DALLAS, May 1, 2018 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 28, 2018.

Highlights include the following:

• On a GAAP basis, earnings per diluted share were $1.02 for the third quarter of fiscal 2018 representing an 18.6 percent increase from $0.86 in the third quarter of fiscal 2017
• Earnings per diluted share, excluding special items, were $1.08 for the third quarter of fiscal 2018 representing a 14.9 percent increase from $0.94 in the third quarter of fiscal 2017 (see non-GAAP reconciliation below)
• Brinker International's total revenues were $812.5 million in the third quarter of fiscal 2018 increasing 0.2 percent compared to the third quarter of fiscal 2017, and company sales were $790.5 million in the third quarter of fiscal 2018 which were flat compared to the third quarter of fiscal 2017
• Chili's company-owned comparable restaurant sales decreased 0.4 percent in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017. Chili's U.S. franchise comparable restaurant sales decreased 3.2 percent in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017
• Chili's international franchise comparable restaurant sales decreased 0.2 percent in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017
• Maggiano's comparable restaurant sales increased 0.5 percent in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017
• Operating income, as a percent of total revenues, was 8.9 percent for the third quarter of fiscal 2018 compared to 9.0 percent for the third quarter of fiscal 2017 representing a decrease of approximately 10 basis points
• Restaurant operating margin, as a percent of company sales, was 16.1 percent for the third quarter of fiscal 2018 compared to 17.0 percent for the third quarter of fiscal 2017 (see non-GAAP reconciliation below)
• For the first thirty-nine weeks of fiscal 2018, cash flows provided by operating activities were $237.7 million and capital expenditures totaled $69.5 million. Free cash flow was $168.2 million (see non-GAAP reconciliation below)
• The Company's Board of Directors approved a quarterly dividend of $0.38 per share on the common stock of the Company. The dividend will be payable June 28, 2018 to shareholders of record as of June 8, 2018
• Brinker has entered into the first Chili's franchise partnership in China, which will cover the Shanghai region.

"Brinker continued to gain momentum during the third quarter, especially related to our foundational strategy to drive positive traffic at Chili's," said Wyman Roberts, Chief Executive Officer and President. "Our investments into our food, our value equation and our curbside To Go offering are working and creating a more compelling guest experience."

Quarterly Operating Performance

CHILI'S company sales in the third quarter of fiscal 2018 decreased 0.1 percent to $688.9 million from $689.7 million in the third quarter of fiscal 2017 primarily due to a decline in comparable restaurant sales, partially offset by an increase in capacity in the United States. As compared to the prior year, Chili's restaurant operating margin¹ declined. Cost of sales, as a percent of company sales, increased compared to the prior year due to food investments into beef and chicken and our promotional activities. These investments were partially offset by increased menu pricing. Restaurant labor, as a percent of company sales, increased compared to the prior year due to higher wage rates and employee health insurance expenses, partially offset by lower incentive bonuses. Restaurant expenses, as a percent of company sales, decreased due to lower technology-related operating lease expenses and lower loyalty program related expenses, partially offset by increased repairs and maintenance expenses.

MAGGIANO'S company sales in the third quarter of fiscal 2018 increased 0.6 percent to $101.6 million from $101.0 million in the third quarter of fiscal 2017 primarily due to an increase in comparable restaurant sales. As compared to the prior year, Maggiano's restaurant operating margin¹ improved. Restaurant labor, as a percent of company sales, decreased compared to the prior year due to sales leverage and labor efficiencies, partially offset by higher wage rates. Restaurant expenses, as a percent of company sales, decreased primarily due to sales leverage, lower property taxes, and lower restaurant opening expenses, partially offset by increased repairs and maintenance expenses. Cost of sales, as a percent of company sales, was positively impacted by favorable menu item mix and increased menu pricing, partially offset by unfavorable commodity pricing.

FRANCHISE AND OTHER revenues in the third quarter of fiscal 2018 increased 10.1 percent to $22.0 million from $20.0 million in the third quarter of fiscal 2017 primarily due to higher gift card-related revenues and development fees. Brinker franchisees generated approximately $337.0 million in sales² for the third quarter of fiscal 2018.

Other

Depreciation and amortization expense for the third quarter of fiscal 2018 decreased $1.8 million compared to the third quarter of fiscal 2017 primarily due to an increase in fully-depreciated assets and restaurant closures, partially offset by depreciation on asset replacements, new restaurant openings and new technology-related capital lease depreciation.

General and administrative expense for the third quarter of fiscal 2018 increased $0.7 million compared to the third quarter of fiscal 2017 primarily due to higher performance-based compensation expenses.

Income Taxes

The Tax Cuts and Jobs Act of 2017 (the "Tax Act") enacted during the second quarter of fiscal 2018 lowered federal statutory tax rates. Brinker's federal statutory tax rate for fiscal 2018 decreased to 28.1 percent, representing a blended tax rate for the current fiscal year based on the number of days in the fiscal year before and after the effective date of the Tax Act. For subsequent years, our federal statutory tax rate will be 21.0 percent under the Tax Act.

On a GAAP basis, the effective income tax rate decreased to 20.4 percent in the third quarter of fiscal 2018 from 28.9 percent in the third quarter of fiscal 2017. This decrease was driven primarily by the positive impact of the lower federal statutory tax rate. Excluding the impact of special items (see non-GAAP reconciliation below for details), the effective income tax rate decreased to 19.6 percent in the third quarter of fiscal 2018 compared to 29.9 percent in the third quarter of fiscal 2017 primarily due to the lower federal statutory tax rate.

Fiscal 2018 Outlook Update

Revenues for fiscal 2018 are now estimated to be flat to down 0.5 percent compared to fiscal 2017.  Comparable restaurant sales for fiscal 2018 are estimated to be down 0.5 percent to down 1.0 percent.  In addition, restaurant operating margin is now estimated to be down approximately 65-75 basis points on a year-over-year basis.

Guidance Policy

Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, excluding special items, and other key line items in the consolidated statements of comprehensive income and will only provide updates if there is a material change versus the original guidance. 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 in the remainder of fiscal 2018, reconciliations to the appropriate GAAP measures will be provided.

Table 1: Q3 Comparable Restaurant Sales¹

Company-owned, reported brands and franchise; percentage

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.

Table 2: Reconciliation of Net Income Excluding Special Items

Q3 18 and Q3 17; $ millions and $ per diluted 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.

Table 3: Reconciliation of Restaurant Operating Margin

Q3 18 and Q3 17; $ millions

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 in that 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 Company restaurant expenses, including Cost of sales, Restaurant labor and Restaurant expenses. Restaurant expenses includes advertising expense. 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 expense, Depreciation and amortization, and Other gains and charges.

Restaurant operating margin excludes Franchise and other revenues which are earned primarily from franchise royalties and other non-food and beverage revenue streams such as banquet service charges, digital entertainment revenues and gift card breakage.  Depreciation and amortization expense, substantially all of which is related to restaurant-level assets, is excluded because such expense represents historical costs which do not reflect current cash outlays for the restaurants. General and administrative expense includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices and is 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.

Table 4: Reconciliation of Free Cash Flow

Q3 18; $ millions

Brinker believes presenting free cash flow provides a useful measure to evaluate the cash flow available for reinvestment after considering the capital requirements of our business operations.

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, May 1, 2018 at 9 a.m. CDT:

http://investors.brinker.com/phoenix.zhtml?c=119205&p=irol-eventDetails&EventId=5269454

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 May 29, 2018.

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-Q for the third quarter of fiscal 2018 filing on or before May 7, 2018; and
• Fourth quarter earnings release, before market opens, Aug. 14, 2018.

About Brinker

Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, as of March 28, 2018, Brinker owned, operated, or franchised 1,686 restaurants under the names Chili's^® Grill & Bar (1,634 restaurants) and Maggiano's Little Italy^® (52 restaurants).

Forward-Looking Statements

The statements 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. These risks and uncertainties are, in many instances, beyond our control. Such risks and uncertainties include, among other things, general business and economic conditions, financial and credit market conditions, litigation, reduced disposable income, the impact of competition, the impact of mergers, acquisitions, divestitures and other strategic transactions, franchisee success, the seasonality of the Company's business, increased minimum wages, increased health care costs, adverse weather conditions, loss of key management personnel, product availability, actions of activist shareholders, terrorist 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 business strategy plan, material weaknesses in internal control over financial reporting, governmental regulations, tax reform, inflation, technology failures, and failure to protect the security of data of our guests and teammates, as well as the risks described under the caption "Risk Factors" in our Annual Report on Form 10-K and future filings with the Securities and Exchange Commission.

 

 

 

 

 

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SOURCE Brinker International, Inc.

MIKA WARE, INVESTOR RELATIONS, investor.relations@brinker.com; AISHA FLETCHER, MEDIA RELATIONS, media.requests@brinker.com, (800) 775-7290, 6820 LBJ FREEWAY, DALLAS, TEXAS 75240