DALLAS, Oct. 20, 2015 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal first quarter ended Sept. 23, 2015.

Highlights include the following:

• Earnings per diluted share, excluding special items, increased 12.0 percent to $0.56 compared to $0.50 for the first quarter of fiscal 2015
• On a GAAP basis, earnings per diluted share increased 10.2 percent to $0.54 compared to $0.49 for the first quarter of fiscal 2015
• Brinker International company sales increased 7.8 percent to $740.5 million
• Chili's company-owned comparable restaurant sales decreased 1.6 percent
• Maggiano's comparable restaurant sales decreased 1.7 percent
• Chili's franchise comparable restaurant sales increased 2.2 percent which includes an 0.8 percent increase for U.S. franchise restaurants and a 4.8 percent increase for international franchise restaurants
• Restaurant operating margin,¹ as a percent of company sales, improved approximately 10 basis points to 14.6 percent compared to 14.5 percent for the first quarter of fiscal 2015
• For the first three months of fiscal 2016, cash flows provided by operating activities were $45.5 million and capital expenditures totaled $23.7 million. Free cash flow² was approximately $21.8 million
• The company repurchased approximately 0.9 million shares of its common stock for $51.1 million in the first quarter
• The company declared a dividend of 32 cents per share to be paid in the second quarter, representing a 14.3% increase over the prior year
• The company acquired 103 Chili's restaurants from a franchisee in the first quarter of fiscal 2016
• The company reaffirms earnings per diluted share, excluding special items, to be in the range of $3.55 to $3.65 for fiscal 2016

"Brinker again delivered solid earnings growth for the quarter, demonstrating the strength of our business model and our ability to deliver bottom line results in a highly competitive market," said Wyman Roberts, Chief Executive Officer and President. "But our top line performance fell short of our expectations, and we are moving aggressively to respond to competitive activity and return to positive sales and traffic."

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.

Quarterly Operating Performance

CHILI'S first quarter company sales increased 8.8 percent to $653.1 million from $600.1 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. As compared to the prior year, Chili's restaurant operating margin¹ declined slightly primarily due to the impact of the recently acquired restaurants. Cost of sales, as a percent of company sales, was positively impacted by favorable menu pricing and commodity pricing related to avocados, cheese and seafood, partially offset by unfavorable menu item mix and commodity pricing primarily related to chicken and beef. Restaurant expenses, as a percent of company sales, increased slightly due to higher repairs and maintenance and rent expenses, partially offset by decreased advertising. Restaurant labor, as a percent of company sales, increased slightly compared to the prior year due to higher wage rates.

MAGGIANO'S first quarter company sales increased 0.7 percent to $87.4 million from $86.8 million in the prior year primarily due to increases in restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin¹ improved. Cost of sales, as a percent of company sales, was positively impacted by menu item changes, increased menu pricing and favorable commodity pricing. Restaurant expenses, as a percent of company sales, were positively impacted by lower preopening and advertising expenses, partially offset by increased repair and maintenance expenses. Restaurant labor, as a percent of company sales, increased compared to prior year due to higher wage rates.

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.

FRANCHISE AND OTHER revenues decreased 8.6 percent to $22.1 million for the first quarter compared to $24.2 million in the prior year driven primarily by a decrease in royalty revenues resulting from the acquisition of 103 Chili's restaurants. Brinker franchisees generated approximately $331 million in sales² for the first quarter of fiscal 2016.

² Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

Other

Depreciation and amortization expense increased $3.6 million for the quarter primarily due to investments in the Chili's reimage program, depreciation on acquired restaurants and new restaurant openings, partially offset by an increase in fully depreciated assets.

General and administrative expense increased approximately $0.5 million primarily due to the acquisition of 103 Chili's restaurants resulting in the termination of accounting and information technology support fees paid by the franchisee to Brinker.

On a GAAP basis, the effective income tax rate increased to 31.9 percent in the current quarter from 31.5 percent in the prior year quarter.  Excluding the impact of special items, the effective income tax rate increased to 32.1 percent in the current quarter compared to 31.7 percent in the prior year.  The effective income tax rate increased due to higher profits and lower tax credits.

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. Special items in the first quarter of fiscal 2016 consist primarily of severance and transaction costs, partially offset by a gain on the sale of property.

Fiscal 2016 Outlook

"We are reaffirming our fiscal year 2016 earnings per diluted share guidance of $3.55 to $3.65, with lower sales offset by commodity and other cost management actions," said Tom Edwards, Executive Vice President and Chief Financial Officer. "We are confident in our ability to drive long term earnings growth due to our continued focus on revenue-driving initiatives, effective cost and margin management and utilization of our substantial free cash flow."

The company reaffirms earnings per diluted share, excluding special items, to increase 15 to 18 percent in the range of $3.55 to $3.65. Fiscal 2016 includes a 53rd week versus 52 weeks in fiscal 2015. Earnings are based on the following expectations, including the impact of the 103 Chili's restaurants acquired in the first quarter of fiscal 2016:

• Total revenues are now expected to increase approximately 10 to 12 percent including the 53rd week
• Comparable restaurant sales are now expected to be down 0.5 to down 1.5 percent
• Company-owned new restaurant development is unchanged and is expected to add year-over-year capacity growth of about one percent excluding the addition of the recently acquired Chili's restaurants
• Restaurant operating margin is unchanged and is expected to be flat to down 25 basis points. Excluding the impact of the recently acquired Chili's restaurants, restaurant operating margin is unchanged and is expected to be up 25 to 50 basis points year-over-year
• Capital expenditures are unchanged and are expected to be $110 to $120 million
• Depreciation expense is now expected to increase $10 to $12 million
• General and administrative expense is now expected to be $3 to $6 million higher
• Interest expense is unchanged and is expected to increase $4 to $6 million
• Excluding the impact of special items, the effective income tax rate is unchanged and is projected to be approximately 31 to 32 percent
• Free cash flow is unchanged and is expected to be $250 to $260 million
• Diluted weighted average shares outstanding is now expected to be 59 to 61 million

The company believes providing fiscal 2016 earnings per diluted share guidance provides investors the appropriate insight into the company's ongoing operating performance.

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 comprehensive 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 broadcast live on the Brinker website (www.brinker.com) at 9 a.m. CDT today (Oct. 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 website until the end of the day Nov. 17, 2015.

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 first quarter of fiscal 2016 filing on or before Nov. 2, 2015; and
-  Second quarter earnings release, before market opens, Jan. 20, 2016.

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 June 24, 2015, Brinker owned, operated, or franchised 1,632 restaurants under the names Chili's^® Grill & Bar (1,583 restaurants) and Maggiano's Little Italy^® (49 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.

 

 

 

 

 

 

 

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SOURCE Brinker International, Inc.

Joe Taylor, Investor Relations, (972) 770-9040, or Ashley Johnson, Media Relations, (800) 775-7290, 6820 LBJ Freeway, Dallas, Texas 75240