Providing a thorough introduction to the world of GAAP earnings, fellow Fool Chris Cather recently pointed out that sometimes adjusted earnings can reflect a truer picture of a company's core performance. Brinker International
On a GAAP basis, third-quarter earnings surged to $0.60 per share, or $55.1 million, from breakeven a year ago. However, last year's third quarter was weighed down by a hefty $54.5 million in one-time charges, including $27 million related to a write-down of the company's interest in Big Bowl restaurants -- a chain that has since been sold. After backing out those charges, adjusted net income only rose by a modest $1 million.
Nevertheless, it was still a fairly decent quarter for Brinker. With fewer shares outstanding, adjusted earnings on a per-share basis jumped 16% to $0.59, on revenues that climbed 8.3% to crack the $1 billion mark. Those gains were made possible by solid same-store sales growth, which was higher across the board, except for a 1.1% drop at the struggling Macaroni Grill. The flagship Chili's chain, which accounts for more than half of Brinker's sales and three-fourths of its profits, paced the growth with a 4.1% improvement in comps.
Chili's results look quite appetizing compared with those of a few of its casual-dining rivals. After posting record results last year, Ruby Tuesday
Brinker has been successful in pushing along commodity increases to its customers, with menu prices rising 3.1% company-wide last month. It has also clamped down on overhead costs, as general and administrative expenses dropped by more than $6 million, or nearly a full point as a percentage of revenues. Still, the company's operating margins remain at the low end of the industry spectrum.
Now that Brinker has shed the Cozymel and Big Bowl concepts that were dragging results lower, it should be able to concentrate on expanding its remaining brands. The company is currently entertaining ideas for ways to revitalize sales at Macaroni Grill. In the meantime, it will continue to rely heavily on Chili's, which is expected to open more than 100 new locations this year. With an average of $3 million in annual unit volume -- higher than most competitors, though nowhere near Cheesecake Factory's
Here are a few more casual dining entrées to choose from:
- A Rare Opportunity
- Everybody Loves Cheesecake
- A Cautious Applebee's
- Chuck E. Cheese Collecting Tokens
Fool contributor Nathan Slaughter owns none of the companies mentioned.