    Special Items
    Table 2: Reconciliation of net income (loss), before special items(1)
    Q2 09 and Q2 08; $ millions and $ per diluted share after-tax

    Item                                        EPS             EPS
                                       Q2 09   Q2 09   Q2 08   Q2 08

    Net Income (Loss)                  (21.8)  (0.21)   54.5    0.52
     Other (Gains) and Charges          53.5    0.52   (10.3)  (0.10)
                                        ----    ----  ------  ------
    Net Income before Special Items     31.7    0.31    44.2    0.42
     Macaroni Grill before Special
      Items                             (3.8)  (0.04)  (11.8)  (0.11)
                                       -----  ------  ------  ------
    Adjusted Net Income before
     Special Items                      27.9    0.27    32.4    0.31
                                        ====    ====    ====    ====


    (1) The company believes excluding other gains and charges and Macaroni
        Grill 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.

Web-cast 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 (http://www.brinker.com) at 9 a.m. CDT today (Jan. 22). 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 on Feb. 19, 2009.

Additional financial information, including reconciliation details and debt covenant information, is also available on the Brinker website under the Financial Information section of the Investor tab.

    Forward Calendar
    --  Second Quarter SEC Form 10-Q filing on or before Feb. 2, 2009; and
    --  Third quarter earnings release, before market opens, on Apr. 21, 2009.

At the end of the second quarter of fiscal quarter 2009, Brinker International either owned, operated, or franchised 1,704 restaurants under the names Chili's Grill & Bar (1,495 restaurants), On The Border Mexican Grill & Cantina (165 restaurants) and Maggiano's Little Italy (44 restaurants). Brinker also holds a minority investment in Romano's Macaroni Grill.

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.

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

                                  Thirteen Week          Twenty-Six Week
                                  Periods Ended           Periods Ended
                           -----------------------------------------------
                              December   December     December    December
                                 24,        26,          24,         26,
                                2008       2007         2008        2007
                                ----       ----         ----        ----


    Revenues                  $949,425   $1,029,785 $1,933,832  $2,084,471
                              --------   ----------  ---------  ----------
       Operating Costs and
        Expenses:
          Cost of sales        268,001      291,339    546,968     583,077
          Restaurant expenses  550,696      584,567  1,129,823   1,186,445
          Depreciation and
           amortization         40,647       39,089     81,803      83,996
          General and
           administrative       39,088       41,396     78,852      84,447
          Other gains and
           charges (a)          85,149      (16,343)    90,102      (7,752)
                                ------     --------     ------     -------
          Total operating costs
           and expenses        983,581      940,048  1,927,548   1,930,213
                               -------      -------  ---------   ---------

    Operating income
     (loss)                    (34,156)      89,737      6,284     154,258

    Interest expense            10,535       12,476     19,992      25,391

    Other, net                    (193)        (845)    (1,565)     (2,102)
                                  -----        -----    -------     -------

    Income (loss) before
     tax expense
     (benefit)                 (44,498)      78,106    (12,143)    130,969

    Income tax expense
     (benefit)                 (22,734)      23,626    (14,160)     38,889
                               --------      ------   --------      ------

     Net income (loss)        $(21,764)     $54,480     $2,017     $92,080
                              =========     =======     ======     =======


    Basic net income
     (loss) per share           $(0.21)       $0.53      $0.02       $0.88
                              =========    ========    =======    ========

    Diluted net income
     (loss) per share           $(0.21)       $0.52      $0.02       $0.86
                              =========    ========    =======    ========



    Basic weighted
     Average shares
     outstanding               101,841      103,498    101,735     104,981
                               =======      =======    =======     =======

    Diluted weighted
     Average shares
     outstanding               101,841      105,339    102,520     107,247
                               =======      =======    =======     =======



    (a) Current year other gains and charges primarily includes long-lived
        asset impairments of $44.2 million related to the decision to close 35
        underperforming restaurants, a loss on the sale of Macaroni Grill of
        $43.3 million and $3.6 million of gains on sales of other assets in
        the second quarter of fiscal 2009.  In the first quarter of fiscal
        2009, other gains and charges primarily included lease termination
        costs of $2.0 million, uninsured costs related to hurricanes of $1.7         million and expenses related to the pending sale of Macaroni Grill of
        $1.3 million.

        Prior year other gains and charges primarily includes a $29.2 million
        gain on the sale of 76 restaurants to a franchisee, $10.5 million of
        charges primarily related to the impairment of long-lived assets and
        $1.9 million of charges related to the sale of Macaroni Grill in the
        second quarter of fiscal 2008.  In the first quarter of fiscal 2008,
        other gains and charges primarily included $7.8 million of charges
        related to the expected sale of Macaroni Grill.



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

                                                  December        June
                                                     24,           25,
                                                    2008          2008
                                                    ----          ----
                                                 (Unaudited)
    ASSETS
      Current assets                               $386,064     $320,173
      Assets held for sale                                -      135,850
      Net property and equipment (a)              1,465,972    1,529,715
      Total other assets                            248,372      207,384
                                                    -------      -------
      Total assets                               $2,100,408   $2,193,122
                                                 ==========   ==========

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current liabilities                          $493,918     $506,443
      Liabilities associated with assets held
       for sale                                       7,875       18,408
      Debt, including current installments          839,926      903,577
      Other liabilities                             178,645      169,605
      Total shareholders' equity                    580,044      595,089
                                                    -------      -------
      Total liabilities and shareholders'
       equity                                    $2,100,408   $2,193,122
                                                ===========  ===========



    (a) At December 24, 2008, the company owned the land and buildings for 228
        of the 1,064 company-owned restaurants.  The net book values of the
        land and buildings associated with these restaurants totaled $180.6         million and $186.1 million, respectively.


                             BRINKER INTERNATIONAL, INC.
                                 RESTAURANT SUMMARY


                        Total       Second     Second     Total   Projected
                      Restaurants   Quarter   Quarter  Restaurants Openings
                       Sept. 24,   Openings/  Closings/  Dec. 24,   Fiscal
                         2008    Acquisitions  Sales      2008       2009
                                    Fiscal     Fiscal
                                     2009       2009
                       ---------  ----------- ---------   ----       ----

    Company-Owned
     Restaurants:
       Chili's            894          -          9        885        9
       On The Border      131          -          2        129        -
       Maggiano's          42          1          -         43        2
       International(a)     6          1          -          7        2
                          ---        ---        ---        ---      ---
                        1,073          2         11      1,064       13
                        =====          =         ==      =====       ==

    Franchise
     Restaurants:
      Chili's             410         19          2        427    25-30
      On The Border        33          2          4         31      6-8
      International(a)    169         13          -        182    34-39
                          ---         --        ---        ---    -----
                          612         34          6        640    65-77
                          ===         ==          =        ===    =====

    Total Restaurants:
      Chili's           1,304         19         11      1,312    34-39
      On The Border       164          2          6        160      6-8
      Maggiano's           42          1          -         43        2
      International       175         14          -        189    36-41
                          ---         --        ---        ---    -----
                        1,685         36         17      1,704    78-90
                        =====         ==         ==      =====    =====


    (a) At the end of second quarter fiscal year 2009, international company-
        owned restaurants by brand were six Chili's and  one Maggiano's.
        International franchise restaurants by brand were 177 Chili's and five
        On The Border's.

 

SOURCE Brinker International, Inc.

 

For further information: Stacey Sullivan Media Relations 1-800-775-7290 or Marie Perry Investor Relations +1-972-770-1276 both for Brinker International Inc. Web Site: http://www.brinker.com
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