EAT Brinker International Inc

DALLAS, Oct. 24 /PRNewswire-FirstCall/ -- 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 (reconciliation included in Table 3). 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 Web-cast Information 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 (Oct. 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 Web site until the end of the day on Nov. 21, 2006. Forward Calendar SEC Form 10-Q for first quarter fiscal year 2007, filing on or before Nov. 6, 2006. Period 4 (October) sales - Nov. 8, 2006, after the market closes. At the end of first quarter fiscal year 2007, Brinker International either owned, operated, or franchised 1,662 restaurants under the names Chili's Grill & Bar (1,232 units), Romano's Macaroni Grill (244 units), Maggiano's Little Italy (38 units), and On The Border Mexican Grill & Cantina (148 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 impact of acquisitions and divestitures, 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, 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 September 27, September 28, 2006 2005 Revenues $1,039,935 $975,896 Operating Costs and Expenses: Cost of sales 285,507 275,158 Restaurant expenses (a) 580,579 542,772 Depreciation and amortization 48,231 46,711 General and administrative 50,265 47,138 Restructure charges and other impairments - 1,167 Total operating costs and expenses 964,582 912,946 Operating income 75,353 62,950 Interest expense 6,237 5,367 Other, net (837) (164) Income before provision for income taxes 69,953 57,747 Provision for income taxes 22,314 19,305 Income from continuing operations 47,639 38,442 Income (loss) from discontinued operations, net of taxes (b) - (6,688) Net income $47,639 $31,754 Basic net income per share: Income from continuing operations $0.57 $0.44 Income (loss) from discontinued operations $0.00 $(0.08) Net income per share $0.57 $0.36 Diluted net income per share: Income from continuing operations $0.57 $0.43 Income (loss) from discontinued operations $0.00 $(0.07) Net income per share $0.57 $0.36 Basic weighted average shares outstanding 82,853 87,807 Diluted weighted average shares outstanding 84,065 89,233 a) Current year restaurant expenses include a $3.2 million gain on the termination of interest rate swaps. Prior year restaurant expenses include a $3.3 million gain on the sale of real estate. b) Discontinued operations relates to the disposition of Corner Bakery. The loss from discontinued operations includes net income from discontinued operations of $2.7 million and the after tax loss on sale of Corner Bakery of $9.4 million. BRINKER INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) September 27, June 28, 2006 2006 (Unaudited) ASSETS Current assets of continuing operations $234,588 $242,310 Net property and equipment(a) 1,815,537 1,792,724 Total other assets 192,922 186,745 Total assets $2,243,047 $2,221,779 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities of continuing operations $492,702 $497,375 Long-term debt, less current installments 504,860 500,515 Other liabilities 148,231 148,057 Total shareholders' equity 1,097,254 1,075,832 Total liabilities and shareholders' equity $2,243,047 $2,221,779 a) At September 27, 2006, the company owned the land and buildings for 315 of the 1,307 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $266.4 million and $271.0 million, respectively. BRINKER INTERNATIONAL, INC. RESTAURANT SUMMARY First First Quarter Quarter Total Openings/ Closings/ Total Projected Restaurants Acquisitions Sales Restaurants Openings June 28, Fiscal Fiscal Sept. 27, Fiscal 2006 2007 2007(a) 2006 2007 Company-Owned Restaurants: Chili's 904 28 (16) 916 125-130 Macaroni Grill 221 2 - 223 4-5 Maggiano's 37 1 - 38 4-5 On The Border 123 2 - 125 12-14 International(b) 5 - - 5 - 1,290 33 (16) 1,307 145-154 Franchise Restaurants: Chili's 181 19 (2) 198 10-15 Macaroni Grill 11 - - 11 3-4 On The Border 21 2 - 23 4-6 International(b) 119 4 - 123 38-41 332 25 (2) 355 55-66 Total Restaurants: Chili's 1,085 47 (18) 1,114 135-145 Macaroni Grill 232 2 - 234 7-9 Maggiano's 37 1 - 38 4-5 On The Border 144 4 - 148 16-20 International 124 4 - 128 38-41 1,622 58 (18) 1,662 200-220 a) During the first quarter of fiscal 2007, the company sold fifteen Chili's restaurants to franchisees. The company and its franchisees opened a total of forty-three new restaurants during the quarter ended September 27, 2006. b) At the end of first quarter fiscal year 2007, international company owned restaurants by brand were 4 Chili's and one Macaroni Grill. International franchise restaurants by brand were 114 Chili's and nine Macaroni Grill's. Contacts: Stacey Calbert, Media Relations (800) 775-7290 Laura Conn, Investor Relations (972) 770-5810 DATASOURCE: Brinker International, Inc. CONTACT: Stacey Calbert, Media Relations, +800-775-7290, or Laura Conn, Investor Relations, +1-972-770-5810, both for Brinker International, Inc. Web site: http://www.brinker.com/

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