Brinker International Reports Increases in Second Quarter Fiscal 2012 EPS, Comparable Restaurant Sales and Traffic

DALLAS, Jan. 24, 2012 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal second quarter ended Dec. 28, 2011.

Highlights for the second quarter of fiscal 2012 include the following:

• Earnings per diluted share, before special items, increased 23.7 percent to $0.47 compared to $0.38 for the second quarter of fiscal 2011 (see non-GAAP reconciliation below)
• On a GAAP basis, earnings per diluted share increased 7.3 percent to $0.44 from $0.41 in the second quarter of the prior year
• Total revenues increased 1.5 percent to $681.9 million
• Restaurant operating margin(1) improved 50 basis points to 17.9 percent compared to the second quarter of fiscal 2011
• Chili's comparable restaurant sales increased 1.4 percent and customer traffic increased 1.1 percent, the third consecutive quarterly increase for both metrics
• Maggiano's comparable restaurant sales increased 2.8 percent, representing the eighth consecutive quarterly increase, and customer traffic increased by 0.6 percent, representing the ninth consecutive quarterly increase
• The company repurchased approximately 2.0 million shares of its common stock for $47.8 million in the second quarter
• The company paid a dividend of 16 cents per share in the second quarter, an increase of 14.3 percent over the prior year quarter
• For the first six months of fiscal 2012, cash flows provided by operating activities were $114.2 million and capital expenditures totaled $53.5 million

"Brinker delivered another strong quarter as evidenced by a 24 percent increase in our EPS. This marked Brinker's fourth consecutive quarter of comp sales and traffic growth, which demonstrates the effectiveness of our strategies, the strength of our team and the receptivity of our guests to the changes we're making to our business," said Doug Brooks, President and Chief Executive Officer. "We are confident we'll deliver on our promise to double EPS by 2015."  

Quarterly Operating Performance

CHILI'S second quarter revenues of $554.8 million represent a 1.2 percent increase from $548.3 million in the prior year period driven by increased guest traffic and menu prices. Chili's operating margin improved compared to the prior year primarily due to successful labor savings initiatives related to food preparation procedures. Restaurant expense was also positively impacted by lower repair and maintenance expense, credit card fees, workers' compensation insurance expenses and sales leverage on fixed costs related to higher revenue. Cost of sales was negatively impacted by unfavorable pricing on oils, beef, produce and dairy, partially offset by favorable pricing on poultry.

MAGGIANO'S second quarter revenues of $110.9 million increased 2.9 percent primarily driven by increased menu prices and improved traffic. Restaurant operating margin improved compared to prior year primarily due to lower workers' compensation insurance expense, credit card fees and sales leverage on fixed costs related to higher revenue.

ROYALTY AND FRANCHISE revenues totaled $16.2 million for the quarter, an increase of 2.5 percent over the prior year driven primarily by 22 international net openings since the second quarter of fiscal 2011. International comparable restaurant sales increased 4.8 percent while domestic franchise comparable restaurant sales increased 1.7 percent. Brinker franchisees generated $389 million in sales(2) for the second quarter of fiscal 2012, an increase of 4.5 percent over the prior year.

"We're pleased with the progress we made during the second quarter on our journey toward a 400 basis-point margin improvement in our business," said Guy Constant, Executive Vice President and Chief Financial Officer. "Our solid results and significant progress on what is a challenging strategic plan gives us confidence we will continue to increase shareholder value."

Other

General and administrative expense remained flat for the quarter primarily due to a decrease in performance based compensation, offset by the impact of the expiration of the transition services agreements with Macaroni Grill and On The Border.

Interest expense decreased $0.5 million for the quarter primarily due to lower interest rates.

Excluding the impact of special items, the effective income tax rate increased to 29.7 percent in the current quarter from 27.3 percent in the same quarter last year driven by increased earnings. On a GAAP basis, the effective income tax rate increased to 29.0 percent in the current quarter as compared to 17.5 percent in the same quarter last year primarily due to the positive impact of resolved tax positions in the prior year and increased earnings.

Non-GAAP Reconciliation

The company 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. 

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 website (www.brinker.com) at 8 a.m. CST today (Jan. 24). 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. 21, 2012. 

Additional financial information, including statements of income which detail operations excluding  special items, franchise development and royalty fees, 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 2012 filing on or before Feb. 6, 2012; and
• Third quarter earnings release, before market opens, April 23, 2012.

About Brinker

Brinker International Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, Brinker currently owns, operates, or franchises 1,574 restaurants under the names Chili's® Grill & Bar (1,529 restaurants) and Maggiano's Little Italy® (45 restaurants). Brinker also holds a minority investment in Romano's Macaroni Grill®.

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, 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 business strategy plan, acts of God, governmental regulations and inflation.  
 

(1) Restaurant operating margin is defined as Revenues less Cost of sales, Restaurant labor and Restaurant expenses.

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

SOURCE Brinker International, Inc.