Fitch Ratings Affirms 'BBB+' Rating for Brinker; Outlook Stable.Business Editors NEW YORK--(BUSINESS WIRE)--July 29, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed its 'BBB+' rating of Brinker International, Inc.'s (Brinker) senior notes. Approximately $465 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was outstanding at March 26, 2003. The Rating Outlook is Stable. The rating reflects the company's strong growth and consistent operating performance which are primarily attributable to the success of its core brand, Chili's. These factors are balanced against inconsistent results at Brinker's other concepts, increased debt levels, and the cyclical and competitive nature of the restaurant industry. Brinker's debt levels have increased significantly over the past several years leading to generally higher leverage. Adjusted leverage, as measured by total debt plus eight times rent divided by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become plus rent, increased to a five year high of 2.6 times (x) in fiscal year ended June 27, 2002 from 2.1x in fiscal 2000. Debt increased due to the acquisition of franchised locations from two large franchisees, the refinancing Refinancing An extension and/or increase in amount of existing debt. of synthetic leases Synthetic Lease An operating lease that is structured in a way so that it is not recorded as a liability on the balance sheet. Instead, it is considered to be an expense on the income statement. , increased capital expenditures and higher share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . Strong EBITDA growth has partially mitigated the impact on leverage. For the last twelve months ended March 26, 2003, adjusted leverage declined to 2.3x. Going forward, Fitch expects that Brinker will maintain its current credit metrics either by continued EBITDA growth, or by moderating share repurchases. Capital expenditures are expected to grow by about 10% per year and gross share repurchases should level off at about $80 million annually. Internally generated funds are anticipated to meet these needs. Brinker may also generate additional cash flow by refranchising some of the restaurants it acquired from franchisees. |
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