Chili's Customer Traffic Increased by 1.9 Percent and Comparable Restaurant Sales Increased 1.7 Percent

Brinker International, Inc. (NYSE: EAT) announced results for the fiscal first quarter ended Sept. 28, 2011.

Highlights for the first quarter of fiscal 2012 include the following:

• Earnings per diluted share, before special items, increased to $0.30 compared to $0.21 for the first quarter of fiscal 2011 (see non-GAAP reconciliation below)
• On a GAAP basis, earnings per diluted share increased to $0.28 from $0.21 in the first quarter of the prior year
• Total revenues increased 2.1 percent to $668.4 million
• Restaurant operating margin(1) improved 80 basis points to 15.8 percent compared to the first quarter of fiscal 2011
• Chili's customer traffic increased by 1.9 percent and comparable restaurant sales increased 1.7 percent
• Chili's customer traffic and comparable restaurant sales have increased for eight consecutive periods
• Maggiano's customer traffic increased by 2.1 percent, representing the eighth consecutive quarterly increase, and comparable restaurant sales increased 3.5 percent, representing the seventh consecutive quarterly increase
• Cash flows provided by operating activities were $30.9 million and capital expenditures totaled $27.7 million
• The company repurchased approximately 3.2 million shares of its common stock for $75.0 million in the first quarter
• The company paid a dividend of 14 cents per share

"As evidenced in Brinker's first quarter results, guests are responding positively to our core value strategies, as we achieved our third consecutive quarter of positive sales and traffic growth. This upward trend, coupled with our continued margin improvements, resulted in profitable growth for Brinker and is keeping us on track to double EPS by 2015," said Doug Brooks, President and Chief Executive Officer.  

Quarterly Operating Performance

CHILI'S first quarter revenues of $566.9 million represent a 1.6 percent increase from $557.8 million in the prior year period driven by increased guest traffic. Chili's operating margin improved compared to the prior year primarily due to successful labor savings initiatives related to food preparation procedures. Restaurant expenses were also positively impacted by sales leverage on fixed costs related to higher revenue.  Cost of sales was negatively impacted by unfavorable pricing on oils, beef and produce, partially offset by favorable pricing on poultry.

MAGGIANO'S first quarter revenues of $85.3 million increased 4.4 percent primarily driven by improved traffic. Restaurant operating margin improved compared to prior year primarily due to favorable restaurant labor and restaurant expenses.

ROYALTY AND FRANCHISE revenues totaled $16.2 million for the quarter, an increase of 5.2 percent over the prior year driven primarily by 25 international net openings since the first quarter of fiscal 2011. International comparable restaurant sales increased 7.5 percent while domestic franchise comparable restaurant sales increased 0.2 percent. Brinker franchisees generated approximately $389 million in sales(2) for the first quarter of fiscal 2012, an increase of 4.5 percent over the prior year.

"Our balanced approach of driving top line growth while improving operating margins continued to generate strong returns for our shareholders," said Guy Constant, Executive Vice President and Chief Financial Officer. "Brinker's margin improvement efforts accelerated during the first quarter as we continued to make progress towards our 400 bps target."

Other

General and administrative expense increased $2.8 million for the quarter primarily due to a decrease in income resulting from the expiration of the transition services agreements with Macaroni Grill and On The Border.

Interest expense remained flat for the quarter primarily due to lower interest rates. Interest expense included a charge of $0.4 million related to deferred financing fees associated with the revision of the company's unsecured senior credit facility executed in August 2011. This charge was lower than originally expected.

Excluding the impact of special items, the effective income tax rate increased to 30.2 percent in the current quarter from 27.9 percent in the same quarter last year driven by increased earnings for the quarter. The effective income tax rate increased to 29.8 percent in the current quarter as compared to 20.4 percent in the same quarter last year primarily due to increased earnings for the quarter, a decrease in special charges and the positive impact of resolved tax positions in the prior year.


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