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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.