View:
Download DOC
Download PDF
Download XLS
8-K


_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
______________________________________
FORM 8-K
 
_____________________________________
 
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 2016
 
_____________________________________
BRINKER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
 
 _____________________________________
 
 
 
 
 
 
Delaware
 
1-10275
 
75-1914582
(State of
Incorporation)
 
(Commission
File Number)
 
(IRS Employment
Identification No.)
6820 LBJ Freeway
Dallas, Texas 75240
(Address of principal executive offices)
Registrant’s telephone number, including area code 972-980-9917

_____________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________







Section 2 – Financial Information.
Item 2.02. Results of Operations and Financial Conditions.
The information contained in this Current Report on Form 8-K, including the Exhibit attached hereto, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Furthermore, the information contained in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
On April 19, 2016, Brinker International, Inc. ("Company") issued a Press Release announcing its third quarter fiscal 2016 results. A copy of this Press Release is attached hereto as Exhibit 99.1.
Section 9 – Financial Statements and Exhibits.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release dated April 19, 2016.




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
BRINKER INTERNATIONAL, INC.
 
 
 
Dated: April 19, 2016
By:
 
/s/ Wyman T. Roberts
 
 
 
Wyman T. Roberts,
 
 
 
Chief Executive Officer and
 
 
 
President and President of Chili’s Grill and Bar
 
 
 
(Principal Executive Officer)



Exhibit
Exhibit 99.1


BRINKER INTERNATIONAL REPORTS THIRD QUARTER RESULTS
DALLAS (April 19, 2016) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 23, 2016.
Highlights include the following:

•
Earnings per diluted share, excluding special items, increased 6.4 percent to $1.00 compared to $0.94 for the third quarter of fiscal 2015

•
On a GAAP basis, earnings per diluted share decreased 2.0 percent to $1.00 compared to $1.02 for the third quarter of fiscal 2015

•
Brinker International total revenues increased 5.2 percent to $824.6 million and company sales increased 5.7 percent to $805.1 million, primarily attributable to the 103 restaurants acquired with the Pepper Dining transaction in the first quarter of fiscal 2016

•
Chili’s company-owned comparable restaurant sales decreased 4.1 percent

•
Maggiano’s comparable restaurant sales increased 0.2 percent

•
Chili's franchise comparable restaurant sales decreased 1.7 percent which includes a 2.2 percent and 0.7 percent decrease for U.S. and international franchise restaurants, respectively

•
Restaurant operating margin,1 as a percent of company sales, declined approximately 150 basis points to 17.4 percent compared to 18.9 percent for the third quarter of fiscal 2015

•
For the first nine months of fiscal 2016, cash flows provided by operating activities were $299.6 million and capital expenditures totaled $76.1 million. Free cash flow2 was approximately $223.5 million

•
The company repurchased approximately 2.6 million shares of its common stock for $126.1 million in the third quarter and a total of approximately 5.4 million shares for $266.2 million year-to-date

•
The company declared a dividend of 32 cents per share to be paid in the fourth quarter, representing a 14.3% increase over the prior year


“While we continue to deliver strong cash flow and positive earnings growth through the year, we are disappointed in our recent sales performance,” said Wyman Roberts, chief executive officer and president. “Our focus going forward is to more aggressively invest in our brands to grow comp sales and capture market share."
1 Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant Labor and Restaurant expenses. Restaurant operating margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. 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 or other similarly titled measures of other companies.

2 Free cash flow is defined as cash flows provided by operating activities less capital expenditures.

1


Table 1: Q3 comparable restaurant sales
Company-owned, reported brands and franchise; percentage
 
 
Q3 16
 
Q3 15
Brinker International
 
(3.6
)
 
1.7

  Chili’s Company-Owned1
 
 
 
 
     Comparable Restaurant Sales
 
(4.1
)
 
1.9

     Pricing Impact2
 
1.1

 
0.8

     Mix-Shift2
 
(0.3
)
 
1.5

     Traffic2
 
(4.9
)
 
(0.4
)
  Maggiano’s
 
 
 
 
     Comparable Restaurant Sales
 
0.2

 
0.1

     Pricing Impact2
 
1.5

 
2.4

     Mix-Shift2
 
(2.4
)
 
(1.2
)
     Traffic2
 
1.1

 
(1.1
)
 
 
 
 
 
Chili's Franchise3
 
(1.7
)
 
2.5

  U.S. Comparable Restaurant Sales
 
(2.2
)
 
3.1

  International Comparable Restaurant Sales
 
(0.7
)
 
1.2

 
 
 
 
 
Chili's Domestic4
 
(3.6
)
 
2.2

System-wide5
 
(3.1
)
 
2.0

1

Chili's company-owned comparable restaurant sales includes 103 Chili's restaurants acquired from a franchisee in the first quarter of fiscal 2016.
2

Reclassifications have been made between pricing impact, mix-shift and traffic in the prior year to conform with current year classification.
3

Revenues generated by franchisees are not included in revenues on the consolidated statements of comprehensive income; however, we generate royalty revenue and advertising fees based on franchisee revenues, where applicable. We believe including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations and may impact future restaurant development.
4

Chili's Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States.
5

System-wide comparable restaurant sales are derived from sales generated by company-owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchise operated restaurants.
Quarterly Operating Performance
CHILI’S third quarter company sales increased 6.1 percent to $703.5 million from $662.9 million in the prior year primarily due to an increase in restaurant capacity resulting from the acquisition of 103 Chili's restaurants on June 25, 2015, partially offset by a decline in comparable restaurant sales. As compared to the prior year, Chili's restaurant operating margin1 declined. Restaurant labor, as a percent of company sales, increased compared to the prior year due to higher wage rates, health insurance expenses and sales deleverage, partially offset by lower incentive bonus. Restaurant expenses, as a percent of company sales, increased due to sales deleverage and higher repairs and maintenance and rent expenses. Cost of sales, as a percent of company sales, increased slightly due to unfavorable menu item mix and commodity pricing primarily related to steak, produce and chicken, partially offset by increased menu pricing and favorable commodity pricing related to burger meat, cheese and seafood.
MAGGIANO’S third quarter company sales increased 2.8 percent to $101.6 million from $98.8 million in the prior year primarily due to an increase in restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin1 improved. Restaurant expenses, as a percent of company sales, decreased compared to prior year due to lower advertising and utilities expenses, partially offset by higher preopening expenses. Cost of sales, as a percent of company sales, was positively impacted by increased menu pricing, favorable commodity pricing and menu item changes. Restaurant labor, as a percent of company sales, increased compared to prior year due to higher wage rates and health insurance expense.
1 Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses. Restaurant operating margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. 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 or other similarly titled measures of other companies.

2

FRANCHISE AND OTHER revenues decreased 13.3 percent to $19.5 million for the third quarter compared to $22.5 million in the prior year driven primarily by a decrease in royalty revenues resulting from the acquisition of 103 Chili's restaurants from a former franchisee. Brinker franchisees generated approximately $346 million in sales2 for the third quarter of fiscal 2016.

2Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.
Other
Depreciation and amortization expense increased $2.5 million for the quarter primarily due to depreciation on acquired restaurants, asset replacements and new restaurant openings, partially offset by an increase in fully depreciated assets.
General and administrative expense decreased approximately $5.0 million primarily due to lower performance-based compensation.
On a GAAP basis, the effective income tax rate decreased to 26.4 percent in the current quarter from 32.1 percent in the prior year quarter. The effective income tax rate decreased primarily due to lower profits and the benefits associated with the release of the valuation allowance for state tax net operating losses and the resolution of certain tax positions. Excluding the impact of special items, the effective income tax rate decreased to 30.1 percent in the current quarter compared to 31.5 percent in the prior year quarter primarily due to lower profits.

Non-GAAP Reconciliation
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 2: Reconciliation of net income excluding special items
Q3 16 and Q3 15; $ millions and $ per diluted share after-tax
 
 
Q3 16
 
EPS Q3 16
 
Q3 15
 
EPS Q3 15
Net Income
 
57.5

 
1.00

 
65.4

 
1.02

Other (Gains) and Charges, net of taxes1
 
2.4

 
0.04

 
(5.2
)
 
(0.08
)
     Adjustment for tax items2
 
(2.6
)
 
(0.04
)
 
—

 
—

Net Income excluding Special Items
 
57.3

 
1.00

 
60.2

 
0.94

1

Pre-tax Other gains and charges includes a charge of $3.9 million and a gain of $8.5 million in the third quarter of fiscal 2016 and 2015, respectively. See footnote "b" to the consolidated statements of comprehensive income for additional details.
2

Discrete tax items result from the benefit associated with the release of the valuation allowance for state net operating losses as well as the resolution of certain tax positions which directly impacts tax expense.

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 statement of comprehensive income 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 broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (April 19). 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 website until the end of the day May 17, 2016.
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 the Brinker website under the Financial Information section of the Investor tab.
Forward Calendar
- SEC Form 10-Q for the third quarter of fiscal 2016 filing on or before May 2, 2016; and
- Fourth quarter earnings release, before market opens, Aug. 11, 2016.

3


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 23, 2016, Brinker owned, operated, or franchised 1,647 restaurants under the names Chili’s® Grill & Bar (1,596 restaurants) and Maggiano’s Little Italy® (51 restaurants).
Forward-Looking Statements
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, franchisee success, the seasonality of the company’s business, increased minimum wages, increased health care costs, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, 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, acts of God, governmental regulations, inflation, technology failures, and failure to protect the security of data of our guests and teammates.

4

BRINKER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Thirteen Week Periods Ended
 
Thirty-Nine Week Periods Ended
 
 
March 23, 2016
 
March 25, 2015
 
March 23, 2016
 
March 25, 2015
Revenues:
 
 
 
 
 
 
 
 
Company sales
 
$
805,145

 
$
761,736

 
$
2,311,298

 
$
2,166,368

Franchise and other revenues (a)
 
19,494

 
22,479

 
64,510

 
71,763

Total revenues
 
824,639

 
784,215

 
2,375,808

 
2,238,131

Operating costs and expenses:
 
 
 
 
 
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
 
 
 
 
 
Cost of sales
 
215,362

 
203,960

 
615,764

 
582,507

Restaurant labor
 
262,701

 
240,105

 
756,874

 
695,114

Restaurant expenses
 
187,216

 
173,611

 
567,049

 
528,047

Company restaurant expenses
 
665,279

 
617,676

 
1,939,687

 
1,805,668

Depreciation and amortization
 
39,050

 
36,599

 
117,335

 
108,213

General and administrative
 
30,170

 
35,194

 
95,190

 
100,488

Other gains and charges (b)
 
3,864

 
(8,477
)
 
5,454

 
747

Total operating costs and expenses
 
738,363

 
680,992

 
2,157,666

 
2,015,116

Operating income
 
86,276

 
103,223

 
218,142

 
223,015

Interest expense
 
8,403

 
7,361

 
24,077

 
21,709

Other, net
 
(277
)
 
(454
)
 
(1,110
)
 
(1,568
)
Income before provision for income taxes
 
78,150

 
96,316

 
195,175

 
202,874

Provision for income taxes
 
20,648

 
30,889

 
56,772

 
63,403

Net income
 
$
57,502

 
$
65,427

 
$
138,403

 
$
139,471

 
 
 
 
 
 
 
 
 
Basic net income per share
 
$
1.01

 
$
1.04

 
$
2.36

 
$
2.19

 
 
 
 
 
 
 
 
 
Diluted net income per share
 
$
1.00

 
$
1.02

 
$
2.33

 
$
2.14

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
56,673

 
62,891

 
58,699

 
63,719

 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
57,407

 
64,091

 
59,505

 
65,108

 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustment (c)
 
$
(29
)
 
$
(2,847
)
 
$
(3,294
)
 
$
(7,183
)
Other comprehensive loss
 
(29
)
 
(2,847
)
 
(3,294
)
 
(7,183
)
Comprehensive income
 
$
57,473

 
$
62,580

 
$
135,109

 
$
132,288

 
 
 
 
 
 
 
 
 
 
(a)
Franchise and other revenues primarily includes royalties, development fees, franchise fees, banquet service charge income, gift card activity (breakage and discounts), tabletop device revenue, Chili's retail food product royalties and delivery fee income.









5

(b)
Other gains and charges include:
 
Thirteen Week Periods Ended
 
Thirty-Nine Week Periods Ended
 
March 23, 2016
 
March 25, 2015
 
March 23, 2016
 
March 25, 2015
Restaurant impairment charges
$
3,413

 
$
—

 
$
3,937

 
$
747

(Gain) Loss on the sale of assets, net
(1,096
)
 
—

 
(2,858
)
 
1,093

Impairment of investment
1,000

 
—

 
1,000

 
—

Acquisition costs
120

 
—

 
700

 
—

Restaurant closure charges
89

 
76

 
89

 
1,457

Litigation
—

 
(8,553
)
 
(2,032
)
 
(2,753
)
Severance
—

 
—

 
2,368

 
—

Impairment of liquor licenses
—

 
—

 
—

 
175

Other
338

 
—

 
2,250

 
28

 
$
3,864

 
$
(8,477
)
 
$
5,454

 
$
747



(c)
The foreign currency translation adjustment included in comprehensive income on the consolidated statements of comprehensive income represents the unrealized impact of translating the financial statements of the Canadian restaurants and the Mexican joint venture from their respective functional currencies to U.S. dollars. This amount is not included in net income and would only be realized upon disposition of the businesses.


6


BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
 
March 23, 2016
 
June 24, 2015
 
 
 
 
 
ASSETS
 
 
 
 
Current assets
 
$
196,724

 
$
187,224

Net property and equipment (a)
 
1,053,024

 
1,032,044

Total other assets
 
239,440

 
216,605

Total assets
 
$
1,489,188

 
$
1,435,873

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
 
 
 
Current installments of long-term debt
 
$
3,605

 
$
3,439

Other current liabilities
 
418,686

 
415,036

Long-term debt, less current installments
 
1,174,660

 
970,825

Other liabilities
 
135,899

 
125,033

Total shareholders’ deficit
 
(243,662
)
 
(78,460
)
Total liabilities and shareholders’ deficit
 
$
1,489,188

 
$
1,435,873


(a)
At March 23, 2016, the company owned the land and buildings for 191 of the 997 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $141.7 million and $108.2 million, respectively.


7

BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Thirty-Nine Week Periods Ended
 
 
March 23, 2016
 
March 25, 2015
Cash Flows From Operating Activities:
 
 
 
 
Net income
 
$
138,403

 
$
139,471

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
117,335

 
108,213

Stock-based compensation
 
12,095

 
11,587

Restructure charges and other impairments
 
5,937

 
8,402

Net (gain) loss on disposal of assets
 
(633
)
 
3,819

Changes in assets and liabilities
 
26,444

 
3,415

Net cash provided by operating activities
 
299,581

 
274,907

Cash Flows from Investing Activities:
 
 
 
 
Payments for property and equipment
 
(76,090
)
 
(107,108
)
Payment for purchase of restaurants
 
(105,577
)
 
—

Proceeds from sale of assets
 
4,256

 
1,950

Net cash used in investing activities
 
(177,411
)
 
(105,158
)
Cash Flows from Financing Activities:
 
 
 
 
Purchases of treasury stock
 
(266,157
)
 
(217,019
)
Borrowings on revolving credit facility
 
256,500

 
442,750

Payments of dividends
 
(56,192
)
 
(53,248
)
Payments on revolving credit facility
 
(50,000
)
 
(177,000
)
Excess tax benefits from stock-based compensation
 
5,365

 
16,920

Payments on long-term debt
 
(2,547
)
 
(188,758
)
Proceeds from issuances of treasury stock
 
4,725

 
14,965

Payments for deferred financing costs
 
—

 
(2,501
)
Net cash used in financing activities
 
(108,306
)
 
(163,891
)
Net change in cash and cash equivalents
 
13,864

 
5,858

Cash and cash equivalents at beginning of period
 
55,121

 
57,685

Cash and cash equivalents at end of period
 
$
68,985

 
$
63,543


8

BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
 
 
 
Third Quarter
Openings
Fiscal 2016
 
Total Restaurants
March 23, 2016
 
Projected Openings Fiscal 2016
Company-Owned Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
—

 
933

 
11-13

Chili’s International
 
—

 
13

 
—

Maggiano’s
 
—

 
51

 
2

 
 
—

 
997

 
13-15

Franchise Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
4

 
325

 
8-10

Chili's International
 
7

 
325

 
25-30

 
 
11

 
650

 
33-40

Total Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
4

 
1,258

 
19-23

Chili's International 
 
7

 
338

 
25-30

Maggiano’s
 
—

 
51

 
2

 
 
11

 
1,647

 
46-55





FOR ADDITIONAL INFORMATION, CONTACT:
JOE TAYLOR
INVESTOR RELATIONS
(972) 770-9040

AISHA FLETCHER
MEDIA RELATIONS
media.requests@brinker.com
(800) 775-7290

6820 LBJ FREEWAY
DALLAS, TEXAS 75240





9