Brinker International Reports Year-Over-Year Increase in Third Quarter Fiscal 2011 EPS

Brinker International, Inc. (NYSE: EAT) today announced results for the fiscal third quarter ended March 30, 2011.

Highlights for the third quarter of fiscal 2011 include the following:

• Earnings per diluted share, before special items, increased to $0.47 compared to $0.37 for the third quarter of fiscal 2010 (see non-GAAP reconciliation below)
• On a GAAP basis, earnings per diluted share increased to $0.45 from $0.39 in the third quarter of the prior year
• Restaurant operating margin(1) improved 150 basis points to 18.3 percent compared to the third quarter of fiscal 2010
• Total revenues increased to $717.1 million
• Customer traffic at company-owned restaurants increased 0.6%, was positive for both brands and has increased at Maggiano's for six consecutive quarters  
• Comparable restaurant sales at company-owned restaurants increased 0.1 percent consisting of a 3.4 percent increase at Maggiano's, the fifth consecutive quarterly increase, and a 0.3 percent decrease at Chili's  
• Cash flows provided by operating activities were $188.2 million and capital expenditures totaled $48.9 million for the first nine months of fiscal 2011
• The Company repurchased approximately 4.5 million shares of its common stock for $107.1 million in the third quarter resulting in a fiscal year to date total of approximately 18.0 million shares for $357.0 million    
• The Company paid a dividend of 14 cents per share

"Brinker's third quarter results demonstrate the effectiveness of our sales strategies as well as our relentless focus on strengthening our business model. Guests are responding positively to the food, service and value they're receiving at our brands, and as a result, Brinker is delivering solid progress toward our goal of doubling EPS in five years," said Doug Brooks, President and Chief Executive Officer.  

The Company's fiscal 2010 consisted of 53 weeks compared to 52 weeks for fiscal 2011.  The third quarter of fiscal 2010 and fiscal 2011 both contained 13 weeks; however, the current quarter contains a one week calendar shift compared to the prior year.  The comparable restaurant sales percentages above have not been adjusted to reflect the one week calendar shift.  Considering this shift, company-owned comparable restaurant sales were (3.1) percent for January, 1.7 percent for February and 1.7 percent for March, resulting in (0.1) percent for the quarter.  Management believes the adjusted presentation provides a useful performance comparison to the third quarter of fiscal 2010 (see adjusted comparable restaurant sales at Table 3).  

Quarterly Operating Performance

CHILI'S third quarter revenues declined slightly to $608.4 million due to small decreases in guest check average and capacity, partially offset by a slight increase in traffic. Restaurant operating margin improved compared to the prior year primarily due to favorable cost of sales and labor.  Cost of sales was favorably impacted by changes made to value offerings and restaurant labor was positively impacted by the implementation of the Team Service and food preparation initiatives which resulted in labor efficiencies.  Chili's restaurant expense also decreased as compared to prior year primarily due to lower utilities expense and a decrease in insurance expenses due to favorable claims experience, partially offset by increased advertising expense.

MAGGIANO'S third quarter revenues were $91.6 million and comparable restaurant sales increased 3.4 percent primarily driven by improved traffic.  Restaurant operating margin increased compared to prior year primarily due to improved cost of sales resulting from menu changes and sales leverage.  

ROYALTY AND FRANCHISE revenues totaled $17.1 million for the quarter, an increase of 3.6 percent over the prior year driven primarily by 20 international and seven domestic net openings.   International comparable restaurant sales increased 2.6 percent while domestic franchise comparable restaurant sales decreased 2.0 percent.  Royalty revenues are recognized based on the sales generated and reported to the company by its franchisees.  Brinker franchisees generated approximately $401.2 million in sales for the third quarter of fiscal 2011, an increase of 1.8 percent over the prior year.

Other

General and administrative expense increased $3.5 million for the quarter primarily due to higher professional fees, performance based compensation and a reduction in income related to the expiration of transitional services provided to Macaroni Grill.

The effective income tax rate increased to 27.5 percent in the current quarter as compared to 19.7 percent in the same quarter last year primarily due to the resolution of certain tax positions resulting in a positive impact in the prior year.  Excluding the impact of special items and resolved tax positions, the effective income tax rate from continuing operations decreased to 27.1 percent in the current quarter from 27.5 percent in the same quarter last year driven primarily by tax credits for workforce programs.

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