This summary is based on the third quarter fiscal 2008 earnings call conducted by Brinker International Inc. (EAT: chart) on April 22, 2008.

Management:

- President, Chief Executive Officer: Douglas H. Brooks
- Executive Vice President, Chief Financial Officer: Charles M. Sonsteby
- Vice President Operations Analysis: Guy Constant
- Vice President Investor Relations, Treasurer: Marie Kerry

Key Investors Issues

- The firm realised a loss of $38.8 million or 33 cents per share, which is a 10.8% decline from a profit of $54.7 million or 45 cents a share in the prior year.
- Revenues decreased 3.9% from $944 million in 2007 to $907.6 million.
- Cash from operations declined to $256 million.

Full Year Highlights:

- Revenues decreased 2% from $2.71 billion in the prior year to $2.67 billion.
- Net income fell 64% to $53.3 million or 51 cents a share.
- The company repurchased 9.1 million common shares and had $60 million available under the share authorizations

Third Quarter Highlights

Net loss was $38.8 million or 33 cents a share, a 10.8% decline from a profit of $54.7 million or 45 cents a share in 2007, with 16 cents of special charges representing the impact of initiatives that will lay the groundwork for new strategies.

- After-tax charges include $7.6 million of development-related costs including discontinued debt sites that the firm did not expect would achieve the required returns along with other asset impairments.
- They also include $5.6 million related to restaurant closures or lease declines that were previously disclosed and $3.3 million of severance to restructure Brinker’s restaurant support centre functions.
- Revenues decreased 3.9% from $944 million in the prior year to $907.6 million as capacity decreases to 6.7% account for the largest piece of the change with comparable restaurant sales and increased franchise revenues offsetting these declines.
- Capacity was negatively impacted by the sale of 172 company-owned restaurants to franchisees over the last 12 months, as well as 18 restaurant closures.

Comparable restaurant sales increased 1.1%, primarily driven by 3% priced and the unfavourable impact of 40 basis points through the Easter holiday trading.

- Franchise royalties increased 75% over prior year to $15.7 million due to a change in mix of company-owned to franchise restaurants supporting the financial goal diversifying portfolio risk by increasing franchise ownership and same-restaurant sales performance.
- Cost of sales increased 50 basis points to 28.9%, as the commodity increase to the quarter was approximately 160 basis points mitigated by a concentration of contracted goods in key commodities, price, and leverage from franchise revenues.
- Restaurant expense was 56.1%, a 60 basis point increase over the prior year as wage rates, supplies, maintenance, and insurance costs were the primary drivers of the increase.

Depreciation and amortization was $40 million, $1.3 million higher than last year due to the growth from new restaurants and investments in restaurants through the re-image program.

- G&A expenses were $39.6 million or 4.4%, down $2.5 million due to savings on team member related areas from evolving the corporate structure to align with the increased mix of franchised restaurants decline in future company restaurant development.
- Interest expense increased $4.4 million to $10.8 million, as a result of the $400 million term loan used to fund the company’s share repurchase program and for general corporate purposes.
- Cash flow for operations was $255.8 million, an $80.6 million decrease from the prior year due to lower adjusted earnings, reduced income taxes payable, and a timing of operational payments and receipts.

This was partially offset by a $76.4 million savings from lower capital expenditures largely due to opening 46 fewer restaurants on a year-over-year basis.

- Credit markets continue to prove challenging, resulting in a more complex process for completing sales of company-owned restaurants.
- Specifically, the firm continues to work with multiple parties on the divestiture of Macaroni Grill.
- Additionally, the company incurred $67.1 million in an after-tax, other gains and charges in discontinued operations primarily related to the breakdown of Macaroni Grill assets held for sale to the estimated fair value cost.

Operational Highlights:

- At Chili’s, excluding the impact of California, Nevada, Florida, and Arizona, the markets hardest hit by the sub-prime crisis, comparable restaurant sales improved to 3.5%.
- Chili’s has outpaced the industry benchmark as reported by Navtrac on comparable sales for the last three quarters with gap widening considerably in the most recent quarter. - The gap speaks to Chili’s ability to differentiate itself in the segment with strong core menu flavour profiles that capitalize on the iconic chili pepper.
- These menu flavours work in partnership with the advertising campaign “Pepper and Some Fun” and Chili’s re-image program to provide an atmosphere customers perceive as uniquely Chili’s.

This momentum, coupled with previously focused actions around key priorities, will be the path for sales and margin growth driving operating results and long-term value creation for shareholders.

- Business inputs by food commodities and labour continue to rise.
- The firm continues to refine its projected domestic company-owned restaurant openings and now expect to open 70 company-owned restaurants in 2008, 15 company-owned restaurants in 2009, and anticipate even fewer restaurants in 2010.
- The slowing of company-owned development is driven by a narrowed focus to emphasize the experience inside the four walls and Brinker’s ongoing promise to generate appropriate returns from any new restaurant investment.

The firm continues to move the ownership mix and will achieve the stated goal of 35% franchise-owned and 65% company-owned by the end of 2008.