EAT Brinker International Inc

Brinker International Announces Third Quarter Diluted EPS Grew 16 Percent to $0.59 Excluding Gain; Reported EPS of $0.60 DALLAS, April 26 /PRNewswire-FirstCall/ -- Brinker International, Inc. (NYSE:EAT), reported net income of $55.1 million, or $0.60 diluted earnings per share, including a $1.3 million after tax gain resulting from the sale of five Chili's restaurants to a new franchise partner, for the company's third quarter ended March 30, 2005. Exclusive of this gain and restructuring charges, diluted earnings per share grew 16 percent to $0.59 compared to $0.51 adjusted diluted earnings per share reported in the same quarter of fiscal 2004. Third Quarter FY '05 (in millions, except per share amounts) Net Diluted Income EPS As reported $55.1 $0.60 Gain on sale of five Chili's restaurants (1.3) (0.01) Restructuring charges 0.2 0.00 Adjusted $54.0 $0.59 Third Quarter FY '04 (in millions, except per share amounts) Net Diluted Income EPS As reported $0.0 $0.00 Long-lived asset impairments 23.5 0.23 Big Bowl goodwill impairment charge 27.0 0.26 Cozymel's charge 4.0 0.04 Impact of change in effective tax rate (1.5) (0.02) Adjusted $53.0 $0.51 As a result of the company's review of its lease accounting policies that began in December 2004, and consistent with the views recently expressed by the Securities and Exchange Commission, the company has adopted new accounting policies associated with landlord contributions and rent holidays. These changes will have no impact on the company's previously reported net income, earnings per share, revenues, total operating costs and expenses, shareholders' equity or compliance with any covenants under its credit facility or other debt instruments. * Brinker previously netted landlord contributions against leasehold improvements, thereby reducing future depreciation related to the leased properties. The landlord contributions will now be recorded as a deferred rent liability and amortized as a reduction of rent expense over the lease term. In addition, the company previously began calculating straight-line rent on the rent commencement date (which is typically the date the restaurant is opened). The straight-line rent calculation will now include the rent holiday period, which is the period of time between the company taking control of a leased site (generally the beginning of construction) and the rent commencement date. The portion of straight-line rent allocated to the construction period will be capitalized. * These accounting policy changes resulted in an increase to net property and equipment and deferred rent liability of $52.7 million as of March 30, 2005. In addition, depreciation expense increased, and rent expense decreased, each by $855,000 for the third quarter of fiscal 2005 and $2.7 million year-to-date of fiscal 2005. As previously reported, the company completed the redemption of its outstanding zero coupon convertible senior debentures due 2021 during the quarter. Debenture holders chose to convert debentures with an accreted value of approximately $10.8 million into 308,092 shares of common stock of Brinker International, Inc., plus cash in lieu of fractional shares. The company redeemed for cash the balance of the debentures of approximately $262.7 million. The company funded the redemption with a combination of cash on hand and available lines of credit. Other results for the third quarter of fiscal 2005 included: * The company and its franchise partners opened 40 restaurants. * Brinker reported revenues for the 13-week period of $1.0 billion, an increase of 8.3 percent compared with $931.9 million reported for the same period in fiscal 2004. These revenue gains were primarily driven by new restaurant development and a 3.2 percent increase in comparable store sales for all Brinker concepts. * For the four reported brands, quarterly comparable store sales increased 4.1 percent at Chili's, decreased 1.1 percent at Macaroni Grill, increased 4.0 percent at On The Border and increased 3.3 percent at Maggiano's. March 2005 Comparable Store Sales For the four-week period ending March 30, 2005, comparable store sales increased 3.6 percent. March comparable store sales for the company and the four reported brands were as follows: Mar. FY '05 Mar. FY '04 Brinker 3.6% 4.5% Chili's 4.4% 4.7% Macaroni Grill 0.9% 0.5% On The Border 2.7% 11.0% Maggiano's 4.1% 5.2% March price increases and product mix-shifts for Brinker and the four reported brands were as follows: Price Increase Product Mix-Shift Brinker 3.1% 1.1% Chili's 3.6% 1.3% Macaroni Grill 2.1% 1.2% On The Border 1.3% -0.4% Maggiano's 1.7% 0.3% The company estimates March sales were negatively impacted approximately 1.5 percent due to the Easter weekend falling in March this year versus April last year. Fourth Quarter and Full Fiscal Year 2005 Forecast The company expects fourth quarter revenue to be up 1 to 2 percent over the last fiscal fourth quarter, which included a 53rd week. Comparable store sales are expected to grow 2 to 3 percent. This assumes weighted average shares of approximately 91 million. The company continues to expect fourth quarter earnings per diluted share to be $0.66 to $0.68, excluding any gains or charges. The company's estimate for full-year fiscal 2005 earnings per diluted share is $2.07 to $2.09, excluding gains and charges. This assumes weighted average shares of approximately 95 million. April sales results will be published on May 11, 2005, after the market closes. Investors and interested parties are invited to listen to today's conference call, as management will provide further details of the quarter and an outlook for future periods. The call will be broadcast live on the Brinker Web site (http://www.brinker.com/ ) at 9 a.m. CDT today (Apr. 26). 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 May 10, 2005. At the end of the third quarter of fiscal 2005, Brinker International either owned, operated, franchised, or was involved in the ownership of 1,557 restaurants under the names Chili's Grill & Bar (1,051 units), Romano's Macaroni Grill (232 units), Maggiano's Little Italy (33 units), On The Border Mexican Grill & Cantina (133 units), Corner Bakery Cafe (87 units), and Rockfish Seafood Grill (21 units). 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, the impact of competition, the seasonality of the company's business, adverse weather conditions, future commodity prices, fuel and utility costs and availability, terrorists acts, consumer perception of food safety, changes in consumer taste, 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 Thirty Nine Week Periods Ended Periods Ended March 30, March 24, March 30, March 24, 2005 2004 2005 2004 (as restated) (as restated) Revenues $1,009,529 $931,922 $2,870,800 $2,689,310 Operating Costs and Expenses: Cost of sales 285,600 255,759 808,803 740,878 Restaurant expenses (A) 554,990 509,059 1,598,817 1,486,251 Depreciation and amortization (B) 47,922 45,687 142,144 133,033 General and administrative 33,310 39,417 113,149 109,339 Restructure charge and other impairments 350 66,501 52,749 68,535 Total operating costs and expenses 922,172 916,423 2,715,662 2,538,036 Operating income 87,357 15,499 155,138 151,274 Interest expense 5,947 2,722 20,147 8,973 Other, net 77 1,103 1,612 1,973 Income before provision for income taxes 81,333 11,674 133,379 140,328 Provision for income taxes (C) 26,189 11,668 22,923 53,090 Net income $55,144 $6 $110,456 $87,238 Basic net income per share $0.63 $0.00 $1.25 $0.90 Diluted net income per share $0.60 $0.00 $1.18 $0.86 Basic weighted average shares outstanding 88,109 95,973 88,458 96,510 Diluted weighted average shares outstanding 91,769 98,007 95,621 106,151 (A) Current year restaurant expenses include: * A $2.0 million gain recorded in the third quarter as a result of the sale of five Chili's to a franchise partner. * Increases in rent expense of $1.4 million and $4.0 million for the third quarter and year-to-date, respectively, due to the correction of the computation of straight-line rent expense announced in December 2004. * A reclass decreasing rent expense and increasing depreciation and amortization of $855,000 for the third quarter of fiscal 2005 and $2.7 million for year-to-date of fiscal 2005 due to the change in accounting policy related to landlord contributions and rent holidays. * A $17.3 million charge recorded in the second quarter related to the IRS resolution announced in December 2004. Prior year restaurant expenses include: * Increases in rent expense of $1.2 million and $3.6 million for the third quarter and year-to-date, respectively, due to the correction of the computation of straight-line rent expense announced in December 2004. * A reclass decreasing rent expense and increasing depreciation and amortization of $845,000 for the third quarter of fiscal 2004 and $2.4 million for year-to-date of fiscal 2004 due to the change in accounting policy related to landlord contributions and rent holidays. * A $2.4 million gain recorded in the second quarter as a result of the sale of four Chili's to a franchise partner and the sale of one real estate property. (B) Current year and prior year depreciation and amortization include reclasses increasing depreciation and amortization and decreasing rent expense of $855,000 and $2.7 million for the third quarter and year-to-date of fiscal 2005, respectively, and $845,000 and $2.4 million for the third quarter and year-to-date of fiscal 2004, respectively, due to the change in accounting policy related to landlord contributions and rent holidays. (C) Current year-to-date provision for income taxes includes a $16.9 million benefit related to the IRS settlement. BRINKER INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 30, June 30, 2005 2004 (Unaudited) ASSETS Total current assets $243,436 $400,920 Net property and equipment (A) 1,677,823 1,613,884 Total other assets 202,357 239,620 Total assets $2,123,616 $2,254,424 LIABILITIES AND SHAREHOLDERS' EQUITY Total current liabilities $412,964 $379,162 Long-term debt, less current installments 436,715 639,291 Other liabilities (A) 248,557 225,549 Total shareholders' equity 1,025,380 1,010,422 Total liabilities and shareholders' equity $2,123,616 $2,254,424 (A) Net property and equipment and other liabilities at March 30, 2005 and June 30, 2004 reflect increases of $52.7 million and $47.0 million, respectively, due to the change in accounting policy related to landlord contributions and rent holidays. BRINKER INTERNATIONAL, INC. UNITS SUMMARY Total Third Quarter Total Projected Units Fiscal 2005 Units Openings Dec. 29, 2004 Net Activity Mar. 30, 2005 Fiscal 2005 Company-Owned Units: Chili's 780 13 793 77-80 Macaroni Grill 214 5 219 15-18 Maggiano's 32 1 33 5 On The Border 113 2 115 8-10 Corner Bakery 83 1 84 6-9 Big Bowl 9 (9) --- 0 1,231 13 1,244 111-122 JV/Franchise Units: Chili's 243 15 258 25-30 Macaroni Grill 13 --- 13 5-6 On The Border 18 --- 18 0-1 Corner Bakery 3 --- 3 0 Rockfish 23 (2) 21 0 300 13 313 30-37 Total Units: Chili's 1,023 28 1,051 102-110 Macaroni Grill 227 5 232 20-24 Maggiano's 32 1 33 5 On The Border 131 2 133 8-11 Corner Bakery 86 1 87 6-9 Big Bowl 9 (9) --- 0 Rockfish 23 (2) 21 0 1,531 26 1,557 141-159 DATASOURCE: Brinker International, Inc. CONTACT: media relations, Louis Adams, +1-972-770-4967, or Chris Barnes, +1-972-770-4959, or investor relations, Lynn Schweinfurth, +1-972-770-7228, all of Brinker International, Inc. Web site: http://www.brinker.com/

Copyright