Exhibit 99(a)
FOR IMMEDIATE RELEASE
Contacts: | Stacey Calbert, Media Relations | | Laura Conn, Investor Relations |
| (800) 775-7290 | | (972) 770-5810 |
BRINKER INTERNATIONAL
REPORTS THIRD QUARTER FISCAL 2007 RESULTS
AND ANNOUNCES ACCELERATED SHARE REPURCHASE TRANSACTION
DALLAS (April 24, 2007) — Brinker International, Inc. (NYSE: EAT) reported income from continuing operations of $54.6 million, or $0.43 diluted earnings per share, for the company’s third quarter ended March 28, 2007. For the same quarter of fiscal 2006, the company reported income from continuing operations of $63.1 million, or $0.48 diluted earnings per share. Before special items, earnings per diluted share from continuing operations increased to $0.44 from $0.43 in the prior year (reconciliation included in Table 3).
As a part of its plan to return capital to shareholders, Brinker also announced that it intends to enter into an agreement to repurchase approximately $300 million of its common stock through a broker-dealer in an accelerated share repurchase (ASR) transaction.
Highlights for third quarter 2007:
· Opened 55 restaurants, 41 company-owned, 14 franchised, including seven international restaurants;
· Signed agreement with Pepper Dining, Inc. to sell 89 company-owned Chili’s restaurants with plans to develop an additional 20-44 new franchised Chili’s locations;
· Signed three new international development agreements for nine new restaurants;
· Sold one company-owned On The Border Mexican Grill & Cantina restaurant with development commitments to build a total of five new franchised restaurants;
· Entered into a domestic development agreement with a franchisee to build three new Macaroni Grill restaurants;
· Declared and paid quarterly dividend of $0.09 per share; and
· Repurchased 3.2 million common shares for approximately $102.7 million.
Year-to-Date highlights for fiscal year 2007:
· Increased earnings per share from continuing operations before special items by approximately 18 percent;
· Opened 148 restaurants, 107 company-owned, 41 franchised, including 23 international restaurants;
· Signed agreements with franchisees to sell 104 company-owned Chili’s restaurants with plans to develop an
additional 51-75 new domestic franchised Chili’s locations;
· Signed eight new international development agreements for 31 new restaurants;
· Increased quarterly dividend in November by 35%; and
· Repurchased 7.7 million common shares for approximately $222.1 million.
Revenue Growth
Brinker reported revenues for the 13-week period of $1,123.4 million, an increase of 2.8 percent compared with $1,092.8 million reported for the same period of fiscal 2006. These revenue gains were primarily driven by restaurant capacity growth of 7.9 percent partially offset by a decrease of 4.4 percent in comparable restaurant sales (see Table 1). The company and its franchisees opened 55 restaurants in the third quarter.
Table 1: Q3 comparable restaurant sales
Q3 07 and Q3 06, company and four reported brands; percentage
| | Q3 07 Comp Sales
| | Q3 06 Comp Sales | | Q3 07 Price Increase
| | Q3 07 Mix-Shift
| |
Brinker International | | | (4.4 | ) | | | 2.7 | | | | 1.1 | | | | (0.8 | ) | |
Chili’s | | | (4.4 | ) | | | 3.4 | | | | 1.1 | | | | (1.4 | ) | |
Macaroni Grill | | | (4.2 | ) | | | (0.3 | ) | | | 1.5 | | | | 0.0 | | |
On The Border | | | (5.7 | ) | | | 1.8 | | | | 0.6 | | | | 1.7 | | |
Maggiano’s | | | (3.0 | ) | | | 5.0 | | | | 0.7 | | | | (1.1 | ) | |
| | | | | | | | | | | | | | | | | |
March 2007 Comparable Restaurant Sales
For the four-week period ending March 28, 2007, comparable restaurant sales decreased 3.6 percent (see Table 2).
Table 2: Month of March comparable restaurant sales
Mar 07 and Mar 06; company and four reported brands; percentage
| | Mar 07 Comp Sales
| | Mar 06 Comp Sales | | Mar 07 Price Increase
| | Mar 07 Mix-Shift
| |
Brinker International | | | (3.6 | ) | | | (0.3 | ) | | | 0.8 | | | | (0.8 | ) | |
Chili’s | | | (3.0 | ) | | | 0.4 | | | | 0.7 | | | | (1.5 | ) | |
Macaroni Grill | | | (4.7 | ) | | | (3.3 | ) | | | 1.6 | | | | 0.8 | | |
On The Border | | | (6.2 | ) | | | (0.6 | ) | | | 0.5 | | | | 1.5 | | |
Maggiano’s | | | (2.9 | ) | | | 2.6 | | | | 0.2 | | | | (1.0 | ) | |
| | | | | | | | | | | | | | | | | |
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Operating Performance
Cost of sales, as a percent of revenues, increased from 28.1 percent to 28.3 percent or 20 basis points for the quarter compared to the prior year. This pressure is due primarily to higher salmon and produce costs.
Restaurant expenses, as a percent of revenues, increased from 53.8 percent to 56.0 percent compared to the prior year, primarily driven by net gains on the sale of company-owned restaurants in the prior year, higher labor costs due to increased minimum wage rates, and continued investment in facilities.
Depreciation and amortization for the third quarter of fiscal 2007 compared to 2006 decreased $2.2 million. The change was primarily driven by the classification of assets held for sale for the Pepper Dining transaction.
General and administrative expense decreased $9.4 million for the quarter, which was primarily driven by lower than expected variable compensation payouts due to decreased operating performance and reduced stock-based compensation expense in 2007 due to award vesting.
The effective income tax rate related to continuing operations decreased to 29.4% for the current quarter as compared to 30.9% for the same quarter last year. The decrease in the tax rate was primarily due to incentive stock options, which are deductible when exercised.
Capital Allocation
Cash flow from operations and capital expenditures for year-to-date fiscal 2007 were approximately $390.5 million and $301.1 million, respectively. The company repurchased approximately 3.2 million shares during the third quarter and diluted weighted average shares outstanding declined approximately 3.4 percent from 130.2 million to 125.7 million on a year-over-year basis. Basic shares outstanding at the end of the period were 120.6 million. Year-to-date, Brinker has repurchased approximately 7.7 million shares for $222.1 million. As of April 23, 2007, approximately $297 million remained available under the company’s share repurchase authorizations.
Total capital expenditures for fiscal year 2007 are currently estimated to be approximately $425 million, a 7.6 percent reduction from the original estimate of $460 million. For fiscal year 2008, initial estimates for total capital expenditures range from $300 million to $325 million, including the opening of 80-90 new company-owned restaurants.
Brinker has also obtained a new $400 million unsecured committed credit facility. The new credit facility will be utilized to fund the ASR and for general corporate purposes.
The number of shares that Brinker may repurchase pursuant to the ASR will not be known until conclusion of the transaction, which is expected to occur during the first quarter of fiscal year 2008.
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Table 3: Reconciliation of income from continuing operations and description of special items
Q3 2007 and Q3 2006; $ millions and $ per diluted share after-tax
Item | | Income Statement Line | | Q3 07 | | Per Share Q3 07 | | Q3 06
| | Per Share Q3 06 | |
Income from Continuing Operations | | | | | 54.6 | | | | 0.43 | | | | 63.1 | | | | 0.48 | | |
Sale of company-owned restaurants | | Restaurant Expenses | | | (1.0 | ) | | | (0.01 | ) | | | (4.4 | ) | | | (0.03 | ) | |
Restructuring Gains and Charges | | Restructure & Other | | | 1.8 | | | | 0.02 | | | | (2.3 | ) | | | (0.02 | ) | |
Total Special Items | | | | | 0.8 | | | | 0.01 | | | | (6.7 | ) | | | (0.05 | ) | |
Income from Continuing Operations, before Special Items | | | | | 55.4 | | | | 0.44 | | | | 56.4 | | | | 0.43 | | |
Web-cast Information
Investors and interested parties are invited to listen to today’s conference call, as management will provide further details on the quarter and an outlook for future periods. The call will be broadcast live on the Brinker Web site (http://www.brinker.com) at 9:00 a.m. Central Time today (Apr. 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 May 22, 2007.
Forward Calendar
Third Quarter 10-Q Filing on or before May 7, 2007.
Period 10 (April) sales on May 9, 2007, after the market closes.
At the end of the third quarter of fiscal 2007, Brinker International either owned, operated, or franchised 1,756 restaurants under the names Chili’s Grill & Bar (1,318 units), Romano’s Macaroni Grill (242 units), On The Border Mexican Grill & Cantina (156 units), and Maggiano’s Little Italy (40 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, 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.
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BRINKER INTERNATIONAL, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
| | Thirteen Week Periods Ended | | Thirty-Nine Week Periods Ended | |
| | March 28, | | March 29, | | March 28, | | March 29, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | |
| | | | | | | | | |
Revenues | | $ | 1,123,428 | | $ | 1,092,790 | | $ | 3,233,950 | | $ | 3,077,769 | |
Operating Costs and Expenses: | | | | | | | | | |
Cost of sales | | 318,463 | | 307,205 | | 903,582 | | 869,668 | |
Restaurant expenses (a) | | 628,763 | | 587,950 | | 1,803,742 | | 1,686,093 | |
Depreciation and amortization | | 46,116 | | 48,357 | | 143,090 | | 142,670 | |
General and administrative | | 44,367 | | 53,735 | | 141,658 | | 152,540 | |
Restructure charges and other impairments | | 2,941 | | (529 | ) | 13,571 | | 1,950 | |
Total operating costs and expenses | | 1,040,650 | | 996,718 | | 3,005,643 | | 2,852,921 | |
| | | | | | | | | |
Operating income | | 82,778 | | 96,072 | | 228,307 | | 224,848 | |
| | | | | | | | | |
Interest expense | | 6,446 | | 5,630 | | 19,297 | | 17,195 | |
Other, net | | (995 | ) | (939 | ) | (2,627 | ) | (1,123 | ) |
| | | | | | | | | |
Income before provision for income taxes | | 77,327 | | 91,381 | | 211,637 | | 208,776 | |
| | | | | | | | | |
Provision for income taxes | | 22,756 | | 28,250 | | 65,235 | | 67,833 | |
| | | | | | | | | |
Income from continuing operations | | 54,571 | | 63,131 | | 146,402 | | 140,943 | |
| | | | | | | | | |
Income (loss) from discontinued operations, net of taxes | | — | | 1,626 | | — | | (1,555 | ) |
| | | | | | | | | |
Net income | | $ | 54,571 | | $ | 64,757 | | $ | 146,402 | | $ | 139,388 | |
| | | | | | | | | |
| | | | | | | | | |
Basic net income per share: | | | | | | | | | |
Income from continuing operations | | $ | 0.45 | | $ | 0.49 | | $ | 1.19 | | $ | 1.09 | |
Income (loss) from discontinued operations | | $ | 0.00 | | $ | 0.02 | | $ | 0.00 | | $ | (0.01 | ) |
Net income per share | | $ | 0.45 | | $ | 0.51 | | $ | 1.19 | | $ | 1.08 | |
| | | | | | | | | |
| | | | | | | | | |
Diluted net income per share: | | | | | | | | | |
Income from continuing operations | | $ | 0.43 | | $ | 0.48 | | $ | 1.16 | | $ | 1.07 | |
Income (loss) from discontinued operations | | $ | 0.00 | | $ | 0.02 | | $ | 0.00 | | $ | (0.01 | ) |
Net income per share | | $ | 0.43 | | $ | 0.50 | | $ | 1.16 | | $ | 1.06 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Basic weighted average | | | | | | | | | |
shares outstanding | | 122,019 | | 127,868 | | 123,213 | | 129,498 | |
| | | | | | | | | |
Diluted weighted average | | | | | | | | | |
shares outstanding | | 125,712 | | 130,182 | | 126,144 | | 131,778 | |
(a) Current year restaurant expenses include a $1.7 million gain on the sale of company-owned restaurants in the third quarter and a $3.2 million gain on the termination of interest rate swaps in the first quarter. Prior year restaurant expenses include net gains on the sale of company-owned restaurants of $7.0 million during the third quarter and a $3.3 million gain on the sale of real estate in the first quarter.
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BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| | March 28, | | June 28, | |
| | 2007 | | 2006 | |
| | (Unaudited) | | | |
ASSETS | | | | | |
Current assets | | $ | 250,842 | | $ | 237,385 | |
Assets held for sale | | 133,688 | | 121,275 | |
Net property and equipment (a) | | 1,786,670 | | 1,679,390 | |
Total other assets | | 191,311 | | 183,729 | |
Total assets | | $ | 2,362,511 | | $ | 2,221,779 | |
| | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | |
Current liabilities | | $ | 551,453 | | $ | 492,454 | |
Liabilities associated with assets held for sale | | 6,017 | | 5,069 | |
Long-term debt, less current installments | | 593,380 | | 500,515 | |
Other liabilities | | 158,099 | | 147,909 | |
Total shareholders’ equity | | 1,053,562 | | 1,075,832 | |
Total liabilities and shareholders’ equity | | $ | 2,362,511 | | $ | 2,221,779 | |
(a) At March 28, 2007, the company owned the land and buildings for 319 of the 1,369 company-owned restaurants. The net book values of the land and buildings associated with these restaurants totaled $271.7 million and $269.5 million, respectively.
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
| | Total Restaurants | | Third Quarter Openings / Acquisitions (a) | | Third Quarter Closings / Sales (a) | | Total Restaurants March 28, | | Projected Openings Fiscal | |
| | Dec. 27, 2006 | | Fiscal 2007 | | Fiscal 2007 | | 2007 | | 2007 | |
| | | | | | | | | | | | | | | | | | | | | |
Company-Owned Restaurants: | | | | | | | | | | | | | | | | | | | | | |
Chili’s | | | 944 | | | | 34 | | | | (1 | ) | | | 977 | | | | 125-130 | | |
Macaroni Grill | | | 224 | | | | — | | | | (8 | ) | | | 216 | | | | 4-5 | | |
Maggiano’s | | | 39 | | | | 1 | | | | — | | | | 40 | | | | 4-5 | | |
On The Border | | | 128 | | | | 6 | | | | (3 | ) | | | 131 | | | | 12-14 | | |
International (b) | | | 5 | | | | — | | | | — | | | | 5 | | | | — | | |
| | | 1,340 | | | | 41 | | | | (12 | ) | | | 1,369 | | | | 145-154 | | |
| | | | | | | | | | | | | | | | | | | | | |
Franchise Restaurants: | | | | | | | | | | | | | | | | | | | | | |
Chili’s | | | 202 | | | | 4 | | | | — | | | | 206 | | | | 10-15 | | |
Macaroni Grill | | | 13 | | | | 2 | | | | — | | | | 15 | | | | 3-4 | | |
On The Border | | | 23 | | | | 2 | | | | — | | | | 25 | | | | 4-6 | | |
International (b) | | | 134 | | | | 7 | | | | — | | | | 141 | | | | 38-41 | | |
| | | 372 | | | | 15 | | | | — | | | | 387 | | | | 55-66 | | |
| | | | | | | | | | | | | | | | | | | | | |
Total Restaurants: | | | | | | | | | | | | | | | | | | | | | |
Chili’s | | | 1,146 | | | | 38 | | | | (1 | ) | | | 1,183 | | | | 135-145 | | |
Macaroni Grill | | | 237 | | | | 2 | | | | (8 | ) | | | 231 | | | | 7-9 | | |
Maggiano’s | | | 39 | | | | 1 | | | | — | | | | 40 | | | | 4-5 | | |
On The Border | | | 151 | | | | 8 | | | | (3 | ) | | | 156 | | | | 16-20 | | |
International | | | 139 | | | | 7 | | | | — | | | | 146 | | | | 38-41 | | |
| | | 1,712 | | | | 56 | | | | (12 | ) | | | 1,756 | | | | 200-220 | | |
(a) During the third quarter of fiscal 2007, the company sold one On The Border restaurant to a franchisee. The company and its franchisees opened a total of 55 new restaurants during the quarter ended March 28, 2007.
(b) At the end of the third quarter of fiscal year 2007, international company-owned restaurants by brand were four Chili’s and one Macaroni Grill. International franchise restaurants by brand were 131 Chili’s and 10 Macaroni Grill’s.
FOR ADDITIONAL INFORMATION, CONTACT:
LAURA CONN
INVESTOR RELATIONS
(972) 770-5810
6820 LBJ FREEWAY
DALLAS, TEXAS 75240
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