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UNITED STATES
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): October 29, 2018
Commission File Number 1-10275
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BRINKER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(972) 980-9917
75-1914582
(State or other jurisdiction of
incorporation or organization)
(Registrant’s telephone number, including area code)
(I.R.S. Employer
Identification No.)
 
 
 
6820 LBJ FREEWAY, DALLAS, TEXAS
 
75240
(Address of principal executive offices)
 
(Zip Code)
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)).
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




SECTION 2 – FINANCIAL INFORMATION
Item 2.02. Results of Operations and Financial Conditions.
The information contained under this Item 2.02 and Item 7.01 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 October 30, 2018, Brinker International, Inc. (“Company”) issued a Press Release announcing its first quarter of fiscal 2019 results. A copy of this Press Release is attached hereto as Exhibit 99.1.
SECTION 7 – REGULATION FD
Item 7.01. Regulation FD Disclosure.
At its October 29, 2018 meeting, the Board of Directors of the Company declared a quarterly dividend of $0.38 per share on the common stock of the Company. The dividend will be payable on December 27, 2018 to shareholders of record as of December 7, 2018.
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated October 30, 2018.




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.,
a Delaware corporation
 
Dated: October 30, 2018
By:
 
/s/ WYMAN T. ROBERTS
 
 
 
Wyman T. Roberts,
 
 
 
President and Chief Executive Officer
 
 
 
and President of Chili's Grill & Bar
 
 
 
(Principal Executive Officer)



Exhibit
Exhibit 99.1


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BRINKER INTERNATIONAL REPORTS FIRST QUARTER RESULTS
DALLAS (October 30, 2018) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal first quarter ended September 26, 2018.
Highlights include the following:
•
Earnings per diluted share, on a GAAP basis, in the first quarter of fiscal 2019 increased 220.0% to $0.64 compared to $0.20 in the first quarter of fiscal 2018 primarily driven by the net gain recognized on sale leaseback transactions during the first quarter of fiscal 2019
•
Earnings per diluted share, excluding special items, in the first quarter of fiscal 2019 increased 11.9% to $0.47 compared to $0.42 in the first quarter of fiscal 2018 (see non-GAAP reconciliation below)
•
Brinker International’s Company sales in the first quarter of fiscal 2019 increased 1.6% to $728.3 million compared to the first quarter of fiscal 2018. Total revenues in the first quarter of fiscal 2019 increased 1.9% to $753.8 million compared to the first quarter of fiscal 2018
•
Chili’s company-owned comparable restaurant sales increased 2.0% in the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018. Chili’s U.S. franchise comparable restaurant sales increased 1.5% in the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018
•
Maggiano’s comparable restaurant sales were flat in the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018
•
Chili’s international franchise comparable restaurant sales decreased 3.0% in the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018
•
Operating income, as a percent of Total revenues, was 6.2% in the first quarter of fiscal 2019 compared to 3.9% in the first quarter of fiscal 2018 representing an increase of approximately 230 basis points
•
Restaurant operating margin, as a percent of Company sales, was 11.1% in the first quarter of fiscal 2019 compared to 12.6% in the first quarter of fiscal 2018 (see non-GAAP reconciliation below)
•
Cash flows provided by operating activities in the first quarter of fiscal 2019 were $49.6 million and capital expenditures totaled $31.2 million. Free cash flow was $18.4 million (see non-GAAP reconciliation below)
•
During the first quarter of fiscal 2019, we completed the sale and leaseback of 141 Chili’s restaurant properties for aggregate consideration of $455.7 million, resulting in a total gross gain of $289.1 million. Of the total gain, $20.1 million was recognized in first quarter of fiscal 2019, and $269.0 million was deferred at September 26, 2018 to be recognized straight-line over the 15 year initial terms of the new operating leases. The net proceeds from these sale leaseback transactions were used to repay borrowings on our revolving credit facility
•
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 December 27, 2018 to shareholders of record as of December 7, 2018
“Brinker’s strong performance this quarter is the result of the continued execution of our strategy to drive traffic and gain market share,” said Wyman Roberts, Chief Executive Officer and President. “We are committed to delivering a quality guest experience while offering a compelling value proposition, a combination we believe is key to our long term success.”

1

QUARTERLY OPERATING PERFORMANCE
Company Sales and Company Restaurant Expenses
Chili’s Company sales in the first quarter of fiscal 2019 increased 2.0% to $640.3 million from $627.6 million in the first quarter of fiscal 2018 primarily due to an increase in comparable restaurant sales. As compared to the first quarter of fiscal 2018, Chili’s restaurant operating margin(1) declined. Chili’s Restaurant expenses, as a percent of Company sales, increased compared to the first quarter of fiscal 2018 primarily due to higher rent expense associated with the new operating leases entered into as part of the sale leaseback transactions and the impact of adopting the new revenue accounting standard (“ASC 606”). Cost of sales, as a percent of Company sales, increased compared to the first quarter of fiscal 2018 primarily due to unfavorable menu item mix. Restaurant labor, as a percent of Company sales, increased compared to the first quarter of fiscal 2018 due to higher wage rates and employee health insurance expenses.
Maggiano’s Company sales in the first quarter of fiscal 2019 decreased 1.5% to $88.0 million from $89.3 million in the first quarter of fiscal 2018 due to a decrease in restaurant capacity. As compared to the first quarter of fiscal 2018, Maggiano’s restaurant operating margin(1) improved. This was primarily driven by Cost of sales, as a percent of Company sales, that decreased compared to the first quarter of fiscal 2018 primarily due to favorable menu item mix.
(1) 
Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses and excludes Depreciation and amortization expenses (see non-GAAP reconciliation below).
Franchise and Other Revenues
Franchise and other revenues in the first quarter of fiscal 2019 increased 13.3% to $25.5 million from $22.5 million primarily related to the adoption of ASC 606 during the first quarter of fiscal 2019, please refer to “REVENUE RECOGNITION UPDATE” section below for more details on the new revenue standard. Brinker franchisees generated approximately $320.7 million in sales(2) in the first quarter of fiscal 2019.
(2) 
Royalty revenues are recognized based on the sales generated and reported to the Company by franchisees.
Other
Depreciation and amortization expense in the first quarter of fiscal 2019 decreased $1.5 million compared to the first quarter of fiscal 2018 primarily due to an increase in fully depreciated assets and restaurant closures, partially offset by additions for existing restaurants primarily related to the Chili’s remodels and new restaurants.
General and administrative expense in the first quarter of fiscal 2019 increased $1.5 million compared to the first quarter of fiscal 2018 primarily due to higher payroll expenses and professional service fees.
Income Taxes
On a GAAP basis, the effective income tax rate in the first quarter of fiscal 2019 decreased to 17.9% compared to 34.8% in the first quarter of fiscal 2018 primarily due to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) that was enacted on December 22, 2017. The Tax Act lowered the federal statutory tax rate from 35.0% to 21.0% effective January 1, 2018. Our fiscal 2019 effective income tax rate is further lowered due to an increase in the FICA tax credit benefit, partially offset by the impact of the sale leaseback transactions.
The tax gains related to the sale leaseback transactions were recognized for tax purposes when the transaction was completed. A tax liability of approximately $73.6 million related to the gain was included in Income taxes payable in the Consolidated Balance Sheets as of September 26, 2018. This liability will be subsequently paid in the second quarter of fiscal 2019.

2

COMPARABLE RESTAURANT SALES
The table below presents the percent change in company-owned and franchise comparable restaurant sales in the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018, and the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017:
 
Comparable Sales (1)
 
Price Impact
 
Mix-Shift (2)
 
Traffic
 
Q1: 19 vs 18
 
Q1: 18 vs 17
 
Q1: 19 vs 18
 
Q1: 18 vs 17
 
Q1: 19 vs 18
 
Q1: 18 vs 17
 
Q1: 19 vs 18
 
Q1: 18 vs 17
Company-owned
1.8
 %
 
(3.3
)%
 
0.3
%
 
2.7
%
 
(2.1
)%
 
2.3
%
 
3.6
 %
 
(8.3
)%
Chili’s
2.0
 %
 
(3.4
)%
 
0.0
%
 
2.8
%
 
(2.0
)%
 
2.5
%
 
4.0
 %
 
(8.7
)%
Maggiano’s (3)
0.0
 %
 
(2.6
)%
 
2.3
%
 
0.1
%
 
(0.2
)%
 
0.5
%
 
(2.1
)%
 
(3.2
)%
Chili’s Franchise (4)
(0.2
)%
 
(4.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
1.5
 %
 
(1.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
International
(3.0
)%
 
(7.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
Chili’s Domestic (5)
1.9
 %
 
(3.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
System-wide (6)
1.2
 %
 
(3.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
Comparable restaurant sales include all restaurants that have been in operation for more than 18 months. Amounts are calculated based on comparable current period verses same period a year ago.  
(2) 
Mix-shift is calculated as the year-over-year percentage change in company sales resulting from the change in menu items ordered by guests.  
(3) 
Maggiano’s Mix-shift and Traffic in the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 were reclassified to conform to the current year classification.
(4) 
Chili’s franchise sales generated by franchisees are not included in revenues in 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.
(5) 
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.  
(6) 
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 Chili’s restaurants.  
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.

3

Reconciliation of Net Income and Earnings Per Share Excluding Special Items
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. The following reconciliation is presented in millions, except per share amounts.
 
Q1 19
 
EPS Q1 19
 
Q1 18
 
EPS Q1 18
Net income
$
26.4

 
$
0.64

 
$
9.9

 
$
0.20

Special items (1)
(10.5
)
 
(0.25
)
 
13.2

 
0.27

Income tax effect related to special items (2)
2.6

 
0.06

 
(4.3
)
 
(0.08
)
Special items, net of taxes
(7.9
)
 
(0.19
)
 
8.9

 
0.19

Adjustment for special tax items (3)
0.7

 
0.02

 
1.6

 
0.03

Net income excluding special items
$
19.2

 
$
0.47

 
$
20.4

 
$
0.42

(1) 
Special items consists of $11.1 million other gains and charges primarily related to the gains recognized on the sale leaseback transactions, offset partially by $0.6 million of incremental depreciation expense associated with a change in estimated useful life of certain restaurant-level long-lived assets. Footnote “(2)” to the Consolidated Statements of Comprehensive Income contains additional details on the composition of the other gains and charges amount.
(2) 
Income tax effect related to special items is based on the statutory tax rate in effect at the end of each period presented.
(3) 
Adjustment for special tax items in the first quarter of fiscal 2019 primarily relate to the tax impact of excess tax shortfalls associated with stock-based compensation. Adjustment for special tax items in the first quarter of fiscal 2018 primarily relates to the recognition of tax deficiencies from the settlement of stock-based compensation awards in the provision for income taxes.
Reconciliation of Restaurant Operating Margin
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. 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.
The adoption of the new revenue standard, ASC 606, in first quarter of fiscal 2019 changed the presentation and recording of certain items contained within Franchise and other revenues, Operating income, and Restaurant operating margin. The adoption did not have a significant impact, for more details about the impact of adopting the new revenue

4

standard please refer to the “REVENUE RECOGNITION UPDATE” section below. The following reconciliation is presented in millions, except percentages.
 
Q1 19
 
Q1 18
Operating income - GAAP
$
46.9

 
$
28.6

Operating income, as a percent of Total revenue
6.2
%
 
3.9
%
 
 
 
 
Operating income
46.9

 
28.6

Less: Franchise and other revenues
(25.5
)
 
(22.5
)
Plus: Depreciation and amortization
37.0

 
38.5

General and administrative
33.8

 
32.3

Other (gains) and charges
(11.1
)
 
13.2

Restaurant operating margin - non-GAAP
$
81.1

 
$
90.1

Restaurant operating margin, as a percent of Company sales
11.1
%
 
12.6
%
Reconciliation of Free Cash Flow
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 (in millions).
 
Q1 19
Cash flows provided by operating activities - GAAP
$
49.6

Capital expenditures
(31.2
)
Free cash flow - non-GAAP
$
18.4

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, October 30, 2018 at 9 a.m. CDT:
http://investors.brinker.com/phoenix.zhtml?c=119205&p=irol-eventDetails&EventId=5275870
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 November 27, 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 fiscal 2019 filing on or before November 5, 2018; and
•
Second quarter earnings release, before market opens, January 29, 2019.
ABOUT BRINKER
Brinker International, Inc. is one of the world’s leading casual dining restaurant companies. Based in Dallas, Texas, as of September 26, 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).

5

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. These risks and uncertainties are, in many instances, beyond our control. Such risks and uncertainties include, among other things, 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, and tax reform, 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.


6

BRINKER INTERNATIONAL, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(In millions, except per share amounts)
 
Q1 19
 
Q1 18
Revenues
 
 
 
Company sales
$
728.3

 
$
716.9

Franchise and other revenues (1)
25.5

 
22.5

Total revenues
753.8

 
739.4

Operating costs and expenses
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
Cost of sales
191.9

 
187.6

Restaurant labor
256.3

 
251.1

Restaurant expenses (1)
199.0

 
188.1

Company restaurant expenses
647.2

 
626.8

Depreciation and amortization
37.0

 
38.5

General and administrative
33.8

 
32.3

Other (gains) and charges (2)
(11.1
)
 
13.2

Total operating costs and expenses
706.9

 
710.8

Operating income
46.9

 
28.6

Interest expense
15.6

 
13.9

Other (income), net
(0.8
)
 
(0.5
)
Income before provision for income taxes
32.1

 
15.2

Provision for income taxes
5.7

 
5.3

Net income
$
26.4

 
$
9.9

 
 
 
 
Basic net income per share
$
0.65

 
$
0.20

 
 
 
 
Diluted net income per share
$
0.64

 
$
0.20

 
 
 
 
Basic weighted average shares outstanding
40.4

 
48.3

 
 
 
 
Diluted weighted average shares outstanding
41.1

 
48.7

 
 
 
 
Other comprehensive income (loss)
 
 
 
Foreign currency translation adjustments (3)
$
0.3

 
$
1.5

Other comprehensive income (loss)
0.3

 
1.5

Comprehensive income
$
26.7

 
$
11.4

(1) 
Franchise and other revenues and Restaurant expenses in the first quarter of fiscal 2019, includes the impact from adoption of ASC 606, whereas the first quarter of fiscal 2018 was not restated, please see “REVENUE RECOGNITION UPDATE” section for further details. Franchise and other revenues includes royalties, advertising fees (effective first quarter of fiscal 2019), development fees, franchise fees, Maggiano’s banquet service charge income, gift card breakage, service fees and discount costs from third-party gift card sales, digital entertainment revenue, delivery fee income, and retail royalty revenues.

7

(2) 
Other (gains) and charges included in the Consolidated Statements of Comprehensive Income include (in millions):
 
Q1 19
 
Q1 18
Sale leaseback (gain), net of transaction charges
$
(13.3
)
 
$
—

Property damages, net of (insurance recoveries)
(0.8
)
 
4.6

Foreign currency transaction gain
(0.8
)
 
—

Restaurant impairment charges
—

 
7.2

Cyber security incident charges
0.4

 
—

Accelerated depreciation
0.5

 
0.5

Remodel-related costs
0.5

 
—

Restaurant closure charges
1.7

 
0.2

Other
0.7

 
0.7

Total
$
(11.1
)
 
$
13.2

(3) 
Foreign currency translation adjustment included within Comprehensive income in the Consolidated Statements of Comprehensive Income represents the unrealized impact of translating the financial statements of the Canadian restaurants and the Mexican joint venture (prior to divestiture in the second quarter of fiscal 2018) 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.

8

REVENUE RECOGNITION UPDATE
Effective in the first quarter of fiscal 2019, we adopted ASC 606 and did not elect to restate the prior year financial statements to reflect the application of the standard. The primary impact of the adoption is the change in presentation of advertising fees received from franchisees and the timing of recognition for franchise related revenues and gift card breakage. Under ASC 606, advertising fees are now presented on a gross basis as a component of Franchise and other revenues. Under the previous revenue accounting guidance (“Legacy GAAP”), the advertising fees were recorded as a reduction to advertising expenses within Restaurant expenses in the Consolidated Statements of Comprehensive Income. The recognition timing change for franchise related fees and gift card breakage, both recorded in Franchise and other revenues, did not have a significant impact to our results of operations during the first quarter of fiscal 2019.
The following table presents a comparative view of the fiscal 2019 first quarter results prepared in accordance with ASC 606 versus Legacy GAAP.
 
First Quarter of Fiscal 2019
 
ASC 606
Amounts
 
Adjustments
 
Legacy GAAP Amounts
Revenues
 
 
 
 
 
Company sales
$
728.3

 
$
—

 
$
728.3

Franchise and other revenues
25.5

 
(4.8
)
 
20.7

Total revenues
753.8

 
(4.8
)
 
749.0

Operating costs and expenses
 
 
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
 
 
Cost of sales
191.9

 
—

 
191.9

Restaurant labor
256.3

 
—

 
256.3

Restaurant expenses
199.0

 
(5.1
)
 
193.9

Company restaurant expenses
647.2

 
(5.1
)
 
642.1

Depreciation and amortization
37.0

 
—

 
37.0

General and administrative
33.8

 
—

 
33.8

Other (gains) and charges
(11.1
)
 
—

 
(11.1
)
Total operating costs and expenses
706.9

 
(5.1
)
 
701.8

Operating income
46.9

 
0.3

 
47.2

Operating income as a percent of Total revenue
6.2
%
 
0.1
%
 
6.3
%
 
 
 


 
 
Interest expense
15.6

 
—

 
15.6

Other (income), net
(0.8
)
 
—

 
(0.8
)
Income before provision for income taxes
32.1

 
0.3

 
32.4

Provision for income taxes
5.7

 
0.1

 
5.8

Net income
$
26.4

 
$
0.2

 
$
26.6

 
 
 
 
 
 
Basic net income per share
$
0.65

 
$
0.01

 
$
0.66

Diluted net income per share
$
0.64

 
$
0.01

 
$
0.65


9

BRINKER INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
(In millions)
 
(Unaudited)
 
 
 
September 26,
2018
 
June 27,
2018
ASSETS
 
 
 
Current assets
$
151.0

 
$
156.3

Net property and equipment (1)
762.2

 
938.9

Deferred income taxes, net (1)
112.1

 
33.6

Total other assets
218.7

 
218.5

Total assets
$
1,244.0

 
$
1,347.3

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
 
 
Current installments of long-term debt
$
7.4

 
$
7.1

Income taxes payable (1)
74.6

 
1.7

Other current liabilities (1)
425.6

 
425.5

Long-term debt, less current installments
1,153.0

 
1,499.6

Deferred gain on sale leaseback transactions (1)
251.0

 
—

Other liabilities
148.3

 
131.7

Total shareholders’ deficit
(815.9
)
 
(718.3
)
Total liabilities and shareholders’ deficit
$
1,244.0

 
$
1,347.3

(1) 
We executed sale leaseback transactions during the first quarter of fiscal 2019 for gross consideration of $455.7 million, and removed the related Net property and equipment totaling $166.6 million from our Consolidated Balance Sheets, resulting in a net gain. Of the gain, as of September 26, 2018, $269.0 million remains deferred and is included within Other current liabilities and Deferred gain on sale leaseback transactions. The total gain is immediately taxable, resulting in an increase to Deferred income taxes, net asset of $68.6 million and a corresponding increase in Income taxes payable of $73.6 million.
Of the 997 company-owned restaurants locations, at September 26, 2018, we continue to own property for 52 restaurant locations, of which the related book value of the land totaled $44.5 million and the net book value of buildings totaled $27.1 million.

10

BRINKER INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
 
Q1 19
 
Q1 18
Cash flows from operating activities
 
 
 
Net income
$
26.4

 
$
9.9

Adjustments to reconcile Net income to net cash from operating activities:
 
 
 
Depreciation and amortization
37.0

 
38.5

Stock-based compensation
3.6

 
3.5

Restructure charges and other impairments
1.9

 
9.0

Net (gain) loss on disposal of assets
(13.6
)
 
0.4

Changes in assets and liabilities
(5.7
)
 
(11.1
)
Net cash provided by operating activities
49.6

 
50.2

Cash flows from investing activities
 
 
 
Payments for property and equipment
(31.2
)
 
(22.4
)
Proceeds from sale of assets
—

 
0.1

Proceeds from note receivable
0.7

 
—

Insurance recoveries
1.4

 
—

Proceeds from sale leaseback transactions, net of related expenses
447.6

 
—

Net cash provided by (used in) investing activities
418.5

 
(22.3
)
Cash flows from financing activities
 
 
 
Borrowings on revolving credit facility
204.0

 
110.0

Payments on revolving credit facility
(549.0
)
 
(77.0
)
Purchases of treasury stock
(105.5
)
 
(41.7
)
Payments of dividends
(16.2
)
 
(17.0
)
Payments on long-term debt
(1.8
)
 
(2.5
)
Proceeds from issuances of treasury stock
0.5

 
0.2

Net cash used in financing activities
(468.0
)
 
(28.0
)
Net change in cash and cash equivalents
0.1

 
(0.1
)
Cash and cash equivalents at beginning of period
10.9

 
9.1

Cash and cash equivalents at end of period
$
11.0

 
$
9.0


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BRINKER INTERNATIONAL, INC.
Restaurant Summary
 
Fiscal 2019
 
 
 
 
 
Full Year Projected Openings
 
Total Restaurants
 
First Quarter Openings
 
Company-owned restaurants
 
 
 
 
 
Chili’s domestic
940

 
—

 
2-4

Chili’s international
5

 
—

 
—

Maggiano’s
52

 
—

 
—

Total company-owned
997

 
—

 
2-4

Franchise restaurants
 
 
 
 
 
Chili’s domestic
310

 
1

 
4

Chili’s international
379

 
4

 
33-38

Maggiano's
—

 
—

 
1

Total franchise
689

 
5

 
38-43

Total restaurants
 
 
 
 
 
Chili’s domestic
1,250

 
1

 
6-8

Chili’s international
384

 
4

 
33-38

Maggiano’s
52

 
—

 
1

Grand total
1,686

 
5

 
40-47

We relocated two company-owned restaurants in the first quarter of fiscal 2019. In fiscal 2019, we plan to relocate a total of five company-owned restaurants. Relocations are not included in the above table.
FOR ADDITIONAL INFORMATION, CONTACT:
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

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