DALLAS, April 30, 2019
/PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today
announced results for the fiscal third quarter ended March 27,
2019.
Highlights include the following:
- Earnings per diluted share, on a GAAP basis, in the third
quarter of fiscal 2019 increased 28.4% to $1.31 compared to $1.02 in the third quarter of fiscal 2018
- Earnings per diluted share, excluding special items, in the
third quarter of fiscal 2019 increased 16.7% to $1.26 compared to $1.08 in the third quarter of fiscal 2018 (see
non-GAAP reconciliation below)
- Brinker International's Company sales in the third quarter of
fiscal 2019 increased 2.7% to $811.6
million compared to the third quarter of fiscal 2018. Total
revenues in the third quarter of fiscal 2019 increased 3.3% to
$839.3 million compared to the third
quarter of fiscal 2018
- Chili's company-owned comparable restaurant sales increased
2.9% in the third quarter of fiscal 2019 compared to the third
quarter of fiscal 2018. Chili's U.S. franchise comparable
restaurant sales increased 2.0% in the third quarter of fiscal 2019
compared to the third quarter of fiscal 2018
- Maggiano's company-owned comparable restaurant sales increased
0.4% in the third quarter of fiscal 2019 compared to the third
quarter of fiscal 2018
- Chili's international franchise comparable restaurant sales
decreased 3.9% in the third quarter of fiscal 2019 compared to the
third quarter of fiscal 2018
- Operating income, as a percent of Total revenues, was 8.4% in
the third quarter of fiscal 2019 compared to 8.9% in the third
quarter of fiscal 2018 representing a decrease of approximately 50
basis points
- Restaurant operating margin, as a percent of Company sales, was
14.3% in the third quarter of fiscal 2019 which included the impact
of the sale leaseback transactions and adopting the new revenue
accounting standard ("ASC 606"), compared to 16.1% in the third
quarter of fiscal 2018 (see non-GAAP reconciliation below).
Excluding the impact of the sale leaseback transactions and ASC
606, Restaurant operating margin would have been flat
year-over-year
- Cash flows provided by operating activities in the thirty-nine
week period ended March 27, 2019 was
$150.6 million and capital
expenditures totaled $128.0 million
resulting in free cash flow of $22.6
million (see non-GAAP reconciliation below) which was
reduced by $75.0 million in cash tax
payments related to the gain on the sale leaseback transactions.
Proceeds from sale leaseback transactions of $468.8 million are included in Cash flows
provided by investing activities
- The Company's Board of Directors approved a quarterly dividend
of $0.38 per share on the common
stock of the Company. The dividend will be payable June 27, 2019 to shareholders of record as of
June 7, 2019
"Brinker posted strong comp sales growth and industry leading
traffic again in the third quarter," said Wyman Roberts, CEO and President. "This marked
our 5th consecutive quarter of significantly outperforming the
category in traffic. Our focus continues to be on elevating our
guest experiences and providing true every day value to increase
the frequency and loyalty of our guests."
QUARTERLY OPERATING PERFORMANCE
Company Sales and Company Restaurant Expenses
Chili's Company sales in the third quarter of fiscal 2019
increased 3.0% to $709.8 million from
$688.9 million in the third quarter
of fiscal 2018 primarily due to an increase in comparable
restaurant sales. As compared to the third quarter of fiscal 2018,
Chili's restaurant operating margin(1) declined. Chili's
Restaurant expenses, as a percent of Company sales, increased
compared to the third quarter of fiscal 2018 primarily due to
higher rent expense associated with the new operating leases
entered into as part of the sale leaseback transactions and the
impact of adopting ASC 606, partially offset by sales leverage.
Cost of sales, as a percent of Company sales, increased compared to
the third quarter of fiscal 2018 primarily due to unfavorable menu
item mix and commodity pricing, partially offset by increased menu
pricing. Restaurant labor, as a percent of Company sales, increased
compared to the third quarter of fiscal 2018 due to higher wage
rates and incentive compensation, partially offset by sales
leverage and lower employee health insurance expenses.
Maggiano's Company sales in the third quarter of fiscal 2019
increased 0.2% to $101.8 million from
$101.6 million in the third quarter
of fiscal 2018 primarily due to an increase in comparable
restaurant sales. As compared to the third quarter of fiscal 2018,
Maggiano's restaurant operating margin(1) declined. This
was primarily driven by Restaurant expenses, as a percent of
Company sales, that increased compared to the third quarter of
fiscal 2018, primarily due to higher rent and repairs and
maintenance expenses. Cost of sales, as a percent of Company sales,
also increased compared to the third quarter of fiscal 2018
primarily due to unfavorable menu item mix and commodity pricing,
partially offset by increased menu pricing. This was partially
offset by a decrease in Restaurant labor, as a percent of Company
sales, primarily due to lower incentive compensation, partially
offset by higher wages.
(1)
|
Restaurant operating
margin is defined as Company sales less Cost of sales, Restaurant
labor and Restaurant expenses and excludes Depreciation and
amortization expenses (see non-GAAP reconciliation
below).
|
Franchise and Other Revenues
Franchise and other revenues in the third quarter of fiscal 2019
increased 25.9% to $27.7 million from
$22.0 million in the third quarter of
fiscal 2018 primarily due to the adoption of ASC 606 during the
first quarter of fiscal 2019. Please refer to "REVENUE RECOGNITION
UPDATE" section below for more details on the new revenue standard.
Brinker franchisees generated approximately $335.0 million in sales(2) in the
third quarter of fiscal 2019.
(2)
|
Royalty revenues are
recognized based on the sales generated and reported to the Company
by franchisees.
|
Other
Depreciation and amortization expense in the third quarter of
fiscal 2019 decreased $1.1 million
compared to the third quarter of fiscal 2018 primarily due to an
increase in fully depreciated assets, sale leaseback transactions
and restaurant closures, partially offset by additions for existing
restaurants primarily related to Chili's remodels and new
restaurants.
General and administrative expense in the third quarter of
fiscal 2019 increased $4.1 million
compared to the third quarter of fiscal 2018 primarily due to
higher incentive compensation and stock compensation expenses.
Income Taxes
On a GAAP basis, the effective income tax rate in the third
quarter of fiscal 2019 decreased to 10.3% compared to 20.4% in the
third quarter of fiscal 2018. The Tax Act lowered the federal
statutory tax rate from 35.0% to 21.0% effective January 1, 2018. Additionally, our fiscal 2019
effective income tax rate is further lowered due to an increase in
the FICA tax credit benefit, partially offset by the impact of sale
leaseback transactions.
Guidance Policy
Brinker provides annual guidance as it relates to comparable
restaurant sales, earnings per diluted share, excluding special
items, and other key line items in the consolidated statements of
comprehensive income and will only provide updates if there is a
material change versus the original guidance. We are unable to
reliably forecast special items such as restaurant impairments,
restaurant closures, reorganization charges and legal settlements
without unreasonable effort. As such, we do not present a
reconciliation of forecasted non-GAAP measures to the corresponding
GAAP measures. If special items are reported in the remainder of
fiscal 2019, reconciliations to the appropriate GAAP measures will
be provided.
COMPARABLE RESTAURANT SALES
The table below presents the percent change in company-owned and
franchise comparable restaurant sales in the third quarter of
fiscal 2019 compared to the third quarter of fiscal 2018, and the
third quarter of fiscal 2018 compared to the third quarter of
fiscal 2017:
|
Comparable Sales
(1)
|
|
Price
Impact
|
|
Mix-Shift
(2)
|
|
Traffic
|
|
Q3: 19 vs
18
|
|
Q3: 18 vs
17
|
|
Q3: 19 vs
18
|
|
Q3: 18 vs
17
|
|
Q3: 19 vs
18
|
|
Q3: 18 vs
17
|
|
Q3: 19 vs
18
|
|
Q3: 18 vs
17
|
Company-owned
|
2.6
|
%
|
|
(0.3)
|
%
|
|
1.5
|
%
|
|
1.2
|
%
|
|
(1.7)
|
%
|
|
0.6
|
%
|
|
2.8
|
%
|
|
(2.1)
|
%
|
Chili's
|
2.9
|
%
|
|
(0.4)
|
%
|
|
1.6
|
%
|
|
1.1
|
%
|
|
(1.7)
|
%
|
|
0.6
|
%
|
|
3.0
|
%
|
|
(2.1)
|
%
|
Maggiano's
|
0.4
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
|
1.3
|
%
|
|
(0.4)
|
%
|
|
0.6
|
%
|
|
0.0
|
%
|
|
(1.4)
|
%
|
Chili's franchise
(3) (4)
|
(0.2)
|
%
|
|
(2.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
(4)
|
2.0
|
%
|
|
(3.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
(3.9)
|
%
|
|
(0.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Chili's domestic
(5)
|
2.7
|
%
|
|
(1.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
System-wide
(6)
|
1.8
|
%
|
|
(0.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Comparable restaurant
sales include all restaurants that have been in operation for more
than 18 months. Amounts are calculated based on comparable current
period versus same period a year ago.
|
|
|
(2)
|
Mix-shift is
calculated as the year-over-year percentage change in Company sales
resulting from the change in menu items ordered by
guests.
|
|
|
(3)
|
Chili's franchise
sales generated by franchisees are not included in revenues in the
Consolidated Statements of Comprehensive Income; however, we
generate royalty revenues and advertising fees based on franchisee
revenues, where applicable. We believe including franchise
comparable restaurant sales provides investors information
regarding brand performance that is relevant to current operations
and may impact future restaurant development.
|
|
|
(4)
|
Chili's franchise
comparable sales in the U.S. for the Q3: 18 vs 17 period were
restated due to a change in franchise reported sales. Chili's
domestic and System-wide comparable sales were not affected by this
restatement.
|
|
|
(5)
|
Chili's domestic
comparable restaurant sales percentages are derived from sales
generated by company-owned and franchise operated Chili's
restaurants in the United States.
|
|
|
(6)
|
System-wide
comparable restaurant sales are derived from sales generated by
company-owned Chili's and Maggiano's restaurants in addition to the
sales generated at franchise-operated Chili's
restaurants.
|
NON-GAAP MEASURES
Brinker management uses certain non-GAAP measures in analyzing
operating performance and believes that the presentation of these
measures in this release provides investors with information that
is beneficial to gaining an understanding of the Company's
financial results. Non-GAAP disclosures should not be viewed as a
substitute for financial results determined in accordance with
GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies. Reconciliations
of these non-GAAP measures are included in the tables below.
Reconciliation of Net Income and Earnings Per Share Excluding
Special Items
Brinker 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. The following reconciliation is
presented in millions, except per share amounts.
|
Q3
19
|
|
EPS Q3
19
|
|
Q3
18
|
|
EPS Q3
18
|
Net income
|
$
|
49.8
|
|
|
$
|
1.31
|
|
|
$
|
46.9
|
|
|
$
|
1.02
|
|
Special items
(1)
|
(2.5)
|
|
|
(0.07)
|
|
|
2.7
|
|
|
0.06
|
|
Income tax effect
related to special items (2)
|
0.6
|
|
|
0.02
|
|
|
(0.8)
|
|
|
(0.02)
|
|
Special items, net of
taxes
|
(1.9)
|
|
|
(0.05)
|
|
|
1.9
|
|
|
0.04
|
|
Adjustment for
special tax items (3)
|
—
|
|
|
—
|
|
|
0.8
|
|
|
0.02
|
|
Net income excluding
special items
|
$
|
47.9
|
|
|
$
|
1.26
|
|
|
$
|
49.6
|
|
|
$
|
1.08
|
|
|
|
(1)
|
Special items in the
third quarter of fiscal 2019 consist of a $3.5 million gain in
Other (gains) and charges, partially offset by $1.0 million of
incremental depreciation expense associated with a change in
estimated useful life of certain restaurant-level long-lived
assets. Special items in the third quarter of fiscal 2018 consist
of a $2.7 million charge primarily related to lease termination
expenses. Footnote "(2)" to the Consolidated Statements of
Comprehensive Income contains additional details on the composition
of Other (gains) and charges.
|
|
|
(2)
|
Income tax effect
related to special items is based on the statutory tax rate in
effect at the end of each period presented.
|
|
|
(3)
|
Adjustment for
special tax items in the third quarter of fiscal 2018 primarily
relates to deferred taxes pursuant to prior year tax return
adjustments.
|
Reconciliation of Restaurant Operating Margin
Restaurant operating margin is not a measurement determined in
accordance with GAAP and should not be considered in isolation, or
as an alternative to operating income as an indicator of financial
performance. Restaurant operating margin is widely regarded in the
restaurant industry as a useful metric by which to evaluate
restaurant-level operating efficiency and performance of ongoing
restaurant-level operations. This non-GAAP measure is not
indicative of overall company performance and profitability in that
this measure does not directly accrue benefit to the shareholders
due to the nature of costs excluded. We define Restaurant operating
margin as Company sales less Company restaurant expenses, including
Cost of sales, Restaurant labor and Restaurant expenses. We believe
this metric provides a more useful comparison between periods and
enables investors to focus on the performance of restaurant-level
operations by excluding revenues not related to food and beverage
sales at company-owned restaurants, corporate General and
administrative expense, Depreciation and amortization, and Other
(gains) and charges.
Restaurant operating margin excludes Franchise and other
revenues which are earned primarily from franchise royalties and
other non-food and beverage revenue streams such as banquet service
charges, digital entertainment revenues and gift card breakage.
Depreciation and amortization expense, substantially all of which
is related to restaurant-level assets, is excluded because such
expense represents historical costs which do not reflect current
cash outlays for the restaurants. General and administrative
expense includes primarily non-restaurant-level costs associated
with support of the restaurants and other activities at our
corporate offices and is therefore excluded. We believe that
excluding special items, included within Other (gains) and charges,
from Restaurant operating margin provides investors with a clearer
perspective of the Company's ongoing operating performance and a
more useful comparison to prior period results. Restaurant
operating margin as presented may not be comparable to other
similarly titled measures of other companies in our industry.
The adoption of the new revenue standard, ASC 606, in first
quarter of fiscal 2019 changed the presentation and recording of
certain items contained within Franchise and other revenues,
Operating income, and Restaurant operating margin. The adoption did
not have a significant impact. For more details about the impact of
adopting the new revenue standard please refer to the "REVENUE
RECOGNITION UPDATE" section below. The following reconciliation is
presented in millions, except percentages.
|
Q3
19
|
|
Q3
18
|
Operating income -
GAAP
|
$
|
70.2
|
|
|
$
|
72.7
|
|
Operating income, as
a percent of Total revenue
|
8.4
|
%
|
|
8.9
|
%
|
|
|
|
|
Operating
income
|
70.2
|
|
|
72.7
|
|
Less: Franchise
and other revenues
|
(27.7)
|
|
|
(22.0)
|
|
Plus:
Depreciation and amortization
|
36.4
|
|
|
37.5
|
|
General and
administrative
|
40.8
|
|
|
36.7
|
|
Other (gains) and
charges
|
(3.5)
|
|
|
2.7
|
|
Restaurant operating
margin - non-GAAP
|
$
|
116.2
|
|
|
$
|
127.6
|
|
Restaurant operating
margin, as a percent of Company sales
|
14.3
|
%
|
|
16.1
|
%
|
Reconciliation of Free Cash Flow
Brinker believes presenting free cash flow provides a useful
measure to evaluate the cash flow available for reinvestment after
considering the capital requirements of our business operations (in
millions).
|
Q3
19
|
Cash flows provided
by operating activities - GAAP
|
$
|
150.6
|
|
Capital
expenditures
|
(128.0)
|
|
Free cash flow -
non-GAAP
|
$
|
22.6
|
|
During the thirty-nine week period ended March 27, 2019, Cash flows provided by operating
activities - GAAP were reduced by $75.0
million of cash tax payments related to the gain on the sale
leaseback transactions. The cash proceeds received from the sale
leaseback transactions of $468.8
million are recorded in Cash flows provided by investing
activities during the thirty-nine week period ended March 27, 2019.
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 broadcast live on Brinker's website
today, April 30, 2019 at 9 a.m.
CDT:
http://investors.brinker.com/events/event-details/q3-2019-brinker-international-earnings-conference-call
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 Brinker's website until the end of the day May 28, 2019.
Additional financial information, including statements of income
which detail operations excluding special items, franchise and
other revenues, and comparable restaurant sales trends by brand, is
also available on Brinker's website under the Financial Information
section of the Investor tab.
FORWARD CALENDAR
- SEC Form 10-Q for the third quarter of fiscal 2019 filing on or
before May 6, 2019; and
- Fourth quarter earnings release on August 13, 2019.
ABOUT BRINKER
Brinker International, Inc. is one of the world's leading casual
dining restaurant companies. Based in Dallas, Texas, as of March 27, 2019,
Brinker owned, operated, or franchised 1,676 restaurants under
the names Chili's® Grill & Bar (1,623 restaurants)
and Maggiano's Little Italy® (53 restaurants).
FORWARD LOOKING STATEMENTS
The statements and tables contained in this release that are not
historical facts are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are
based on our current plans and expectations and involve risks and
uncertainties which could cause actual results to differ materially
from our historical results or from those projected in
forward-looking statements. These risks and uncertainties are, in
many instances, beyond our control. Such risks and uncertainties
include, among other things, the impact of competition, changes in
consumer preferences, consumer perception of food safety, reduced
disposable income, unfavorable publicity, increased minimum wages,
governmental regulations, the impact of mergers, acquisitions,
divestitures and other strategic transactions, the Company's
ability to meet its business strategy plan, loss of key management
personnel, failure to hire and retain high-quality restaurant
management, the impact of social media, failure to protect the
security of data of our guests and team members, product
availability, regional business and economic conditions,
litigation, franchisee success, inflation, changes in the retail
industry, technology failures, failure to protect our intellectual
property, outsourcing, impairment of goodwill or assets, failure to
maintain effective internal control over financial reporting,
actions of activist shareholders, adverse weather conditions,
terrorist acts, health epidemics or pandemics, and tax reform, as
well as the risks described under the caption "Risk Factors" in our
fiscal 2018 Annual Report on Form 10-K and future filings with the
Securities and Exchange Commission.
BRINKER
INTERNATIONAL, INC.
|
Consolidated
Statements of Comprehensive Income (Unaudited)
|
(In millions,
except per share amounts)
|
|
|
Thirteen Week
Periods Ended
|
|
Thirty-Nine Week
Periods Ended
|
|
March 27,
2019
|
|
March 28,
2018
|
|
March 27,
2019
|
|
March 28,
2018
|
Revenues
|
|
|
|
|
|
|
|
Company
sales
|
$
|
811.6
|
|
|
$
|
790.5
|
|
|
$
|
2,301.4
|
|
|
$
|
2,250.1
|
|
Franchise and other
revenues (1)
|
27.7
|
|
|
22.0
|
|
82.4
|
|
|
68.2
|
|
Total
revenues
|
839.3
|
|
|
812.5
|
|
|
2,383.8
|
|
|
2,318.3
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
Cost of
sales
|
216.7
|
|
|
207.3
|
|
|
609.5
|
|
|
587.8
|
|
Restaurant
labor
|
274.0
|
|
|
265.4
|
|
|
791.1
|
|
|
766.9
|
|
Restaurant expenses
(1)
|
204.7
|
|
|
190.2
|
|
|
609.4
|
|
|
566.9
|
|
Company restaurant
expenses
|
695.4
|
|
|
662.9
|
|
|
2,010.0
|
|
|
1,921.6
|
|
Depreciation and
amortization
|
36.4
|
|
|
37.5
|
|
|
109.5
|
|
|
113.7
|
|
General and
administrative
|
40.8
|
|
|
36.7
|
|
|
110.0
|
|
|
102.1
|
|
Other (gains) and
charges (2)
|
(3.5)
|
|
|
2.7
|
|
|
(12.4)
|
|
|
25.2
|
|
Total operating costs
and expenses
|
769.1
|
|
|
739.8
|
|
|
2,217.1
|
|
|
2,162.6
|
|
Operating
income
|
70.2
|
|
|
72.7
|
|
|
166.7
|
|
|
155.7
|
|
Interest
expense
|
15.3
|
|
|
14.6
|
|
|
46.3
|
|
|
42.8
|
|
Other (income),
net
|
(0.6)
|
|
|
(0.8)
|
|
|
(2.2)
|
|
|
(2.3)
|
|
Income before
provision for income taxes
|
55.5
|
|
|
58.9
|
|
|
122.6
|
|
|
115.2
|
|
Provision for income
taxes
|
5.7
|
|
|
12.0
|
|
|
14.4
|
|
|
33.1
|
|
Net income
|
$
|
49.8
|
|
|
$
|
46.9
|
|
|
$
|
108.2
|
|
|
$
|
82.1
|
|
|
|
|
|
|
|
|
|
Basic net income per
share
|
$
|
1.33
|
|
|
$
|
1.03
|
|
|
$
|
2.80
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share
|
$
|
1.31
|
|
|
$
|
1.02
|
|
|
$
|
2.75
|
|
|
$
|
1.74
|
|
|
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
37.5
|
|
|
45.4
|
|
|
38.6
|
|
|
46.7
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
38.1
|
|
|
46.0
|
|
|
39.3
|
|
|
47.2
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments (3)
|
$
|
0.2
|
|
|
$
|
(0.2)
|
|
|
$
|
(0.1)
|
|
|
$
|
0.6
|
|
Other comprehensive
income (loss)
|
0.2
|
|
|
(0.2)
|
|
|
(0.1)
|
|
|
0.6
|
|
Comprehensive
income
|
$
|
50.0
|
|
|
$
|
46.7
|
|
|
$
|
108.1
|
|
|
$
|
82.7
|
|
|
|
(1)
|
Franchise and other
revenues and Restaurant expenses in the thirteen and thirty-nine
week periods ended March 27, 2019 includes the impact
from adoption of ASC 606, whereas the thirteen and thirty-nine
week periods ended March 28, 2018 was not restated. Please see
"REVENUE RECOGNITION UPDATE" section for further details. Franchise
and other revenues include royalties, advertising fees (effective
in the first quarter of fiscal 2019), gift card breakage,
Maggiano's banquet service charge income, digital entertainment
revenues, gift card equalization, gift card discount costs from
third-party gift card sales, franchise and development fees,
delivery fee income, merchandise income and retail royalty
revenues.
|
|
|
(2)
|
Other (gains) and
charges included in the Consolidated Statements of Comprehensive
Income include (in millions):
|
|
Thirteen Week
Periods Ended
|
|
Thirty-Nine Week
Periods Ended
|
|
March 27,
2019
|
|
March 28,
2018
|
|
March 27,
2019
|
|
March 28,
2018
|
(Gain) on sale of
assets, net
|
$
|
(6.0)
|
|
|
$
|
—
|
|
|
$
|
(6.8)
|
|
|
$
|
(0.3)
|
|
Sale leaseback
(gain), net of transaction charges
|
(4.3)
|
|
|
—
|
|
|
(22.0)
|
|
|
—
|
|
Foreign currency
transaction (gain)
|
(0.5)
|
|
|
(1.0)
|
|
|
(0.6)
|
|
|
(0.1)
|
|
Corporate
headquarters relocation charges
|
5.2
|
|
|
—
|
|
|
5.2
|
|
|
—
|
|
Remodel-related
costs
|
1.7
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
Restaurant closure
charges
|
0.2
|
|
|
2.8
|
|
|
4.0
|
|
|
7.3
|
|
Property damages, net
of (insurance recoveries)
|
0.1
|
|
|
0.3
|
|
|
(0.5)
|
|
|
5.4
|
|
Restaurant impairment
charges
|
—
|
|
|
—
|
|
|
1.0
|
|
|
9.2
|
|
Accelerated
depreciation
|
—
|
|
|
0.5
|
|
|
1.0
|
|
|
1.5
|
|
Cyber security
incident charges
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
Lease guarantee
charges
|
—
|
|
|
0.5
|
|
|
—
|
|
|
1.9
|
|
Other
|
0.1
|
|
|
(0.4)
|
|
|
1.1
|
|
|
0.3
|
|
Total
|
$
|
(3.5)
|
|
|
$
|
2.7
|
|
|
$
|
(12.4)
|
|
|
$
|
25.2
|
|
|
|
(3)
|
Foreign currency
translation adjustment included within Comprehensive income in the
Consolidated Statements of Comprehensive Income represents the
unrealized impact of translating the financial statements of the
Canadian restaurants and the Mexican joint venture (prior to
divestiture in the second quarter of fiscal 2018) from their
respective functional currencies to U.S. dollars. This amount is
not included in Net income and would only be realized upon
disposition of the businesses.
|
REVENUE RECOGNITION UPDATE
Effective in the first quarter of fiscal 2019, we adopted ASC
606 and did not elect to restate the prior year financial
statements to reflect the application of the standard. The primary
impact of the adoption is the change in presentation of advertising
fees received from franchisees and the timing of recognition for
franchise related revenues and gift card breakage. Under ASC 606,
advertising fees are now presented on a gross basis as a component
of Franchise and other revenues. Under the previous revenue
accounting guidance ("Legacy GAAP"), the advertising fees were
recorded as a reduction to advertising expenses within Restaurant
expenses in the Consolidated Statements of Comprehensive Income.
The recognition timing change for franchise related fees and gift
card breakage, both recorded in Franchise and other revenues, did
not have a significant impact to our results of operations during
the third quarter of fiscal 2019.
The following table presents a comparative view of the thirteen
and thirty-nine week period ended March 27,
2019 results prepared in accordance with ASC 606 versus
Legacy GAAP.
|
Thirteen Week
Period Ended
|
|
Thirty-Nine Week
Period Ended
|
|
March 27,
2019
|
|
March 27,
2019
|
|
ASC 606
Amounts
|
|
Adjustments
|
|
Legacy
GAAP
Amounts
|
|
ASC 606
Amounts
|
|
Adjustments
|
|
Legacy
GAAP
Amounts
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Company
sales
|
$
|
811.6
|
|
|
$
|
—
|
|
|
$
|
811.6
|
|
|
$
|
2,301.4
|
|
|
$
|
—
|
|
|
$
|
2,301.4
|
|
Franchise and other
revenues
|
27.7
|
|
|
(6.9)
|
|
|
20.8
|
|
|
82.4
|
|
|
(17.7)
|
|
|
64.7
|
|
Total
revenues
|
839.3
|
|
|
(6.9)
|
|
|
832.4
|
|
|
2,383.8
|
|
|
(17.7)
|
|
|
2,366.1
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurants
(excluding depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
216.7
|
|
|
—
|
|
|
216.7
|
|
|
609.5
|
|
|
—
|
|
|
609.5
|
|
Restaurant
labor
|
274.0
|
|
|
—
|
|
|
274.0
|
|
|
791.1
|
|
|
—
|
|
|
791.1
|
|
Restaurant
expenses
|
204.7
|
|
|
(5.5)
|
|
|
199.2
|
|
|
609.4
|
|
|
(15.8)
|
|
|
593.6
|
|
Company restaurant
expenses
|
695.4
|
|
|
(5.5)
|
|
|
689.9
|
|
|
2,010.0
|
|
|
(15.8)
|
|
|
1,994.2
|
|
Depreciation and
amortization
|
36.4
|
|
|
—
|
|
|
36.4
|
|
|
109.5
|
|
|
—
|
|
|
109.5
|
|
General and
administrative
|
40.8
|
|
|
—
|
|
|
40.8
|
|
|
110.0
|
|
|
—
|
|
|
110.0
|
|
Other (gains) and
charges
|
(3.5)
|
|
|
—
|
|
|
(3.5)
|
|
|
(12.4)
|
|
|
—
|
|
|
(12.4)
|
|
Total operating costs
and expenses
|
769.1
|
|
|
(5.5)
|
|
|
763.6
|
|
|
2,217.1
|
|
|
(15.8)
|
|
|
2,201.3
|
|
Operating
income
|
70.2
|
|
|
(1.4)
|
|
|
68.8
|
|
|
166.7
|
|
|
(1.9)
|
|
|
164.8
|
|
Operating income as a
percent of Total revenue
|
8.4
|
%
|
|
(0.1)
|
%
|
|
8.3
|
%
|
|
7.0
|
%
|
|
0.0
|
%
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
15.3
|
|
|
—
|
|
|
15.3
|
|
|
46.3
|
|
|
—
|
|
|
46.3
|
|
Other (income),
net
|
(0.6)
|
|
|
—
|
|
|
(0.6)
|
|
|
(2.2)
|
|
|
—
|
|
|
(2.2)
|
|
Income before
provision for income taxes
|
55.5
|
|
|
(1.4)
|
|
|
54.1
|
|
|
122.6
|
|
|
(1.9)
|
|
|
120.7
|
|
Provision for income
taxes
|
5.7
|
|
|
(0.3)
|
|
|
5.4
|
|
|
14.4
|
|
|
(0.5)
|
|
|
13.9
|
|
Net income
|
$
|
49.8
|
|
|
$
|
(1.1)
|
|
|
$
|
48.7
|
|
|
$
|
108.2
|
|
|
$
|
(1.4)
|
|
|
$
|
106.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share
|
$
|
1.33
|
|
|
$
|
(0.03)
|
|
|
$
|
1.30
|
|
|
$
|
2.80
|
|
|
$
|
(0.03)
|
|
|
$
|
2.77
|
|
Diluted net income
per share
|
$
|
1.31
|
|
|
$
|
(0.03)
|
|
|
$
|
1.28
|
|
|
$
|
2.75
|
|
|
$
|
(0.03)
|
|
|
$
|
2.72
|
|
BRINKER
INTERNATIONAL, INC.
|
Condensed
Consolidated Balance Sheets
|
(In
millions)
|
|
|
(Unaudited)
|
|
|
|
March 27,
2019
|
|
June 27,
2018
|
ASSETS
|
|
|
|
Current
assets
|
$
|
168.6
|
|
|
$
|
156.3
|
|
Net property and
equipment (1)
|
758.6
|
|
|
938.9
|
|
Deferred income
taxes, net (1)
|
119.8
|
|
|
33.6
|
|
Total other
assets
|
217.1
|
|
|
218.5
|
|
Total
assets
|
$
|
1,264.1
|
|
|
$
|
1,347.3
|
|
LIABILITIES AND
SHAREHOLDERS' DEFICIT
|
|
|
|
Current installments
of long-term debt
|
$
|
7.9
|
|
|
$
|
7.1
|
|
Other current
liabilities (1)
|
445.6
|
|
|
427.2
|
|
Long-term debt, less
current installments
|
1,219.3
|
|
|
1,499.6
|
|
Deferred gain on sale
leaseback transactions (1)
|
250.7
|
|
|
—
|
|
Other
liabilities
|
154.8
|
|
|
131.7
|
|
Total shareholders'
deficit
|
(814.2)
|
|
|
(718.3)
|
|
Total liabilities and
shareholders' deficit
|
$
|
1,264.1
|
|
|
$
|
1,347.3
|
|
|
|
(1)
|
We executed sale
leaseback transactions during the thirty-nine week period ended
March 27, 2019 for gross consideration of $477.4 million, and
removed the related Net property and equipment totaling $178.6
million from our Consolidated Balance Sheets, resulting in a
net gain. Of the gain, as of March 27, 2019, $269.4 million
remains deferred and is included within Other current
liabilities and Deferred gain on sale leaseback transactions.
The total gain is immediately taxable, resulting in $76.0
million of tax on the gain, of which $75.0 million was paid
during the thirty-nine week period ended March 27, 2019.
|
|
|
|
Of the
997 company-owned restaurants locations, at March 27,
2019, we continue to own property for 47 restaurant locations. The
related book value of the land totaled $37.4 million and the
net book value of buildings totaled $22.3 million for these
locations.
|
BRINKER
INTERNATIONAL, INC.
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
(In
millions)
|
|
|
Thirty-Nine Week
Periods Ended
|
|
March 27,
2019
|
|
March 28,
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
108.2
|
|
|
$
|
82.1
|
|
Adjustments to
reconcile Net income to Net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
109.5
|
|
|
113.7
|
|
Stock-based
compensation
|
13.0
|
|
|
11.0
|
|
Restructure charges
and other impairments
|
14.4
|
|
|
16.1
|
|
Net (gain) loss on
disposal of assets
|
(27.6)
|
|
|
1.4
|
|
Changes in assets and
liabilities
|
(66.9)
|
|
|
13.4
|
|
Net cash provided by
operating activities
|
150.6
|
|
|
237.7
|
|
Cash flows from
investing activities
|
|
|
|
Payments for property
and equipment
|
(128.0)
|
|
|
(69.5)
|
|
Payments for
franchise restaurant acquisitions
|
(1.3)
|
|
|
—
|
|
Proceeds from sale of
assets
|
1.4
|
|
|
14.8
|
|
Proceeds from note
receivable
|
2.0
|
|
|
1.2
|
|
Insurance
recoveries
|
1.4
|
|
|
1.7
|
|
Proceeds from sale
leaseback transactions, net of related expenses
|
468.8
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
344.3
|
|
|
(51.8)
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings on
revolving credit facility
|
626.0
|
|
|
524.0
|
|
Payments on revolving
credit facility
|
(903.0)
|
|
|
(484.0)
|
|
Purchases of treasury
stock
|
(167.7)
|
|
|
(162.0)
|
|
Payments of
dividends
|
(46.0)
|
|
|
(53.1)
|
|
Payments on long-term
debt
|
(5.7)
|
|
|
(7.8)
|
|
Proceeds from
issuances of treasury stock
|
2.8
|
|
|
1.3
|
|
Net cash used in
financing activities
|
(493.6)
|
|
|
(181.6)
|
|
Net change in cash
and cash equivalents
|
1.3
|
|
|
4.3
|
|
Cash and cash
equivalents at beginning of period
|
10.9
|
|
|
9.1
|
|
Cash and cash
equivalents at end of period
|
$
|
12.2
|
|
|
$
|
13.4
|
|
BRINKER
INTERNATIONAL, INC.
|
Restaurant
Summary
|
|
|
Fiscal
2019
|
|
March 27,
2019
|
|
Third Quarter
Openings
|
|
YTD
Openings
|
|
Full Year
Projected
Openings
|
|
Total
Restaurants
|
New
Openings
|
|
|
|
|
|
|
|
Company-owned
restaurants
|
|
|
|
|
|
|
|
Chili's
domestic
|
2
|
|
|
2
|
|
|
2-4
|
|
|
940
|
|
Chili's
international
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
Maggiano's
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
Total
company-owned
|
2
|
|
|
2
|
|
|
2-4
|
|
|
997
|
|
|
|
|
|
|
|
|
|
Franchise
restaurants
|
|
|
|
|
|
|
|
Chili's
domestic
|
1
|
|
|
4
|
|
|
4-5
|
|
|
308
|
|
Chili's
international
|
4
|
|
|
14
|
|
|
21-24
|
|
|
370
|
|
Maggiano's
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Total
franchise
|
5
|
|
|
19
|
|
|
26-30
|
|
|
679
|
|
|
|
|
|
|
|
|
|
Chili's
domestic
|
3
|
|
|
6
|
|
|
6-9
|
|
|
1,248
|
|
Chili's
international
|
4
|
|
|
14
|
|
|
21-24
|
|
|
375
|
|
Maggiano's
|
—
|
|
|
1
|
|
|
1
|
|
|
53
|
|
Grand
total
|
7
|
|
|
21
|
|
|
28-34
|
|
|
1,676
|
|
|
|
|
|
|
|
|
|
Relocation
Openings
|
|
|
|
|
|
|
|
Chili's domestic
company-owned relocations
|
2
|
|
|
5
|
|
|
5
|
|
|
|
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SOURCE Brinker International, Inc.