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EAT 2014.12.24 8K


_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________


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): January 28, 2015
 
_____________________________________
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 January 28, 2015, the Registrant issued a Press Release announcing its second quarter fiscal 2015 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 January 28, 2015.




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
BRINKER INTERNATIONAL, INC.
 
 
 
Dated: January 28, 2015
By:
 
/s/ Wyman T. Roberts
 
 
 
Wyman T. Roberts,
 
 
 
Chief Executive Officer and
 
 
 
President and President of Chili’s Grill and Bar
 
 
 
(Principal Executive Officer)



Q2F15 Press Release

Exhibit 99.1
Contacts: Ashley Johnson, Media Relations
 
 
Jill Cuthbertson, Investor Relations
(800) 775-7290
 
 
(972) 980-9917

BRINKER INTERNATIONAL REPORTS INCREASES IN SECOND QUARTER FISCAL 2015 EPS,
COMPARABLE RESTAURANT SALES AND TRAFFIC
DALLAS (Jan. 28, 2015) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 24, 2014.
Highlights include the following:

•
Earnings per diluted share, excluding special items, increased 20.3 percent to $0.71 compared to $0.59 for the second quarter of fiscal 2014

•
On a GAAP basis, earnings per diluted share increased 10.3 percent to $0.64 compared to $0.58 for the second quarter of fiscal 2014

•
Brinker International company sales increased 4.9 percent to $717.8 million and comparable restaurant sales at company-owned restaurants increased 3.7 percent including the positive impact to each brand of approximately 1.1 percent from Christmas Day moving to the third quarter

•
Chili’s company-owned comparable restaurant sales increased 4.0 percent and traffic increased 2.1 percent

•
Maggiano’s comparable restaurant sales increased 2.3 percent, representing the 20th consecutive quarterly increase, and traffic increased 1.6 percent

•
Chili's franchise comparable restaurant sales increase of 3.2 percent includes a 4.9 percent increase for U.S. franchise restaurants, partially offset by a 0.5 percent decrease for international franchise restaurants

•
Restaurant operating margin,1 as a percent of company sales, improved approximately 60 basis points to 16.4 percent compared to 15.8 percent for the second quarter of fiscal 2014. Brinker's operating income, excluding special items,2 as a percentage of total revenues improved 70 basis points from 9.3 percent to 10.0 percent

•
For the first six months of fiscal 2015, cash flows provided by operating activities were $162.5 million and capital expenditures totaled $79.5 million

•
The company repurchased approximately 1.1 million shares of its common stock for $59.5 million in the second quarter and a total of approximately 2.2 million shares for $112.8 million year-to-date

•
The company paid a dividend of 28 cents per share in the second quarter, an increase of 17 percent over the prior year second quarter, and declared a dividend of 28 cents per share to be paid in the third quarter

"Brinker delivered another solid quarter of double digit EPS growth," said Wyman Roberts, Chief Executive Officer and President. "We’ve seen our sales and traffic driving strategies take hold, which gives us a great deal of optimism about continuing our positive momentum."
    
1 Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant Labor and Restaurant expenses.
2 Operating income, excluding special items, is defined as Operating income excluding Other gains and charges.

1
Exhibit 99.1


Table 1: Q2 comparable restaurant sales
Q2 F15 and Q2 F14, company-owned, reported brands and franchise; percentage
 
 
Q2 15
 
Q2 14
Brinker International
 
3.7

 
0.8

  Chili’s Company-Owned
 
 
 
 
     Comparable Restaurant Sales
 
4.0

 
0.7

     Pricing Impact
 
1.4

 
1.5

     Mix-Shift
 
0.5

 
1.1

     Traffic
 
2.1

 
(1.9
)
  Maggiano’s
 
 
 
 
     Comparable Restaurant Sales
 
2.3

 
0.9

     Pricing Impact
 
2.2

 
1.5

     Mix-Shift
 
(1.5
)
 
(0.5
)
     Traffic
 
1.6

 
(0.1
)
 
 
 
 
 
Chili's Franchise1
 
3.2

 
0.0

  U.S. Comparable Restaurant Sales
 
4.9

 
(0.7
)
  International Comparable Restaurant Sales
 
(0.5
)
 
1.4

 
 
 
 
 
Chili's Domestic2
 
4.2

 
0.3

System-wide3
 
3.5

 
0.5

1

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.
2

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.
3

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 second quarter company sales increased 4.4 percent to $602.0 million from $576.7 million in the prior year primarily due to increases in comparable restaurant sales and restaurant capacity. As compared to the prior year, Chili's restaurant operating margin1,2 improved. Restaurant labor, as a percent of company sales, was favorably impacted by leverage related to higher company sales coupled with lower health insurance expenses, partially offset by increased wage rates. Cost of sales, as a percent of company sales, was favorably impacted by menu pricing, menu item changes and efficiency gains related to new fryer equipment, partially offset by unfavorable commodity pricing primarily related to burger meat, cheese and avocados which are market based, as well as unfavorable pricing related to salmon. Restaurant expenses, as a percent of company sales, increased due to higher credit card fees, equipment charges associated with tabletop devices,2 and new restaurant development, partially offset by leverage related to higher company sales.
MAGGIANO’S second quarter company sales increased 7.5 percent to $115.8 million from $107.7 million primarily due to increases in comparable restaurant sales and restaurant capacity. As compared to the prior year, Maggiano's restaurant operating margin1 improved. Restaurant expenses, as a percent of company sales, were positively impacted by lower supplies expense coupled with leverage related to higher company sales, partially offset by higher utilities expense and new restaurant development. Restaurant labor, as a percent of company sales, was favorably impacted by leverage related to higher company sales, partially offset by higher performance-based compensation. Cost of sales, as a percent of company sales, was negatively impacted by commodity pricing on beef, seafood, cheese and produce, partially offset by increased menu pricing and menu item changes.
1 Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses.
2As compared to the prior year, the Chili’s restaurant operating margin metric was negatively impacted by the classification of revenues and expenses associated with tabletop devices. The revenues associated with tabletop devices are included in Franchise and other revenues while the associated equipment charges are included in Restaurant expenses, a component of the restaurant operating margin calculation.

2
Exhibit 99.1

FRANCHISE AND OTHER revenues increased 18.1 percent to $25.1 million for the second quarter compared to $21.3 million in the prior year driven primarily by the revenues associated with tabletop devices, royalty revenues related to Chili's new retail food products, and higher royalty income driven by an increase in U.S. franchise comparable restaurant sales as well as international franchise restaurant openings. U.S. franchise comparable restaurant sales increased 4.9 percent, while international comparable restaurant sales decreased 0.5 percent. Brinker franchisees generated approximately $406 million in sales3 for the second quarter of fiscal 2015.

3Royalty 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 investments in the Chili's reimage program, new restaurant openings and new fryer equipment, partially offset by an increase in fully depreciated assets.
General and administrative expense increased $2.3 million primarily due to higher performance-based compensation.
On a GAAP basis, the effective income tax rate decreased to 29.7 percent in the current quarter from 31.1 percent in the prior year quarter primarily due to an increase in the FICA Tip Credit, partially offset by increased earnings. Excluding the impact of special items, the effective income tax rate decreased to 30.7 percent in the current quarter compared to 31.3 percent in the prior year primarily due to an increase in the FICA Tip Credit, partially offset by increased earnings.
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 second quarter of fiscal 2015 consist primarily of charges related to litigation reserves, a loss on the sale of assets and the impairment of restaurants.
Table 2: Reconciliation of net income excluding special items
Q2 15 and Q2 14; $ millions and $ per diluted share after-tax
 
 
Q2 15
 
EPS Q2 15
 
Q2 14
 
EPS Q2 14
Net Income
 
41.3

 
0.64

 
39.7

 
0.58

Other (Gains) and Charges, net of taxes1
 
5.1

 
0.07

 
0.8

 
0.01

Net Income excluding Special Items
 
46.4

 
0.71

 
40.5

 
0.59

1

Pre-tax Other gains and charges were $8.3 million and $1.2 million in the second quarter of fiscal 2015 and 2014, respectively. See footnote "b" to the consolidated statements of comprehensive income for additional details.
Guidance Policy
Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, 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. CST today (Jan. 28). 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 Feb. 25, 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 second quarter fiscal 2015 filing on or before Feb. 2, 2015; and
- Third quarter earnings release, before market opens, April 21, 2015.

3
Exhibit 99.1

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 Dec. 24, 2014, Brinker owned, operated, or franchised 1,634 restaurants under the names Chili’s® Grill & Bar (1,585 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.

4
Exhibit 99.1

BRINKER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Thirteen Week Periods Ended
 
Twenty-Six Week Periods Ended
 
 
Dec. 24, 2014
 
Dec. 25, 2013
 
Dec. 24, 2014
 
Dec. 25, 2013
Revenues:
 
 
 
 
 
 
 
 
Company sales
 
$
717,768

 
$
684,385

 
$
1,404,632

 
$
1,348,887

Franchise and other revenues (a)
 
25,130

 
21,277

 
49,284

 
41,435

Total revenues
 
742,898

 
705,662

 
1,453,916

 
1,390,322

Operating costs and expenses:
 
 
 
 
 
 
 
 
Company restaurants (excluding depreciation and amortization)
 
 
 
 
 
 
 
 
Cost of sales
 
193,762

 
185,179

 
378,547

 
365,837

Restaurant labor
 
227,733

 
219,919

 
455,009

 
438,635

Restaurant expenses
 
178,898

 
171,144

 
354,436

 
338,834

Company restaurant expenses
 
600,393

 
576,242

 
1,187,992

 
1,143,306

Depreciation and amortization
 
36,072

 
33,538

 
71,614

 
66,694

General and administrative
 
32,660

 
30,362

 
65,294

 
64,783

Other gains and charges (b)
 
8,291

 
1,221

 
9,224

 
2,227

Total operating costs and expenses
 
677,416

 
641,363

 
1,334,124

 
1,277,010

Operating income
 
65,482

 
64,299

 
119,792

 
113,312

Interest expense
 
7,349

 
7,047

 
14,348

 
14,060

Other, net
 
(611
)
 
(461
)
 
(1,114
)
 
(1,043
)
Income before provision for income taxes
 
58,744

 
57,713

 
106,558

 
100,295

Provision for income taxes
 
17,438

 
17,969

 
32,514

 
31,339

Net income
 
$
41,306

 
$
39,744

 
$
74,044

 
$
68,956

 
 
 
 
 
 
 
 
 
Basic net income per share
 
$
0.65

 
$
0.59

 
$
1.15

 
$
1.03

 
 
 
 
 
 
 
 
 
Diluted net income per share
 
$
0.64

 
$
0.58

 
$
1.13

 
$
1.00

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
63,590

 
66,811

 
64,129

 
66,752

 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
64,963

 
68,628

 
65,613

 
68,715

 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
Foreign currency translation adjustment (c)
 
$
(3,529
)
 
$
(819
)
 
$
(4,336
)
 
$
(754
)
Other comprehensive loss
 
(3,529
)
 
(819
)
 
(4,336
)
 
(754
)
Comprehensive income
 
$
37,777

 
$
38,925

 
$
69,708

 
$
68,202

 
 
 
 
 
 
 
 
 
 
(a)
Franchise and other revenues primarily includes royalties, development fees and 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. Beginning in fiscal 2015, income primarily related to Maggiano's delivery is included in Franchise and other revenues on the consolidated statement of comprehensive income. This income was previously included in Restaurant expenses. The prior year consolidated statement of comprehensive income has been adjusted to conform to the fiscal 2015 presentation. This adjustment has no effect on net income previously reported.





5
Exhibit 99.1

(b)
Other gains and charges include:

 
Thirteen Week Periods Ended
 
Twenty-Six Week Periods Ended
 
Dec. 24, 2014
 
Dec. 25, 2013
 
Dec. 24, 2014
 
Dec. 25, 2013
Litigation
$
5,800

 
$
—

 
$
5,800

 
$
—

Restaurant impairment charges
747

 
1,285

 
747

 
1,285

Restaurant closure charges
509

 
265

 
1,381

 
1,107

Loss (Gain) on the sale of assets, net
1,069

 
(579
)
 
1,093

 
(579
)
Impairment of liquor licenses
175

 
—

 
175

 
—

Other
(9
)
 
250

 
28

 
414

 
$
8,291

 
$
1,221

 
$
9,224

 
$
2,227


(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
Exhibit 99.1


BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
 
Dec. 24, 2014
 
June 25, 2014
 
 
 
 
 
ASSETS
 
 
 
 
Current assets
 
$
285,453

 
$
210,854

Net property and equipment (a)
 
1,045,447

 
1,056,454

Total other assets
 
218,931

 
223,296

Total assets
 
$
1,549,831

 
$
1,490,604

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current installments of long-term debt
 
$
28,036

 
$
27,884

Current liabilities
 
483,073

 
438,226

Long-term debt, less current installments
 
901,241

 
832,302

Other liabilities
 
132,540

 
129,098

Total shareholders’ equity
 
4,941

 
63,094

Total liabilities and shareholders’ equity
 
$
1,549,831

 
$
1,490,604


(a)
At Dec. 24, 2014, the company owned the land and buildings for 189 of the 888 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $142.2 million and $120.1 million, respectively.


7
Exhibit 99.1

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

 
 
Twenty-Six Week Periods Ended
 
 
Dec. 24, 2014
 
Dec. 25, 2013
Cash Flows From Operating Activities:
 
 
 
 
Net income
 
$
74,044

 
$
68,956

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
71,614

 
66,694

Stock-based compensation
 
6,992

 
8,196

Restructure charges and other impairments
 
8,326

 
2,091

Net loss on disposal of assets
 
2,974

 
2,051

Changes in assets and liabilities
 
(1,485
)
 
(667
)
Net cash provided by operating activities
 
162,465

 
147,321

Cash Flows from Investing Activities:
 
 
 
 
Payments for property and equipment
 
(79,481
)
 
(69,692
)
Proceeds from sale of assets
 
1,950

 
833

Net cash used in investing activities
 
(77,531
)
 
(68,859
)
Cash Flows from Financing Activities:
 
 
 
 
Purchases of treasury stock
 
(112,789
)
 
(93,101
)
Borrowings on revolving credit facility
 
83,000

 
80,000

Payments of dividends
 
(35,409
)
 
(31,345
)
Excess tax benefits from stock-based compensation
 
10,351

 
14,569

Payments on long-term debt
 
(13,338
)
 
(13,260
)
Proceeds from issuances of treasury stock
 
3,975

 
7,963

Payments on revolving credit facility
 
—

 
(40,000
)
Net cash used in financing activities
 
(64,210
)
 
(75,174
)
Net change in cash and cash equivalents
 
20,724

 
3,288

Cash and cash equivalents at beginning of period
 
57,685

 
59,367

Cash and cash equivalents at end of period
 
$
78,409

 
$
62,655


8
Exhibit 99.1

BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
 
 
 
Second Quarter
Openings
Fiscal 2015
 
Total Restaurants
Dec. 24, 2014
 
Projected Openings Fiscal 2015
Company-Owned Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
3

 
826

 
8-10

Chili’s International
 
1

 
13

 
1

Maggiano’s
 
1

 
49

 
3

 
 
5

 
888

 
12-14

Franchise Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
1

 
440

 
5

Chili's International
 
9

 
306

 
34-38

 
 
10

 
746

 
39-43

Total Restaurants:
 
 
 
 
 
 
Chili’s Domestic
 
4

 
1,266

 
13-15

Chili's International 
 
10

 
319

 
35-39

Maggiano’s
 
1

 
49

 
3

 
 
15

 
1,634

 
51-57


FOR ADDITIONAL INFORMATION, CONTACT:
JILL CUTHBERTSON
INVESTOR RELATIONS
(972) 980-9917
6820 LBJ FREEWAY
DALLAS, TEXAS 75240



9