DALLAS, Aug. 12, 2020 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today provided a business update related to the first quarter of fiscal 2021 and announced results for the fourth quarter and fiscal year 2020 ended June 24, 2020.

"Our continued strategic focus on value, off-premise, digital and scale is allowing us to successfully navigate through the pandemic," said Wyman Roberts, Chief Executive Officer and President of Brinker International. "Leaning into these existing strategies with a clear focus and continually prioritizing the safety of our Team Members and Guests has allowed us to accelerate our performance and deliver industry leading results."

Fiscal 2021 First Quarter-to-Date Highlights

During the first quarter of fiscal 2021 Chili's and Maggiano's continue to operate with reduced dining room capacities due to state and local mandates related to COVID-19. The following represents a business update from our first period of fiscal 2021 ended July 29, 2020, related to Company-owned restaurants:

• As of July 29, 2020, there were 885 Chili's and 52 Maggiano's Company-owned restaurants with dining rooms or patios open, representing 84.0% of total Company-owned restaurants. Capacities are limited in accordance with state and local mandates
• Comparable restaurant sales for the first period of fiscal 2021, ended July 29, 2020, compared to the prior year are as follows:

• It's Just Wings^™, a virtual brand offering through our partnership with Doordash, launched nationally in 1,050 of our Company-owned restaurants on June 23, 2020. It's Just Wings sales are included in comparable restaurant sales for restaurants operating the virtual brand
• Brinker had total liquidity of $576.2 million as of July 29, 2020

Fiscal 2021 Outlook

We are providing a financial outlook for the first quarter of fiscal 2021 quarter instead of our usual practice of providing an annual outlook. Forecasting longer term business performance is not reliable given the uncertainties created by the ongoing COVID-19 pandemic. We plan to update our financial outlook on a quarterly basis until such time we can reliably forecast on a longer term basis.

First Quarter of Fiscal 2021 Guidance

• Adjusted net loss per diluted share is expected to be in the range of $0.40 to $0.25
• Comparable restaurant sales are expected to be down low to mid-teens
• Operating cash flow is expected to be positive
• Weighted average diluted shares is expected to be 45.0 million to 46.0 million

Fiscal 2021 is a 53-week year, and includes an extra operating week in the fourth quarter.

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 2021, reconciliations to the appropriate GAAP measures will be provided.

Fiscal 2020 Highlights - Fourth Quarter and Fiscal Year

Financial metrics of the fourth quarter of fiscal 2020 compared to the fourth quarter of fiscal 2019, and fiscal year 2020 compared to fiscal year 2019, were negatively impacted due to the COVID-19 pandemic, partially offset by the acquisition of 116 Chili's restaurants in the first quarter of fiscal 2020 and increased off-premise sales. For non-GAAP information and related reconciliations, refer to the tables and information at the end of this earnings release.

• Reported earnings per diluted share was a loss of $1.20 in the fourth quarter of fiscal 2020, and earnings of $0.63 in fiscal 2020
• Adjusted earnings per diluted share was a loss of $0.88 in the fourth quarter of fiscal 2020, and earnings of $1.71 in fiscal 2020
• Cash flows from operating activities in the full fiscal year 2020 were $245.0 million, and capital expenditures totaled $104.5 million resulting in free cash flow of $140.5 million

Fiscal 2020 Quarterly Operating Performance

Segment Performance

Chili's

• Chili's Company sales and Total revenues decreased primarily due to the COVID-19 pandemic that impacted restaurant sales due to guests dining out less, temporary dining room closures and capacity limitations, partially offset by the acquisition of 116 Chili's restaurants in the first quarter of fiscal 2020 and increased off-premise sales
• Chili's Company restaurant expenses, as a percentage of Company sales, increased primarily due to sales deleverage as a result of COVID-19, higher expenses primarily related to delivery fees and supplies in connection with the growth in off-premise sales, and unfavorable commodity pricing. These increases were partially offset by lower advertising expenses, lower manager and hourly labor expenses as a result of COVID-19 decreased sales and closures, lower repairs and maintenance expenses, and favorable menu item mix

Maggiano's

• Maggiano's Company sales and Total revenues decreased due to lower comparable restaurant sales driven by guests dining out less, temporary dining and banquet room closures and limited capacity of reopened locations from the COVID-19 pandemic, partially offset by increased off-premise sales
• Maggiano's Company restaurant expenses, as a percentage of Company sales increased primarily due to sales deleverage as a result of COVID-19, higher expenses primarily related to delivery fees and supplies in connection with the growth in off-premise sales, and unfavorable commodity pricing. These increases were partially offset by lower manager and hourly labor expenses as a result of COVID-19 decreased sales and closures, lower repairs and maintenance expenses, favorable menu item mix primarily related to seafood, lower utilities expenses, and favorable menu pricing

Franchise and other revenues

• Franchise and other revenues include royalties and advertising fees that are based on franchise sales. Our franchisees generated sales of approximately $82.4 million in the fourth quarter of fiscal 2020 compared to $331.7 million in the fourth quarter of fiscal 2019. This decrease is primarily due to the adverse impact of the COVID-19 pandemic on our domestic and global franchise restaurants, and the acquisition of 116 Chili's restaurants from a franchisee in the first quarter of fiscal 2020
• Maggiano's Franchise and other revenues decreased primarily due to lower banquet fee income as a result of the COVID-19 pandemic

Income Taxes

• On a GAAP basis, the effective income tax rate was a benefit of 27.8% in the fourth quarter of fiscal 2020 compared to an expense of 5.1% in the fourth quarter of fiscal 2019 primarily driven by the impact of a net loss before income taxes, due to reduced profitability related to the COVID-19 pandemic, and the leverage on the FICA tax credit relative to the net loss before income taxes in fiscal 2020. Excluding the impact of special items (see non-GAAP reconciliation below for details), the effective income rate was a benefit of 26.9% in the fourth quarter of fiscal 2020 compared to an expense of 10.1% in the fourth quarter of fiscal 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 12, 2020 at 9 a.m. CDT:

http://investors.brinker.com/events/event-details/q4-2020-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 26, 2020.

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 2020 filing on or before August 24, 2020
• Earnings release call for the first quarter of fiscal 2021 on October 28, 2020

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.

About Brinker

Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Based in Dallas, Texas, as of June 24, 2020, Brinker owned, operated, or franchised 1,663 restaurants under the names Chili's^® Grill & Bar (1,610 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, and are currently, or in the future could be, amplified by the novel strain of the coronavirus ("COVID-19") pandemic. Such risks and uncertainties include, among other things, uncertainty of the magnitude, duration, geographic reach and impact of the COVID-19 pandemic on local, national and global economies; the current, and uncertain future, impact of the COVID-19 pandemic and governments' responses to it on our industry, business, growth, reputation, projections, prospects, financial condition, operations, cash flows, and liquidity; the adequacy or effectiveness of steps we take to respond to the COVID-19 crisis, including cost reduction or other mitigation programs; 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 (such as COVID-19); and tax reform; as well as the risks and uncertainties described in "Risk Factors" in our Annual Report on Form 10-K and future filings with the Securities and Exchange Commission.

The Condensed Consolidated Balance Sheets (Unaudited) at June 24, 2020 included the final purchase price allocation for the 116 Chili's restaurants acquired on September 5, 2019. Of the 1,116 Company-owned restaurant locations, at June 24, 2020, we own both building and land for 43 restaurant locations. The related book values associated with these restaurants included land of $34.1 million and buildings of $13.9 million.

Additionally, effective fiscal 2020, we adopted ASC 842, the new lease accounting standard that required us to recognize operating lease assets and liabilities in the balance sheet. Upon adoption, we eliminated the remaining deferred balance associated with the fiscal 2019 sale leaseback transactions gain and related deferred tax asset. Under our historical accounting, operating leases were not recognized in the balance sheet. Prior results have not been restated for the impact of this accounting change.

Included in the Total Restaurants Open at June 24, 2020 are locations that have been temporarily closed due to the COVID-19 pandemic which include 9 Company-owned Chili's restaurants located within a closed structure or closed due to local regulations, 18 domestic Chili's franchise locations, and 89 Chili's international franchise locations.

Reconciliation of Net Income (Loss) and Adjusted Net Income (Loss) Per Share (in millions, except per share)

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.

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 because 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 Food and beverage costs, 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, advertising fees, and other non-food and beverage revenues streams such as gift card breakage, banquet service charges, delivery fee income, and digital entertainment revenues. Depreciation and amortization expenses, substantially all of which are related to restaurant-level assets, are 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.

Reconciliation of Free Cash Flow (in millions)

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.

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SOURCE Brinker International, Inc.

MIKA WARE, INVESTOR RELATIONS, investor.relations@brinker.com, MEDIA RELATIONS, media.requests@brinker.com, (800) 775-7290, 3000 OLYMPUS BOULEVARD, DALLAS, TEXAS 75019