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Free Hospitality Publications
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Restaurant Industry News
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Tuesday October 24th, 2006 |
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Brinker International Reports 29 Percent Increase in First Quarter Fiscal 2007 Results
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Brinker International, Inc. (NYSE:EAT) reported income from continuing operations of $47.6 million, or $0.57 diluted earnings per share, for the company's first quarter ended Sept. 27, 2006. For the same quarter of fiscal 2006, the company reported income from continuing operations of $38.4 million, or $0.43 diluted earnings per share. Before special items, earnings per diluted share from continuing operations increased to $0.54 from $0.42 in the prior year. |
Click here for financial tables
Highlights for the first quarter 2007:
• Increased earnings per share from continuing operations before special items by 29 percent
• Opened 43 new system restaurants during the quarter
• Grew revenues by approximately 7 percent over the prior year
• Sold 15 Chili's Grill & Bar restaurants to a franchisee with development commitments to build 31 new restaurants in Wisconsin and the St. Louis markets
• Signed two new international development agreements for 12 new restaurants over the next several years
• Paid quarterly dividend of $0.10 per diluted share
• Repurchased 1.1 million common shares for approximately $38.9 million during the quarter
• Provided additional access to capital by securing a $400 million, one- year credit facility
Chuck Sonsteby, Brinker Chief Financial Officer, said, "While the underlying operating environment continues to have challenges related to consumer traffic, our restaurant and support teams have responded well to deliver continued improvement in cost of sales, effective cost management and new restaurant development as drivers of our overall improved quarterly performance."
Revenue Growth
Brinker reported revenues for the 13-week period of $1.04 billion, an increase of 6.6 percent compared with $975.9 million reported for the same period of fiscal 2006. These revenue gains were primarily driven by restaurant capacity growth (as measured by average weeks) of 7.3 percent, offset by a 2.1 percent decrease in comparable store sales. During the first quarter, the company opened 33 restaurants and its franchisees opened ten restaurants
Table 1: Q1 Comparable store sales
Q1 07 and Q1 06, company and four reported brands; Percentage
Q1 07 Q1 06 Q1 07
Comp Store Comp Store Price Q1 07
Sales Sales Increase Mix-Shift
Brinker
International (2.1) 3.7 2.8 0.6
Chili's (2.3) 6.1 3.2 0.1
Macaroni Grill (1.7) (1.6) 1.4 1.0
On The Border (2.2) (0.7) 2.2 3.5
Maggiano's (1.5) 2.7 2.9 (0.3)
September Comparable Store Sales
For the four-week period ending Sept. 27, 2006, comparable store sales decreased 1.0 percent (see Table 2).
Table 2: Month of September comparable store sales
Sept 07 and Sept 06, company and four reported brands; Percentage
Sept 07 Sept 06 Sept 07
Comp Store Comp Store Price Sept 07
Sales Sales Increase Mix-Shift
Brinker
International(1) (1.0) 4.8 2.5 0.8
Chili's (1.2) 8.4 2.9 0.6
Macaroni Grill 0.4 (2.5) 1.3 0.9
On The Border (1.6) (2.5) 2.2 3.4
Maggiano's (1.5) 3.8 2.6 (0.7)
(1) September FY06 Brinker comparable-store sales were negatively impacted
0.6 percent by the storms in the Southeastern United States. By
reported brand, comparable-store sales were negatively impacted 0.7
percent at Chili's, 0.3 percent at Macaroni Grill, 0.2 percent at
Maggiano's and 0.4 percent at On The Border.
Quarterly Operating Performance
Cost of sales, as a percent of revenues, improved from 28.2 percent to 27.5 percent or 70 basis points for the quarter compared to the prior year. The improvement was due primarily to menu price changes, lower commodity prices for proteins and cheese, and favorable product mix shifts, partially offset by higher produce prices.
Restaurant expenses, as a percent of revenues, increased from 55.6 percent to 55.8 percent compared to the prior year. Included in the prior year is a $3.3 million gain, or approximately 40 basis points, associated with the sale of real estate. The current quarter includes gains of $3.2 million related to the termination of an interest rate swap on an operating lease commitment, and $582,000 on the sale of 15 company-owned Chili's restaurants to a franchisee, respectively. On a comparable basis, restaurant expense increased slightly, primarily driven by incremental repair and maintenance projects during the quarter.
Depreciation and amortization for the first quarter of fiscal 2007, compared to the same quarter in fiscal year 2006, increased by $1.5 million. The change was driven by new restaurants.
Compared to the prior year, general and administrative expense increased $3.1 million for the quarter, driven by the previously announced change in the company's annual grant date for equity-based compensation. Adjusting for this timing change, general and administrative expense declined by $1.2 million.
The effective income tax rate for continuing operations decreased to 31.9 percent for the current quarter as compared to 33.4 percent for the same quarter last year. The decrease in the tax rate was primarily due to a decrease in stock-based compensation related to incentive stock options, which is not deductible until exercised, and benefits from state income tax planning.
Capital Allocation
Cash flow from operations for fiscal year 2007 first quarter was approximately $108.9 million compared to $103.4 million in the prior year or a five percent increase. Capital expenditures for the quarter were $90.9 million.
The company repurchased approximately 1.1 million shares during the first quarter and weighted average diluted shares outstanding declined six percent from 89.2 million to 84.1 million on a year over year basis. In addition, on Oct. 18, 2006, the company completed its tender offer which resulted in a total of 1,259,241 tendered shares. Including the tender offer, and the on- going open market share repurchases, Brinker has returned approximately $924 million over the past three years to shareholders in the form of share repurchases and dividends. As of Oct. 23, 2006, approximately $478.6 million was available under the company's share repurchase authorizations.
Special Items
Table 3: Reconciliation of income from continuing operations and description of special items Q1 2007 and Q1 2006; $ millions and $ per diluted share after-tax
Income Per Per
Statement $ Share $ Share
Item Line Q1 07 Q1 07 Q1 06 Q1 06
Income from Continuing
Operations 47.6 0.57 38.4 0.43
Gain on Termination of Restaurant
Swaps Expenses (2.0) (0.03)
Gain on Sale of Real Restaurant
Estate Expenses (2.0) (0.02)
Restructuring Charges Restructure &
Other 0.7 0.01
Total Special Items (2.0) (0.03) (1.3) (0.01)
Income from Continuing
Operations, before Special
Items 45.6 0.54 37.1 0.42
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