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Brinker International Reports 17 Percent Increase in Second Quarter Fiscal 2007 Results
Highlights for the second quarter 2007:
-- Increased earnings per share from continuing operations before special
items by 29 percent
-- Opened 50 new system restaurants during the quarter
-- Grew revenues by approximately 6 percent over the prior year
-- Signed 3 new international development agreements for 10 new
restaurants
-- Increased quarterly dividend by 35 percent to $0.09 per share.
-- Repurchased 2.8 million common shares for approximately $80.4 million.
Doug Brooks, Brinker Chief Executive Officer, said, Our employees, both in our restaurants and at the home office, again this quarter demonstrated their ability to deliver improved operating results for our shareholders and execute the strategies that are driving our business forward.
Revenue Growth
Brinker reported revenues of $1.07 billion for the 13-week period, an increase of 6.1 percent compared with $1.01 billion reported for the same period of fiscal 2006. These revenue gains were primarily driven by restaurant capacity growth (as measured by average weeks) of 7.8 percent, offset by a 2.1 percent decrease in comparable store sales. During the second quarter, the company opened 33 restaurants and its franchisees opened 17 restaurants.
Table 1: Q2 Comparable store sales
Q2 07 and Q2 06, company and four reported brands; Percentage
Q2 07 Q2 06 Q2 07
Comp Store Comp Store Price Q2 07
Sales Sales Increase Mix-Shift
Brinker International (2.1%) 2.2% 1.9% 0.1%
Chili's (1.2%) 2.7% 2.0% (0.1%)
Macaroni Grill (4.9%) 1.1% 1.4% (0.5%)
On The Border (3.6%) 0.4% 1.8% 3.3%
Maggiano's (1.3%) 2.6% 1.8% (0.1%)
December Comparable Store Sales
For the four-week period ending Dec. 27, 2006, comparable store sales decreased 1.6 percent (see Table 2).
Table 2: Month of December comparable store sales
Dec 07 and Dec 06, company and four reported brands; Percentage
Dec 07 Dec 06 Dec 07
Comp Store Comp Store Price Dec 07
Sales Sales Increase Mix-Shift
Brinker International (1.6%) 2.7% 1.3% (0.1%)
Chili's (1.1%) 4.1% 1.2% (0.4%)
Macaroni Grill (4.5%) (1.5)% 1.4% (0.6%)
On The Border (1.4%) (0.6)% 1.8% 3.8%
Maggiano's (0.3%) 4.5% 1.4% (0.5%)
Quarterly Operating Performance
Cost of sales, as a percent of revenues, improved from 28.5 percent to 28.0 percent or 50 basis points for the quarter compared to the prior year. The improvement was due primarily to menu price changes and lower commodity prices for beef, chicken, and cheese, partially offset by product mix shifts for ribs.
Restaurant expenses, as a percent of revenues, increased from 55.0 percent to 55.5 percent compared to the prior year. A variety of items contributed to the overall increase; however, no single item was more predominant than another.
Depreciation and amortization for the second quarter of fiscal 2007, compared to the same quarter in fiscal year 2006, increased by $1.1 million. The change was driven by new restaurants.
Compared to the prior year, general and administrative expense, as a percent of revenues, improved by 80 basis points to 4.4 percent or $4.6 million for the quarter. The decrease was primarily due to the change in our annual grant date for stock-based compensation and the expense of the Chili's 30th Anniversary conference in the prior year.
The effective income tax rate for continuing operations decreased to 31.3 percent for the current quarter as compared to 34.0 percent for the same quarter last year. The decrease in the tax rate was primarily due to a decrease in stock-based compensation related to incentive stock options, which is not deductible until exercised, and the benefits from state tax planning.
Capital Allocation
Cash flow from operations and capital expenditures for year-to-date fiscal 2007 were approximately $293.3 million and $194.8 million, respectively. Consolidated return on invested capital improved by 100 basis points from fiscal year-end 2006 to 17.8 percent.
The company repurchased approximately 2.8 million shares during the second quarter and diluted weighted average shares outstanding declined approximately four percent from 131.4 million to 126.6 million on a year-over-year basis. Year-to-date, Brinker has repurchased approximately 4.5 million shares or $119.2 million. As of Jan. 22, 2007, approximately $430.0 million remained available under the company's share repurchase authorizations.
Special Items
Table 3: Reconciliation of income from continuing operations and description of special item
Q2 2007 and Q2 2006; $ millions and $ per diluted share after-tax
Per Per
Item Income Statement $ Share $ Share
Line Q2 07 Q2 07 Q2 06 Q2 06
Income from
Continuing
Operations 44.2 0.35 39.4 0.30
Special Item -
Total
Restructuring
Charges Restructure & Other 6.7 0.05 0.8 0.01
Income from
Continuing
Operations,
before Special
Item 50.9 0.40 40.2 0.31
During the quarter, a comprehensive analysis was performed that examined restaurants not meeting minimum return on investment thresholds and certain other operating performance criteria. As a result, a charge of $10.6 million ($6.7 million after-tax) for long-lived asset impairments was recorded.
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 and an outlook for future periods. The call will be broadcast live on the Brinker Web site (http://www.brinker.com) at 9 a.m. CDT today (Jan. 23). 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. 6, 2007.
Forward Calendar
SEC Form 10-Q for second quarter fiscal year 2007, filing on or before Feb. 5, 2007
Period 7 (January) sales - Feb. 7, 2007, after the market closes.
At the end of second quarter fiscal year 2007, Brinker International either owned, operated, or franchised 1,712 restaurants under the names Chili's Grill & Bar (1,275 units), Romano's Macaroni Grill (247 units), On The Border Mexican Grill & Cantina (151 units), and Maggiano's Little Italy (39 units).
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, the impact of competition, the impact of acquisitions and divestitures, the seasonality of the company's business, adverse weather conditions, future commodity prices, 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.
(1) Common stock share and per share amounts reflect the 3:2 common stock
split completed on November 30, 2006.
BRINKER INTERNATIONAL, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Thirteen Week Periods Ended Twenty-Six Week Periods Ended
December 27, December 28, December 27, December 28,
2006 2005 2006 2005
Revenues $1,070,587 $1,009,083 $2,110,522 $1,984,979
Operating Costs
and Expenses:
Cost of sales 299,612 287,305 585,119 562,463
Restaurant
expenses (a) 594,400 555,371 1,174,979 1,098,143
Depreciation and
amortization 48,743 47,602 96,974 94,313
General and
administrative 47,026 51,667 97,291 98,805
Restructure charges
and other
impairments 10,630 1,312 10,630 2,479
Total operating
costs and
expenses 1,000,411 943,257 1,964,993 1,856,203
Operating income 70,176 65,826 145,529 128,776
Interest expense 6,614 6,198 12,851 11,565
Other, net (795) (20) (1,632) (184)
Income before
provision for
income taxes 64,357 59,648 134,310 117,395
Provision for
income taxes 20,165 20,278 42,479 39,583
Income from
continuing
operations 44,192 39,370 91,831 77,812
Income (loss) from
discontinued
operations, net of
taxes (b) - 3,507 - (3,181)
Net income $44,192 $42,877 $91,831 $74,631
Basic net income
per share:
Income from
continuing
operations $0.36 $0.31 $0.74 $0.60
Income (loss) from
discontinued
operations $0.00 $0.02 $0.00 $(0.03)
Net income per share $0.36 $0.33 $0.74 $0.57
Diluted net income
per share:
Income from
continuing
operations $0.35 $0.30 $0.73 $0.59
Income (loss) from
discontinued
operations $0.00 $0.03 $0.00 $(0.03)
Net income per share $0.35 $0.33 $0.73 $0.56
Basic weighted average
shares outstanding 123,451 128,970 123,835 130,364
Diluted weighted average
shares outstanding 126,641 131,427 126,339 132,626
(a) Current year restaurant expenses include a $3.2 million gain on the
termination of interest rate swaps in the first quarter. Prior year
restaurant expenses include a $3.3 million gain on the sale of real
estate in the first quarter.
(b) Discontinued operations relates to the disposition of Corner Bakery.
The loss from discontinued operations includes net income from
discontinued operations of $2.7 million and the after tax loss on
sale of Corner Bakery of $9.4 million.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 27, June 28,
2006 2006
(Unaudited)
ASSETS
Current assets $281,583 $242,310
Net property and equipment(a) 1,855,722 1,792,724
Total other assets 197,227 186,745
Total assets $2,334,532 $2,221,779
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $604,783 $497,375
Long-term debt, less current installments 487,387 500,515
Other liabilities 155,003 148,057
Total shareholders' equity 1,087,359 1,075,832
Total liabilities and shareholders' equity $2,334,532 $2,221,779
(a) At December 27, 2006, the company owned the land and buildings for
316 of the 1,340 company-owned restaurants. The net book values of
the land and buildings associated with these restaurants totaled
$268.9 million and $270.1 million, respectively.
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
Second Second
Quarter Quarter Projected
Total Openings/ Closings/ Total Openings
Restaurants Acquisitions Sales Restaurants Fiscal
Sept. 27, 2006 Fiscal 2007 Fiscal 2007 Dec. 27, 2006 2007
Company-Owned
Restaurants:
Chili's 916 28 - 944 125-130
Macaroni Grill 223 1 - 224 4-5
Maggiano's 38 1 - 39 4-5
On The Border 125 3 - 128 12-14
International(a) 5 - - 5 -
1,307 33 - 1,340 145-154
Franchise
Restaurants:
Chili's 198 4 - 202 10-15
Macaroni Grill 11 2 - 13 3-4
On The Border 23 - - 23 4-6
International(a) 123 11 - 134 38-41
355 17 - 372 55-66
Total Restaurants:
Chili's 1,114 32 - 1,146 135-145
Macaroni Grill 234 3 - 237 7-9
Maggiano's 38 1 - 39 4-5
On The Border 148 3 - 151 16-20
International 128 11 - 139 38-41
1,662 50 - 1,712 200-220
(a) At December 27, 2006, international company owned restaurants by brand
were 4 Chili's and one Macaroni Grill. International franchise
restaurants by brand were 125 Chili's and nine Macaroni Grill's.
FOR ADDITIONAL INFORMATION, CONTACT:
LAURA CONN
INVESTOR RELATIONS
(972) 770-5810
6820 LBJ FREEWAY
DALLAS, TEXAS 75240
STACEY CALBERT
MEDIA RELATIONS
(800) 775-7290
SOURCE Brinker International, Inc.
Stacey Calbert, Media Relations, 1-800-775-7290, or Laura Conn, Investor Relations, +1-972-770-5810, both for Brinker International, Inc.
http://www.brinker.com