Brinker International Inc. (EAT), which operates Chili’s Grill & Bar and Maggiano’s Little Italy restaurants, raised its share buyback program by an additional $325 million.
Management plans to continue to repurchase shares with the proceeds stemming from the On The Border divestiture on June 2010, as well as with excess free cash flow in fiscal 2011. On March 26, 2010, Brinker’s board of directors authorized an additional $250 million of share repurchases.
During the first quarter of 2011, the company bought back 5.3 million shares at an average price of $17.50, followed by an additional 4.3 million shares by the end of the quarter at an average price of $19.30. As of September 29, 2010, approximately $197 million was available under current share repurchase authorizations.
Dallas-based Brinker also declared a quarterly dividend of 14 cents per share to be paid on December 30, 2010, to stockholders of record on December 10, 2010. The company increased its quarterly dividend by 27% to 14 cents per share on March 26, 2010, with an intention to boost shareholder value.
Management remains committed to increase shareholder value through the payment of quarterly dividends and ongoing share repurchases.
At the end of first quarter, the company had cash and cash equivalents of $215.1 million. The company also reduced its long-term debt by $5.5 million sequentially to $519.0 million. We believe the company has a strong cash position and the ability to provide a sound value to its shareholders.
One of company’s peers, Denny’s Corporation (DENN), has also announced its plan to repurchase up to 3.0% or approximately 3 million of its common stock as of September 29, 2010. The board of directors approved the plan to repurchase shares from the open market or private transactions by December 31, 2011.
We appreciate Brinker’s efforts to consistently enhance shareholder returns, even in times of an economic downturn.
We have a Zacks #3 Rank (short-term Hold recommendation) on the stock. Our long-term recommendation for the stock also remains in the middle of the road at Neutral.
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