This summary is based on the first quarter fiscal 2008 earnings call conducted by Brinker International Inc. (EAT: chart) on October 23, 2007.

Management:

President, CEO: Doug Brooks
EVP, CFO: Chuck Sonsteby
VP, Operations Analysis: Guy Constant
Investor Relations: Lynn Schweinfurth

Key Investors Issues

- Revenues increased 3% to $895 million as company-owned and franchise restaurants, or system restaurants increased 12%.
- The company entered into two development agreements with new or existing franchisees with commitments to build 57 restaurants over the next several years.
- The company repurchased 5 million shares for $140 million.

First Quarter Highlights

Revenues were $895.1 million, an increase of 3% from $869.3 million realised in the prior year driven by restaurant capacity growth 2.6%.

- Revenue growth was negatively impacted by 7.3% due to the sale of 97 restaurants to franchisees and other restaurant closures.
- This change is reflected in franchise revenues, which increased 33% to $14.1 million and while the soft demand by consumers continues to grab headlines, the firm drove improved trends at Chili''s by offering new, cravable products on target with the Chili''s brand promise.
- Cost of sales came in better than expected, holding even with the prior year at 27.4% of revenues despite higher prices in most commodities.
- Unfavorable commodity prices, particularly in beef, cheese and cooking oil and unfavorable product mix shifts were offset by favorable menu price increases and increased franchise revenues.

Earnings were down 21% to $37.6 million or 34 cents a share as margins were affected by unfavourable commodity prices.

- Restaurant expense increased to 56.1% compared to the prior year, driven by higher wage rates, primarily due to increased State minimum wages.
- Higher restaurant supply expenses were partially offset by decreased pre-opening costs as the firm opened 16 fewer restaurants versus the prior year and lower stock-based compensation expense.
- In addition, the sale of company restaurants to franchise partners and the ensuing royalty stream contributed a benefit to restaurant expense as a percentage of revenues.
- Depreciation and amortization was $38.5 million, a $1.7 million improvement from last year due to the required suspension of depreciation expense for restaurants held for sale to franchise partners, closed restaurants and fully depreciated assets. The benefits were partially offset by new restaurants and remodel investments.

G&A was 4.6% or down $7.2 million due to reduced stock-based compensation expense from forfeitures and the expiration of prior plans and reduced performance-based compensation expense.

- Interest expense was $12.9 million versus $6.2 million a year ago due to the use of a $400 million, one-year unsecured committed credit facility to fund the accelerated share repurchase of $297 million of common stock and for general corporate purposes.
- Cash flow from continuing operations decreased $14.7 million to $77.9 million primarily due to the timing and amount of income taxes.
- Capital expenditures for continuing operations were $15.5 million less than the prior year, due to 16 fewer restaurants being built.
- The company repurchased 5 million shares for $140 million and still has $160 million remaining under the share authorizations.

Segment Highlights:

- Sales at Chili''s included the impact of price increases of 2% and strong mix shift driven by sales of new appetizers and desserts as well as cannibalization from new Chili''s restaurants.
- Even though comparable sales are negatively impacted, overall shareholder value continues to grow because cannibalization is included in the return projections for new restaurants.
- Chili''s continues to offer great everyday value with attractive price points for high-quality fare delivered with hospitality in a comfortable setting.
- The restaurant recently rolled out its latest menu with an adjusted layout carrying bigger category pictures, new grilled rib flavors and a lunch menu on the back.

- Romano''s Macaroni Grill reported a decrease in same-restaurant sales of 4.8%, driven by a decrease in traffic and partially offset by pricing and mix.
- On The Border same-restaurant sales decreased 5.3%, driven by decreased traffic and mix and partially offset by pricing.
- The On The Border team continues to focus on improving execution through its new Mucho Gusto hospitality program which was developed to build an emotional connection to the guest, correctly pacing the desired experience and ensuring order accuracy each and every time.
- The firm anticipates successfully concluding the Macaroni Grill transaction and continues to make progress with the ongoing refranchising program.

Maggiano''s comparable store sales were up 0.5%, driven by increases in traffic and price and partially offset by a decrease in mix.

- The team continues to focus on operational excellence and menu variety for each occasion, whether it is in the dining room, the banquet room or delivery service. We are pleased traffic trends continue to improve.
- The delivery service rollout to the system has been successful, adding a new revenue layer to brand performance.

Strategic Intent:

- The firm has successfully generated growth, primarily through new company restaurant development and going forward, focus will be on building profitable sales to generate ongoing earnings growth while shifting a greater proportion of new restaurant development to the expanding franchise network.
- The portfolio strategy is improving financial returns and optimizing development opportunities throughout the United States and overseas, which is apparent with the flowthrough on top line growth.
- Additionally, system restaurant growth was an impressive 12%.
- Chili''s continues to be a high return growth vehicle for the company and franchise partners, serving more guests per restaurant than the competition, generating an enviable return on investment as the current re-image program drives incremental traffic.
- The previously announced transaction with ERJ Dining to buy 76 Chili''s restaurants in the Midwest remains on track and should be completed in the second quarter.

The company continues to invest in making hospitality a competitive advantage across the portfolio through staff selection, operational excellence, culinary development, technology improvements and new restaurant designs.