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 20, 2010
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 20, 2010, the Registrant issued a Press Release announcing its second quarter fiscal 2010 results. A copy of this Press Release is attached hereto as Exhibit 99(a).
Section 9 – Financial Statements and Exhibits.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99(a) | Press Release dated January 20, 2010. |
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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. | ||||||
| Date: January 21, 2010 | By: | /S/ DOUGLAS H. BROOKS | ||||
| Douglas H. Brooks, | ||||||
| Chairman of the Board President and Chief Executive Officer | ||||||
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Exhibit 99(a)
| Contacts: Stacey Sullivan, Media Relations | Marie Perry, Investor Relations | |
| (800) 775-7290 | (972) 770-1276 |
BRINKER INTERNATIONAL REPORTS SECOND QUARTER FISCAL 2010 EPS
DALLAS (Jan. 20, 2010) – Brinker International, Inc. (NYSE: EAT) announced second quarter fiscal 2010 earnings per diluted share of $0.29 compared to $0.27 for the second quarter of fiscal 2009, before special items and excluding Romano’s Macaroni Grill® (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share increased to $0.18 from a loss per diluted share of $0.21 for the second quarter in the prior year.
In the second quarter of fiscal 2009, the company completed the sale of Macaroni Grill while retaining a minority ownership interest. The information presented below includes Macaroni Grill unless otherwise noted.
Quarterly Revenues
Brinker reported revenues for the 13-week period of $781.9 million, a decrease of 17.6 percent compared with $949.4 million reported for the same period of fiscal 2009. The company experienced a 3.1 percent decrease in comparable restaurant sales (see Table 1) in the second quarter of fiscal 2010. Revenues were also negatively impacted by a net decline in capacity of 17.7 percent due to the sale of 189 Macaroni Grill restaurants at the end of the second quarter of fiscal 2009. The decline in capacity was also due to 47 restaurant closures and the sale of 21 restaurants to a franchisee since the second quarter of fiscal 2009. Royalty and franchise revenues were $17.3 million for the quarter.
Table 1: Q2 comparable restaurant sales
Q2 10 and Q2 09, company and three reported brands; percentage
| Q2 10 Comparable Sales 2 |
Q2 09 Comparable Sales |
Q2 10 Pricing Impact |
Q2 10 Mix-Shift |
||||||||
| Brinker International 1 |
(3.1 | ) | (4.5 | ) | 1.2 | (1.7 | ) | ||||
| Chili’s |
(3.2 | ) | (4.2 | ) | 1.2 | (1.3 | ) | ||||
| On The Border |
(4.7 | ) | (3.7 | ) | 2.3 | (4.3 | ) | ||||
| Maggiano’s |
(1.6 | ) | (6.9 | ) | 0.5 | (2.2 | ) |
| 1 | Brinker International comparable restaurant sales exclude the impact of Macaroni Grill. |
| 2 | Brinker International comparable restaurant sales by period are provided on the company’s web site. |
Quarterly Operating Performance
Cost of sales, as a percent of revenues, increased from 28.2 percent in the prior year to 28.9 percent in the second quarter of fiscal 2010. During the quarter, cost of sales was negatively impacted by recent promotions and unfavorable commodity prices primarily related to chicken, produce and dairy, partially offset by favorable menu price changes.
Restaurant expenses, as a percent of revenues, decreased to 56.0 percent from 58.0 percent in the prior year primarily due to reduced labor costs, utility expenses and the receipt of a $3.3 million credit card class action lawsuit settlement.
Depreciation and amortization decreased $2.4 million compared to the prior year due to fully depreciated assets and restaurant closures, partially offset by investments in existing restaurants.
General and administrative expense decreased $6.0 million for the quarter primarily due to reduced salary and training expenses as well as income related to transitional services provided to Macaroni Grill.
Other gains and charges primarily includes long-lived asset impairments of $21.4 million related to the closure and impairment of certain underperforming restaurants, partially offset by a $2.8 million gain on the sale of 21 restaurants to a franchisee.
Interest expense decreased $3.7 million due to lower interest rates and lower average borrowings.
The effective income tax rate increased to a provision of 19.6 percent in the current quarter as compared to a benefit of 51.1 percent due to the loss on the sale of Macaroni Grill and long-lived asset impairment charges in the prior year. The effective income tax rate before special items and excluding Macaroni Grill increased to 27.6 percent as compared to 22.4 percent in the second quarter of fiscal 2009, primarily due to increased income and lower tax credits.
Special Items
Table 2: Reconciliation of net income, before special items 1
Q2 10 and Q2 09; $ millions and $ per diluted share after-tax
| Item |
Q2 10 | EPS Q2 10 |
Q2 09 | EPS Q2 09 |
||||||||||
| Net Income (Loss) |
$ | 18.3 | $ | 0.18 | $ | (21.8 | ) | $ | (0.21 | ) | ||||
| Other (Gains) and Charges |
11.8 | 0.11 | 53.5 | 0.52 | ||||||||||
| Net Income before Special Items |
30.1 | 0.29 | 31.7 | 0.31 | ||||||||||
| Macaroni Grill before Special Items |
— | — | (3.8 | ) | (0.04 | ) | ||||||||
| Adjusted Net Income before Special Items and Macaroni Grill |
$ | 30.1 | $ | 0.29 | $ | 27.9 | $ | 0.27 | ||||||
| 1 | The company believes excluding other gains and charges and Macaroni Grill 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. |
Cash Flow and Capital Allocation
Cash flow from operations for the first six months of fiscal 2010 increased to $156.3 million compared to $94.8 million in the prior year. Capital expenditures totaled $25.0 million, a reduction of $34.6 million compared to the prior year resulting from a decrease in new company-owned restaurant development. Due to strong cash flows, the company made payments of $140.0 million on the outstanding term loan during the quarter which reduced the balance to $250.0 million.
Guidance Policy
Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the 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 be broadcast live on the Brinker web site (www.brinker.com) at 9 a.m. CDT today (Jan. 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 web site until the end of the day on Feb. 17, 2010.
Additional financial information, including reconciliation details and debt covenant information, is also available on the Brinker web site under the Financial Information section of the Investor tab.
Forward Calendar
| • | SEC Form 10-Q for second quarter fiscal 2010 filing on or before Feb. 1, 2010; and |
| • | Third quarter earnings release, before market opens, on April 20, 2010. |
At the end of the second quarter fiscal year 2010, Brinker International either owned, operated, or franchised 1,712 restaurants under the names Chili’s® Grill & Bar (1,504 restaurants), On The Border Mexican Grill & Cantina® (163 restaurants) and Maggiano’s Little Italy® (45 restaurants). Brinker also holds a minority investment in Romano’s Macaroni Grill®.
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, the seasonality of the company’s business, adverse weather conditions, future commodity prices, product availability, fuel and utility costs and availability, terrorists 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 growth plan, acts of God, governmental regulations, and inflation.
BRINKER INTERNATIONAL, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
| Thirteen Week Periods Ended | Twenty-Six Week Periods Ended | |||||||||||||||
| Dec. 23, 2009 |
Dec. 24, 2008 |
Dec. 23, 2009 |
Dec. 24, 2008 |
|||||||||||||
| Revenues |
$ | 781,853 | $ | 949,425 | $ | 1,559,934 | $ | 1,933,832 | ||||||||
| Operating Costs and Expenses: |
||||||||||||||||
| Cost of sales |
225,854 | 268,001 | 445,331 | 546,968 | ||||||||||||
| Restaurant expenses |
437,947 | 550,696 | 893,029 | 1,129,823 | ||||||||||||
| Depreciation and amortization |
38,227 | 40,647 | 77,096 | 81,803 | ||||||||||||
| General and administrative |
33,093 | 39,088 | 69,017 | 78,852 | ||||||||||||
| Other gains and charges (a) |
18,830 | 85,149 | 21,617 | 90,102 | ||||||||||||
| Total operating costs and expenses |
753,951 | 983,581 | 1,506,090 | 1,927,548 | ||||||||||||
| Operating income (loss) |
27,902 | (34,156 | ) | 53,844 | 6,284 | |||||||||||
| Interest expense |
6,812 | 10,535 | 13,760 | 19,992 | ||||||||||||
| Other, net |
(1,692 | ) | (193 | ) | (4,034 | ) | (1,565 | ) | ||||||||
| Income (loss) before tax expense (benefit) |
22,782 | (44,498 | ) | 44,118 | (12,143 | ) | ||||||||||
| Income tax expense (benefit) |
4,458 | (22,734 | ) | 10,027 | (14,160 | ) | ||||||||||
| Net income (loss) |
$ | 18,324 | $ | (21,764 | ) | $ | 34,091 | $ | 2,017 | |||||||
| Basic net income (loss) per share |
$ | 0.18 | $ | (0.21 | ) | $ | 0.33 | $ | 0.02 | |||||||
| Diluted net income (loss) per share |
$ | 0.18 | $ | (0.21 | ) | $ | 0.33 | $ | 0.02 | |||||||
| Basic weighted average shares outstanding |
102,481 | 101,841 | 102,362 | 101,735 | ||||||||||||
| Diluted weighted average shares outstanding |
102,994 | 102,278 | 103,005 | 102,520 | ||||||||||||
| (a) | Current year other gains and charges primarily includes long-lived asset impairments of $21.4 million related to the closure and impairment of certain underperforming restaurants, partially offset by a $2.8 million gain on the sale of 21 restaurants to a franchisee. In the first quarter of fiscal 2010, other gains and charges primarily included lease termination costs of $2.0 million and severance costs of $0.5 million. |
Prior year other gains and charges primarily includes long-lived asset impairments of $44.2 million related to the decision to close 35 underperforming restaurants, a loss on the sale of Macaroni Grill of $43.3 million and $3.6 million of gains on sales of other assets in the second quarter of fiscal 2009. In the first quarter of fiscal 2009, other gains and charges primarily included lease termination costs of $2.0 million, uninsured costs related to hurricanes of $1.7 million and expenses related to the pending sale of Macaroni Grill of $1.3 million.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| Dec. 23, 2009 |
June 24, 2009 | |||||
| (Unaudited) | ||||||
| ASSETS |
||||||
| Current assets |
$ | 325,075 | $ | 369,215 | ||
| Net property and equipment (a) |
1,309,167 | 1,400,352 | ||||
| Total other assets |
226,125 | 179,380 | ||||
| Total assets |
$ | 1,860,367 | $ | 1,948,947 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
| Current liabilities |
$ | 441,593 | $ | 407,067 | ||
| Long-term debt, including current installments |
590,543 | 729,262 | ||||
| Other liabilities |
163,828 | 165,694 | ||||
| Total shareholders’ equity |
664,403 | 646,924 | ||||
| Total liabilities and shareholders’ equity |
$ | 1,860,367 | $ | 1,948,947 | ||
| (a) | At December 23, 2009, the company owned the land and buildings for 220 of the 1,001 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $175.8 million and $172.8 million, respectively. |
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
| Total Restaurants Sept. 23, 2009 |
Second Quarter Openings/Acquisitions Fiscal 2010 |
Second Quarter Closings/Sales Fiscal 2010 |
Total Restaurants Dec. 23, 2009 |
Projected Openings Fiscal 2010 | ||||||
| Company-Owned Restaurants: |
||||||||||
| Chili’s |
857 | — | 22 | 835 | — | |||||
| On The Border |
122 | 1 | 1 | 122 | 1 | |||||
| Maggiano’s |
44 | — | — | 44 | 1 | |||||
| 1,023 | 1 | 23 | 1,001 | 2 | ||||||
| Franchise Restaurants: |
||||||||||
| Chili’s |
439 | 26 | — | 465 | 11-14 | |||||
| On The Border |
31 | — | — | 31 | 1-3 | |||||
| International(a) |
206 | 10 | 1 | 215 | 30-35 | |||||
| 676 | 36 | 1 | 711 | 42-52 | ||||||
| Total Restaurants: |
||||||||||
| Chili’s |
1,296 | 26 | 22 | 1,300 | 11-14 | |||||
| On The Border |
153 | 1 | 1 | 153 | 2-4 | |||||
| Maggiano’s |
44 | — | — | 44 | 1 | |||||
| International |
206 | 10 | 1 | 215 | 30-35 | |||||
| 1,699 | 37 | 24 | 1,712 | 44-54 | ||||||
| (a) | At December 23, 2009, international franchise restaurants by brand were 204 Chili’s, 10 On The Borders and one Maggiano’s. |
FOR ADDITIONAL INFORMATION, CONTACT:
MARIE PERRY
INVESTOR RELATIONS
(972) 770-1276
6820 LBJ FREEWAY
DALLAS, TEXAS 75240