Brinker International reports fiscal Q1 net earnings of US$29.2M, up 4.7% from year-ago period; revenue flat at US$683.9M

Nevin Barich

DALLAS , October 23, 2013 (press release) – Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal first quarter ended Sept. 25, 2013.

Highlights include the following:

Earnings per diluted share, excluding special items, increased 16.2 percent to $0.43 compared to $0.37 for the first quarter of fiscal 2013 (see non-GAAP reconciliation below)

On a GAAP basis, earnings per diluted share increased 16.7 percent to $0.42 compared to $0.36 for the first quarter of fiscal 2013

Brinker's operating income, excluding special items,1 as a percentage of total revenues improved 40 basis points from 6.9 percent to 7.3 percent driven by reduced general and administrative expenses in addition to improved restaurant operating margin2

Chili's domestic comparable restaurant sales3 decreased 1.9 percent for the first quarter consisting of a 1.6 percent decrease for company-owned restaurants and a 2.6 percent decrease for franchised restaurants. Chili's international franchise comparable restaurant sales increased 2.7 percent

Maggiano's comparable restaurant sales increased 0.6 percent, representing the 15th consecutive quarterly increase

For the first three months of fiscal 2014, cash flows provided by operating activities were $55.4 million and capital expenditures totaled $29.8 million

The company repurchased approximately 1.6 million shares of its common stock for $66.3 million in the first quarter

The company paid a dividend of 20 cents per share in the first quarter, an increase of 25 percent over the prior year first quarter

"Our ability to continue to deliver double-digit earnings growth, even in a softer sales environment, is a testament to the strength of Brinker's long-term strategy," said Wyman Roberts, Chief Executive Officer and President.

1 Operating income, excluding special items, is defined as Operating income excluding Other gains and charges.

2 Restaurant operating margin is defined as Company sales less Cost of sales, Restaurant labor and Restaurant expenses.

3 Chili's domestic comparable restaurant sales is defined as comparable restaurant sales generated from company-owned and franchise operated Chili's restaurants in the United States.

Quarterly Operating Performance

CHILI'S first quarter company sales increased slightly to $581.6 million from $581.3 million in the prior year primarily due to the acquisition of 11 restaurants in Canada, partially offset by a decrease in comparable restaurant sales due to traffic declines. As compared to the prior year, Chili's operating margin remained flat. Cost of sales was favorably impacted by mix changes related to the introduction of new menu items, improved waste control and menu pricing, partially offset by unfavorable commodity pricing primarily related to beef and poultry. Restaurant labor was positively impacted by improved labor productivity resulting from the installation of new kitchen equipment, partially offset by increased health insurance expenses related to the severity of claims. Restaurant expense was negatively impacted by higher advertising accruals, workers' compensation insurance expenses and costs related to new restaurant development.

MAGGIANO'S first quarter company sales of $82.9 million increased 0.6 percent primarily driven by favorable mix and menu pricing. As compared to the prior year, Maggiano's restaurant operating margin was negatively impacted by training costs associated with the installation of a new point of sale system, workers' compensation insurance expenses, expenses related to new restaurant development and higher direct marketing expenses. Cost of sales was positively impacted by favorable commodity pricing on seafood and meat as well as increased menu pricing, partially offset by unfavorable mix changes.

FRANCHISE AND OTHER revenues totaled $19.4 million for the quarter, a decrease of 2.0 percent compared to $19.8 million in the prior year driven primarily by lower domestic royalty income. International comparable restaurant sales increased 2.7 percent, while U.S. franchise comparable restaurant sales decreased 2.6 percent. Brinker franchisees generated approximately $389 million in sales1 for the first quarter of fiscal 2014.

1 Royalty revenues are recognized based on the sales generated and reported to the company by franchisees.

Other

Depreciation and amortization expense increased $0.5 million for the quarter primarily due to investments in the Chili's reimage program, kitchen equipment, and software as well as the acquisition of 11 restaurants in Canada, partially offset by an increase in fully depreciated assets.

General and administrative expense decreased $2.9 million primarily due to lower stock-based and other compensation costs and a decrease in professional fees.
Excluding the impact of special items, the effective income tax rate increased to 31.6 percent in the current quarter compared to 31.2 percent in the prior year primarily due to increased earnings and lower tax credits.

Non-GAAP Reconciliation

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. Special items in the first quarter of fiscal 2014 consist primarily of charges associated with closed restaurants.

Guidance Policy

Brinker provides annual guidance as it relates to comparable restaurant sales, earnings per diluted share, and other key line items in the income statement and will only provide updates if there is a material change versus the original guidance. Consistent with prior practice, management will not discuss intra-period sales or other key operating results not yet reported as the limited data may not accurately reflect the final results of the period or quarter referenced.

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 the Brinker website (www.brinker.com) at 9 a.m. CDT today (Oct. 23). 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 website until the end of the day Nov. 20, 2013.

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 the Brinker website under the Financial Information section of the Investor tab.

Forward Calendar

SEC Form 10-Q for first quarter fiscal 2014 filing on or before Nov. 4, 2013; and

Second quarter earnings release, before market opens, Jan. 22, 2014.

About Brinker

Brinker International, Inc. is one of the world's leading casual dining restaurant companies. Founded in 1975 and based in Dallas, Texas, as of Sept. 25, 2013, Brinker owned, operated, or franchised 1,596 restaurants under the names Chili's® Grill & Bar (1,552 restaurants) and Maggiano's Little Italy® (44 restaurants).

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