Delaware | 1-10275 | 75-1914582 | ||
(State of Incorporation) | (Commission File Number) | (IRS Employment Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
BRINKER INTERNATIONAL, INC. | |||
Dated: August 10, 2017 | By: | /s/ Wyman T. Roberts | |
Wyman T. Roberts, | |||
President and Chief Executive Officer |
• | For fiscal 2017, the fourth quarter and fiscal-year periods included 13 weeks and 52 weeks, respectively. For fiscal 2016, the fourth quarter and fiscal-year periods included 14 weeks and 53 weeks, respectively |
• | On a GAAP basis, earnings per diluted share in the fourth quarter of fiscal 2017 decreased 7.3 percent to $1.02 compared to $1.10 for the fourth quarter of fiscal 20161. On a GAAP basis, earnings per diluted share in fiscal 2017 decreased 14.0 percent to $2.94 compared to $3.42 for fiscal 20161 |
• | Earnings per diluted share, excluding special items, in the fourth quarter of fiscal 2017 decreased 12.1 percent to $1.09 compared to $1.24 for the fourth quarter of fiscal 20161. Earnings per diluted share, excluding special items, in fiscal 2017 decreased 9.9 percent to $3.20 compared to $3.55 for fiscal 20161 (see non-GAAP reconciliation below) |
• | Brinker International's total revenues in the fourth quarter of fiscal 2017 decreased 8.1 percent to $810.7 million compared to the fourth quarter of fiscal 2016, and company sales in the fourth quarter of fiscal 2017 decreased 8.1 percent to $785.8 million compared to the fourth quarter of fiscal 2016, primarily attributable to one less operating week in the fourth quarter of 2017 |
• | Chili’s company-owned comparable restaurant sales2 in the fourth quarter of fiscal 2017 decreased 2.2 percent compared to the fourth quarter of fiscal 2016. Chili's U.S. franchise comparable restaurant sales2 in the fourth quarter of fiscal 2017 decreased 0.2 percent compared to the fourth quarter of fiscal 2016 |
• | Maggiano’s comparable restaurant sales2 in the fourth quarter of fiscal 2017 increased 0.5 percent compared to the fourth quarter of fiscal 2016 |
• | Chili's international franchise comparable restaurant sales2 in the fourth quarter of fiscal 2017 decreased 4.2 percent compared to the fourth quarter of fiscal 2016 |
• | Operating income, as a percent of total revenues, declined approximately 140 basis points to 9.9 percent in the fourth quarter of fiscal 2017 compared to 11.3 percent for the fourth quarter of fiscal 2016 |
• | Restaurant operating margin, as a percent of company sales, declined approximately 130 basis points to 17.0 percent in the fourth quarter of fiscal 2017 compared to 18.3 percent for the fourth quarter of fiscal 2016 (see non-GAAP reconciliation below) |
• | For fiscal 2017, cash flows provided by operating activities were $312.9 million and capital expenditures totaled $102.6 million. Free cash flow was $210.3 million (see non-GAAP reconciliation below) |
• | The company's Board of Directors authorized an additional $250 million in share repurchases which brings the total available authority to approximately $365 million |
• | The company's Board of Directors approved a quarterly dividend of $0.38 per share on the common stock of the company, representing a 12 percent increase over the prior year. The dividend will be payable Sept. 28, 2017 to shareholders of record as of Sept. 8, 2017 |
Q4 17 | Q4 16 | FY 17 | FY 16 | |||||||||
Brinker International | (1.8 | ) | (1.8 | ) | (2.1 | ) | (2.4 | ) | ||||
Chili’s Company-Owned | ||||||||||||
Comparable Restaurant Sales | (2.2 | ) | (1.8 | ) | (2.3 | ) | (2.6 | ) | ||||
Pricing Impact | 2.9 | 1.0 | 1.8 | 1.0 | ||||||||
Mix-Shift2 | 1.4 | 1.3 | 1.7 | 0.1 | ||||||||
Traffic | (6.5 | ) | (4.1 | ) | (5.8 | ) | (3.7 | ) | ||||
Maggiano’s | ||||||||||||
Comparable Restaurant Sales | 0.5 | (1.7 | ) | (0.6 | ) | (1.3 | ) | |||||
Pricing Impact | 1.0 | 1.8 | 2.1 | 1.9 | ||||||||
Mix-Shift2 | 1.6 | (2.5 | ) | 0.3 | (1.6 | ) | ||||||
Traffic | (2.1 | ) | (1.0 | ) | (3.0 | ) | (1.6 | ) | ||||
Chili's Franchise3 | (1.7 | ) | (3.4 | ) | (2.1 | ) | (0.7 | ) | ||||
U.S. Comparable Restaurant Sales | (0.2 | ) | (2.1 | ) | (1.1 | ) | (1.2 | ) | ||||
International Comparable Restaurant Sales | (4.2 | ) | (5.5 | ) | (3.7 | ) | 0.2 | |||||
Chili's Domestic4 | (1.7 | ) | (1.8 | ) | (2.0 | ) | (2.2 | ) | ||||
System-wide5 | (1.8 | ) | (2.2 | ) | (2.1 | ) | (1.9 | ) |
1 | Comparable restaurant sales includes all restaurants that have been in operation for more than 18 months. Amounts are calculated based on comparable 13 weeks in each fiscal quarter and 52 weeks in each fiscal year. | |
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 | Revenues generated by franchisees are not included in revenues on the consolidated statements of comprehensive income; however, we generate royalty revenue 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 Domestic comparable restaurant sales percentages are derived from sales generated by company-owned and franchise operated Chili's restaurants in the United States. | |
5 | 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. |
• | Revenues are expected to be up approximately one half percent to 1.5 percent |
• | Comparable restaurant sales are expected to be flat to up 1.0 percent |
• | Restaurant operating margin is expected to be down approximately 25 to 40 basis points year-over-year |
• | Depreciation expense is expected to be $2 to $3 million lower reflecting the impact of fully-depreciated assets coupled with lower capital expenditures. Capital expenditures are expected to be $105 to $115 million |
• | General and administrative expense is expected to be $5 to $6 million higher on a dollar basis due to planning incentive compensation at target |
• | Interest expense is expected to increase $8 to $9 million due to a higher debt balance and a higher anticipated average interest rate in fiscal 2018 |
• | Excluding the impact of special items, the effective income tax rate is projected to be approximately 27 to 29 percent |
• | EBITDA is expected to be $420 to $430 million |
• | Free cash flow is expected to be $205 to $215 million |
• | Diluted weighted average shares outstanding is expected to be 47 to 49 million |
Q4 17 | EPS Q4 17 | Q4 161 | EPS Q4 161 | |||||||||
Net Income | 50.6 | 1.02 | 62.2 | 1.10 | ||||||||
Special items2 | 7.2 | 0.14 | 11.7 | 0.21 | ||||||||
Income tax effect related to special items | (2.6 | ) | (0.05 | ) | (4.4 | ) | (0.07 | ) | ||||
Special items, net of taxes | 4.6 | 0.09 | 7.3 | 0.14 | ||||||||
Adjustment for tax items3 | (1.1 | ) | (0.02 | ) | 0.2 | — | ||||||
Net Income excluding special items | 54.1 | 1.09 | 69.7 | 1.24 |
FY 17 | EPS FY 17 | FY 161 | EPS FY 161 | |||||||||||||
Net Income | $ | 150.8 | $ | 2.94 | $ | 200.6 | $ | 3.42 | ||||||||
Special items2 | 22.7 | 0.44 | 17.2 | 0.29 | ||||||||||||
Income tax effect related to special items | (8.4 | ) | (0.16 | ) | (6.5 | ) | (0.11 | ) | ||||||||
Special items, net of taxes | 14.3 | 0.28 | 10.7 | 0.18 | ||||||||||||
Adjustment for tax items3 | (1.1 | ) | (0.02 | ) | (3.2 | ) | (0.05 | ) | ||||||||
Net Income excluding special items | $ | 164.0 | $ | 3.20 | $ | 208.1 | $ | 3.55 |
1 | Prior-year amounts are revised due to the correction of an immaterial error. Refer to disclosures in tables 6 and 7 in this press release for further information. | |
2 | See footnote "b" to the consolidated statements of comprehensive income for additional details on the composition of these amounts. | |
3 | Amounts resulting from the favorable resolution of liabilities established for uncertain tax positions. |
Q4F17 | Q4F16 | |||||
Operating income - GAAP | 80.3 | 99.3 | ||||
Operating income as a percent of total revenues | 9.9 | % | 11.3 | % | ||
Operating income | 80.3 | 99.3 | ||||
Less: Franchise and other revenues | (24.8 | ) | (26.3 | ) | ||
Plus: Depreciation and amortization | 38.9 | 39.0 | ||||
General and administrative | 30.8 | 32.5 | ||||
Other gains and charges | 8.7 | 11.7 | ||||
Restaurant operating margin - non-GAAP | 133.9 | 156.2 | ||||
Restaurant operating margin as a percent of company sales | 17.0 | % | 18.3 | % |
Fifty-Two Week Period Ended June 28, 2017 | |||
Cash flows provided by operating activities - GAAP | 312.9 | ||
Capital expenditures | (102.6 | ) | |
Free cash flow - non-GAAP | 210.3 |
Fifty-Three Week Period Ended June 29, 2016 | Fifty-Two Week Period Ended June 24, 2015 | |||||||||||||||
As Reported | As Revised | As Reported | As Revised | |||||||||||||
Income before provision for income taxes | $ | 286,387 | $ | 286,387 | $ | 284,277 | 284,277 | |||||||||
Provision for income taxes | 85,642 | 85,767 | 87,583 | 89,618 | ||||||||||||
Net income | $ | 200,745 | $ | 200,620 | $ | 196,694 | $ | 194,659 | ||||||||
Basic net income per share | $ | 3.47 | $ | 3.47 | $ | 3.12 | $ | 3.09 | ||||||||
Diluted net income per share | $ | 3.42 | $ | 3.42 | $ | 3.05 | $ | 3.02 | ||||||||
Basic weighted average shares outstanding | 57,895 | 57,895 | 63,072 | 63,072 | ||||||||||||
Diluted weighted average shares outstanding | 58,684 | 58,684 | 64,404 | 64,404 | ||||||||||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustment | $ | (2,964 | ) | $ | (2,964 | ) | $ | (7,690 | ) | $ | (7,690 | ) | ||||
Other comprehensive loss | (2,964 | ) | (2,964 | ) | (7,690 | ) | (7,690 | ) | ||||||||
Comprehensive income | $ | 197,781 | $ | 197,656 | $ | 189,004 | $ | 186,969 |
June 29, 2016 | ||||||||
As Reported | As Revised | |||||||
Accounts receivable, net | $ | 43,944 | $ | 45,612 | ||||
Current assets | 176,774 | 178,442 | ||||||
Deferred income taxes, net | 27,003 | 14,325 | ||||||
Total other assets | 249,534 | 236,856 | ||||||
Total assets | 1,469,460 | 1,458,450 | ||||||
Income taxes payable | 18,814 | 22,022 | ||||||
Other current liabilities | 428,880 | 432,088 | ||||||
Other liabilities | 139,423 | 137,682 | ||||||
Total shareholders’ deficit | (213,099 | ) | (225,576 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,469,460 | $ | 1,458,450 |
Thirteen Week Period Ended | Fourteen Week Period Ended (revised) | Fifty-Two Week Period Ended | Fifty-Three Week Period Ended (revised) | |||||||||||||
June 28, 2017 | June 29, 2016 | June 28, 2017 | June 29, 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Company sales | $ | 785,836 | $ | 855,361 | $ | 3,062,579 | $ | 3,166,659 | ||||||||
Franchise and other revenues (a) | 24,825 | 26,320 | 88,258 | 90,830 | ||||||||||||
Total revenues | 810,661 | 881,681 | 3,150,837 | 3,257,489 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Company restaurants (excluding depreciation and amortization) | ||||||||||||||||
Cost of sales | 203,579 | 224,440 | 791,321 | 840,204 | ||||||||||||
Restaurant labor | 257,051 | 279,131 | 1,017,945 | 1,036,005 | ||||||||||||
Restaurant expenses | 191,364 | 195,614 | 773,510 | 762,663 | ||||||||||||
Company restaurant expenses | 651,994 | 699,185 | 2,582,776 | 2,638,872 | ||||||||||||
Depreciation and amortization | 38,883 | 39,033 | 156,409 | 156,368 | ||||||||||||
General and administrative | 30,805 | 32,403 | 132,819 | 127,593 | ||||||||||||
Other gains and charges (b) | 8,671 | 11,726 | 22,655 | 17,180 | ||||||||||||
Total operating costs and expenses | 730,353 | 782,347 | 2,894,659 | 2,940,013 | ||||||||||||
Operating income | 80,308 | 99,334 | 256,178 | 317,476 | ||||||||||||
Interest expense | 13,439 | 8,497 | 49,547 | 32,574 | ||||||||||||
Other, net | (793 | ) | (375 | ) | (1,877 | ) | (1,485 | ) | ||||||||
Income before provision for income taxes | 67,662 | 91,212 | 208,508 | 286,387 | ||||||||||||
Provision for income taxes | 17,078 | 28,995 | 57,685 | 85,767 | ||||||||||||
Net income | $ | 50,584 | $ | 62,217 | $ | 150,823 | $ | 200,620 | ||||||||
Basic net income per share | $ | 1.03 | $ | 1.12 | $ | 2.98 | $ | 3.47 | ||||||||
Diluted net income per share | $ | 1.02 | $ | 1.10 | $ | 2.94 | $ | 3.42 | ||||||||
Basic weighted average shares outstanding | 48,917 | 55,657 | 50,638 | 57,895 | ||||||||||||
Diluted weighted average shares outstanding | 49,435 | 56,394 | 51,250 | 58,684 | ||||||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment (c) | $ | 1,084 | $ | 330 | $ | (327 | ) | $ | (2,964 | ) | ||||||
Other comprehensive income (loss) | 1,084 | 330 | (327 | ) | (2,964 | ) | ||||||||||
Comprehensive income | $ | 51,668 | $ | 62,547 | $ | 150,496 | $ | 197,656 |
(a) | Franchise and other revenues primarily includes royalties, development fees, franchise fees, Maggiano's banquet service charge income, gift card breakage and discounts, digital entertainment revenue, Chili's retail food product royalties and delivery fee income. |
(b) | Other gains and charges include: |
Thirteen Week Period Ended | Fourteen Week Period Ended | Fifty-Two Week Period Ended | Fifty-Three Week Period Ended | ||||||||||||
June 28, 2017 | June 29, 2016 | June 28, 2017 | June 29, 2016 | ||||||||||||
Restaurant impairment charges | $ | 3,338 | $ | 6,714 | $ | 5,190 | $ | 10,651 | |||||||
Lease guarantee charges | 1,089 | — | 1,089 | — | |||||||||||
Accelerated depreciation | 644 | — | 1,988 | — | |||||||||||
Restaurant closure charges | 463 | 3,691 | 4,084 | 3,780 | |||||||||||
Severance and other benefits | 369 | 936 | 6,591 | 3,304 | |||||||||||
Information technology restructuring | 39 | — | 2,739 | — | |||||||||||
Gain on the sale of assets, net | (35 | ) | — | (2,659 | ) | (2,858 | ) | ||||||||
Impairment of investment | — | — | — | 1,000 | |||||||||||
Impairment of intangible assets | — | 392 | — | 392 | |||||||||||
Litigation | — | (1,159 | ) | — | (3,191 | ) | |||||||||
Acquisition costs | — | — | — | 700 | |||||||||||
Other | 2,764 | 1,152 | 3,633 | 3,402 | |||||||||||
$ | 8,671 | $ | 11,726 | $ | 22,655 | $ | 17,180 |
(c) | The foreign currency translation adjustment included in comprehensive income on the consolidated statements of comprehensive income represents the unrealized impact of translating the financial statements of the Canadian restaurants and the Mexican joint venture 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. |
June 28, 2017 | June 29, 2016 (revised) | |||||||
ASSETS | ||||||||
Current assets | $ | 154,392 | $ | 178,442 | ||||
Net property and equipment (a) | 1,000,614 | 1,043,152 | ||||||
Total other assets | 258,694 | 236,856 | ||||||
Total assets | $ | 1,413,700 | $ | 1,458,450 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current installments of long-term debt | $ | 9,649 | $ | 3,563 | ||||
Other current liabilities | 436,779 | 432,088 | ||||||
Long-term debt, less current installments | 1,319,829 | 1,110,693 | ||||||
Other liabilities | 141,124 | 137,682 | ||||||
Total shareholders’ deficit | (493,681 | ) | (225,576 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,413,700 | $ | 1,458,450 |
(a) | At June 28, 2017, the company owned the land and buildings for 190 of the 1,003 company-owned restaurants. The net book values of the land totaled $143.2 million and the buildings totaled $97.3 million associated with these restaurants. |
Fifty-Two Week Period Ended | Fifty-Three Week Period Ended (revised) | |||||||
June 28, 2017 | June 29, 2016 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 150,823 | $ | 200,620 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 156,409 | 156,368 | ||||||
Stock-based compensation | 14,568 | 15,159 | ||||||
Restructure charges and other impairments | 14,412 | 17,445 | ||||||
Net (gain) loss on disposal of assets | (377 | ) | 87 | |||||
Changes in assets and liabilities | (22,949 | ) | 5,021 | |||||
Net cash provided by operating activities | 312,886 | 394,700 | ||||||
Cash Flows from Investing Activities: | ||||||||
Payments for property and equipment | (102,573 | ) | (112,788 | ) | ||||
Proceeds from sale of assets | 3,157 | 4,256 | ||||||
Payment for business acquisition, net of cash acquired | — | (105,577 | ) | |||||
Net cash used in investing activities | (99,416 | ) | (214,109 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of long-term debt | 350,000 | — | ||||||
Purchases of treasury stock | (370,877 | ) | (284,905 | ) | ||||
Payments on revolving credit facility | (388,000 | ) | (110,000 | ) | ||||
Borrowings on revolving credit facility | 250,000 | 256,500 | ||||||
Payments of dividends | (70,771 | ) | (74,066 | ) | ||||
Payments for debt issuance costs | (10,216 | ) | — | |||||
Proceeds from issuances of treasury stock | 5,621 | 6,147 | ||||||
Payments on long-term debt | (3,832 | ) | (3,402 | ) | ||||
Excess tax benefits from stock-based compensation | 2,223 | 5,460 | ||||||
Net cash used in financing activities | (235,852 | ) | (204,266 | ) | ||||
Net change in cash and cash equivalents | (22,382 | ) | (23,675 | ) | ||||
Cash and cash equivalents at beginning of year | 31,446 | 55,121 | ||||||
Cash and cash equivalents at end of year | $ | 9,064 | $ | 31,446 |
Fourth Quarter Openings Fiscal 2017 | Total Restaurants June 28, 2017 | Openings Fiscal 2017 | Projected Openings Fiscal 2018 | |||||||||
Company-owned restaurants: | ||||||||||||
Chili’s domestic | 3 | 937 | 7 | 5-6 | ||||||||
Chili’s international | — | 14 | 1 | — | ||||||||
Maggiano’s | — | 52 | 2 | 1 | ||||||||
Total company-owned | 3 | 1,003 | 10 | 6-7 | ||||||||
Franchise restaurants: | ||||||||||||
Chili’s domestic | 1 | 315 | 6 | 6-8 | ||||||||
Chili's international | 14 | 356 | 30 | 38-43 | ||||||||
Total franchise | 15 | 671 | 36 | 44-51 | ||||||||
Total restaurants: | ||||||||||||
Chili’s domestic | 4 | 1,252 | 13 | 11-14 | ||||||||
Chili's international | 14 | 370 | 31 | 38-43 | ||||||||
Maggiano’s | — | 52 | 2 | 1 | ||||||||
Grand total | 18 | 1,674 | 46 | 50-58 |
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