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Brinker International Announces Fourth Quarter Fiscal 2008 Results and Provides Fiscal 2009 Outlook

August 5, 2008

DALLAS, Aug. 5 /PRNewswire-FirstCall/ — Brinker International, Inc. announced fiscal 2008 fourth quarter earnings per diluted share decreased to $0.41 from $0.71 in the prior year. Before special items, earnings per diluted share decreased to $0.50 from $0.57 in the prior year (reconciliation included in Table 3). For the full-year fiscal 2008, earnings per diluted share decreased to $0.91 from $1.85 in the prior year. Before special items, earnings per diluted share decreased to $1.75 from $1.76 in the prior year (reconciliation included in Table 4).

In the first quarter of fiscal 2008, the company announced its intention to sell Romano’s Macaroni Grill and began presenting results from Macaroni Grill operations as discontinued operations in its financial statements. Brinker is in negotiations to sell a majority interest in the brand. As a result, accounting principles require that the results of Macaroni Grill be reclassified into continuing operations at this time; therefore, the company’s results for the fourth quarter and full-year of fiscal 2008 and 2007 reflect the inclusion of the brand. The company expects to finalize the negotiations prior to the filing of its Form 10-K and to record an additional pre-tax impairment in its fiscal 2008 results ranging from $45 to $60 million. The information presented below includes Macaroni Grill unless otherwise noted. In certain instances, the company believes it is more useful to the reader to provide information excluding the impact of Macaroni Grill in order to gain insight into the company’s ongoing operations. The company has also included a reconciliation of fourth quarter and year-to-date results excluding Macaroni Grill in the attached financial statements.

For the fourth quarter of fiscal 2008, earnings per diluted share before special items and excluding Macaroni Grill decreased to $0.42 from $0.49 in the prior year (reconciliation included in Table 3). For the full-year fiscal 2008, earnings per diluted share before special items and excluding Macaroni Grill decreased to $1.41 from $1.49 in prior year (reconciliation included in Table 4).

   Highlights for the fiscal year 2008:   -- Brinker, excluding Macaroni Grill, experienced a 0.3 percent increase      in comparable restaurant sales, driven by positive sales at Chili's in      three of the four quarters;   -- Introduced successful menu items across our brands as a result of our      focus on food and beverage excellence, including Honey Chipotle Chicken      Crispers and updates on the classic Big Mouth Burger at Chili's, Border      Smart selections at On the Border, and award-winning Little Italy      favorites at Maggiano's;   -- Innovated ToGo at Chili's through developments in technology and      processes with positive results and plans to expand into fiscal year      2009;   -- Re-imaged 73 Chili's restaurants, resulting in mid-single digit      increases in sales, with plans to continue our reimage program in      fiscal year 2009 at a lower level of investment per restaurant;   -- Experienced significant growth in favorable guest feedback across the      brands as a result of the company's focus on both hospitality and food      and beverage excellence;   -- Sold 76 Chili's restaurants to our franchisee, ERJ Dining IV, LLC, with      a commitment to develop an additional 49 new Chili's restaurants;   -- Increased royalty revenues from franchisees by approximately 60%      percent;   -- Internationally, opened 32 restaurants, including eight under the      company's joint investment with CMR, SAB de CV to develop 50 Chili's      and Maggiano's restaurants in Mexico, and entered into 10 additional      development agreements with franchisees with commitments to build 56      restaurants;   -- Domestically, opened 70 company-owned restaurants (26 net of closures)      and 43 franchised restaurants and entered into three development      agreements with franchisees, with commitments to build 77 restaurants;   -- Increased quarterly dividend by 22 percent to $0.11 per share and paid      out $42.9 million in dividends; and   -- Repurchased 9.1 million shares of our common stock for $240.3 million.    

“Our brands are responding to the difficult operating environment with a disciplined focus on delivering an outstanding dining experience for our guests’ investment of money and time,” said Doug Brooks, Chairman and CEO. “We are driving this strategy with flavorful new menu offerings, updated restaurant atmosphere and guest-focused training for all positions. Our guests’ response to these efforts has been very favorable, as evidenced by the fact that Chili’s has outperformed the casual dining industry benchmark in terms of sales and traffic for four consecutive quarters.”

Quarterly Revenues

Brinker reported revenues for the 13-week period of $1,073.6 million, a decrease of 6.1 percent compared with $1,143.0 million reported for the same period of fiscal 2007. The company experienced a 1.0 percent increase in comparable restaurant sales (see Table 1) in the fourth quarter of fiscal 2008 driven by an increase at Chili’s of 3.4 percent. Revenues were negatively impacted by a net decline in capacity of 9.3 percent due to sales of 171 restaurants to franchisees and 44 restaurant closures (27 of which are Macaroni Grill). Royalty revenues from franchisees increased 67.3 percent to $16.9 million from $10.1 million in the prior year.

   Table 1: Q4 comparable restaurant sales   Q4 08 and Q4 07, company and four reported brands; percentage                                 Q4 08       Q4 07       Q4 08                            Comparable  Comparable    Pricing      Q4 08                               Sales       Sales       Impact    Mix-Shift   Brinker Excluding    Macaroni Grill              2.3        (1.9)         4.3      (0.2)    Brinker International        1.0        (2.0)         4.0      (0.1)     Chili's                    3.4        (1.6)         4.6      (0.3)     On The Border             (2.3)       (4.7)         3.8       1.1     Maggiano's                (0.5)       (1.3)         3.1      (0.8)     Macaroni Grill            (5.7)       (2.1)         2.5       0.4       Table 2:  FY comparable restaurant sales    FY 08 and FY 07, company and four reported brands; percentage                                 FY 08       FY 07      FY 08                            Comparable  Comparable    Pricing      FY 08                               Sales       Sales      Impact     Mix-Shift   Brinker Excluding    Macaroni Grill              0.3        (2.5)        3.0        0.4    Brinker International       (0.5)       (2.7)        2.9        0.5     Chili's                    0.8        (2.4)        3.1        0.8     On The Border             (3.3)       (4.1)        2.5       (0.2)     Maggiano's                 0.4        (1.7)        2.8       (1.9)     Macaroni Grill            (4.4)       (3.2)        2.2        1.1     Quarterly Operating Performance  

Cost of sales, as a percent of revenues, increased from 27.9 percent in the prior year to 28.6 percent in the fourth quarter of fiscal 2008. During the quarter, cost of sales was negatively impacted by unfavorable commodity prices, primarily beef, ribs, chicken and dairy products, and unfavorable product mix shifts related to new menu items, partially offset by favorable menu price changes.

Restaurant expenses, as a percent of revenues, increased to 55.8 percent from 54.9 percent in the prior year primarily driven by increased labor expenses due to increased wage rates and training at the restaurants, restaurant supply costs and repair and maintenance expenses, partially offset by lower pre-opening expenses.

Depreciation and amortization decreased $4.8 million primarily driven by the classification of assets held for sale related to Macaroni Grill and restaurant closures, partially offset by additional depreciation on remodels and new restaurants.

Compared to the prior year, general and administrative expense decreased $8.1 million for the quarter due to reduced salary and team member related expenses resulting from the company’s efforts to evolve its corporate structure to align with the increased mix of franchise restaurants and the expected decline in future company-owned restaurant development. In addition, the company incurred lower stock and performance-based compensation expenses as compared to the prior year.

Other gains and charges resulted in a charge of $8.1 million in the fourth quarter of fiscal 2008 primarily due to long-lived asset impairments and lease termination charges.

Interest expense decreased $2.0 million primarily due to lower interest rates, partially offset by increased average borrowings as compared to the same quarter last year.

The effective income tax rate increased to 33.8 percent for the current quarter as compared to 21.7 percent for the same quarter last year. The increase in the tax rate was primarily due to a cumulative adjustment in the fourth quarter of fiscal year 2008 related to taxes for prior years as well as the favorable settlement of certain tax audits and benefits from state income tax planning in the fourth quarter of fiscal year 2007.

Cash Flow and Capital Allocation

Cash flow from operations for fiscal year 2008 decreased to approximately $361.5 million compared to $485.0 million in the prior year due to lower income (adjusted for non-cash items) driven by incremental margin pressures and the sale of 171 company-owned restaurants to franchisees as well as the timing of operational payments and receipts.

Capital expenditures for fiscal year 2008 totaled $270.4 million, a reduction of $160.1 million compared to the prior year, primarily due to a decrease in new restaurants developed by the company. The company repurchased 9.1 million common shares for fiscal year 2008. At the end of the year, approximately $60 million remained available under the company’s share authorizations. Diluted weighted average shares outstanding for the fiscal year declined over 15 percent to 104.9 million from 124.1 million at the end of fiscal year 2007.

   Special Items   Table 3: Reconciliation of net income, before special items   Q4 08 and Q4 07; $ millions and $ per diluted share after-tax                                                    EPS                EPS   Item                                  Q4 08   Q4 08    Q4 07     Q4 07   Net Income                             42.6    0.41     83.6      0.71     Other (Gains) and Charges              5.1    0.05    (11.0)    (0.09)     Tax Expense (Benefit)                  3.7    0.04     (5.4)    (0.05)   Net Income before Special Items        51.4    0.50     67.2      0.57    Macaroni Grill before Special     Items                                (8.2)  (0.08)    (9.1)    (0.08)   Adjusted Net Income before    Special Items                         43.2    0.42     58.1      0.49      Table 4: Reconciliation of net income, before special items   FY 08 and FY 07; $ millions and $ per diluted share after-tax                                                     EPS               EPS   Item                                  FY 08    FY 08   FY 07     FY 07   Net Income                             95.9    0.91     230.0     1.85     Other (Gains) and Charges             83.9    0.80     (5.6)    (0.05)     Tax Expense (Benefit)                  3.7    0.04     (5.4)    (0.04)   Net Income before Special Items       183.5    1.75    219.0      1.76    Macaroni Grill before Special     Items                               (35.2)  (0.34)   (34.1)    (0.27)   Adjusted Net Income before    Special Items                        148.3    1.41    184.9      1.49      Fiscal 2009 Outlook  

In fiscal 2009, the company continues to focus on executing its strategic priorities which will allow for sustainable growth in a variety of economic environments. The company expects that fiscal 2009 will continue to be a transitional period as development shifts from company-owned to franchisee growth. In addition, the company faces continuing cost of sales pressures from higher commodity costs. Depreciation expense is expected to be higher as well due to recent capital spending on reimages and lower depreciation in fiscal 2008 resulting from the classification of assets held for sale related to the ERJ refranchise transaction.

Guidance for fiscal 2009 excludes the operating results of Macaroni Grill. The company anticipates earnings per diluted share growth of eight to 10 percent in fiscal 2009 based on the following assumptions:

   -- Revenue growth of between 2.5 and 3.5 percent based primarily on:       * Comparable restaurant sales growth of 1.5 to 2.5 percent;       * Franchise revenue growth of about seven percent, bringing the total         to approximately $70 million; and       * Total company-owned restaurant capacity increase (as measured by         average-weighted sales weeks) of slightly less than one percent.   -- General and administrative expenses of about 4.5 percent of revenue;   -- Operating income of about flat to 20 basis points lower than fiscal      2008 based on escalating costs, particularly in cost of sales and      depreciation, at a rate higher than the company expects to be able to      offset with operating efficiencies and price increases; and   -- Capital expenditures of approximately $175 to $185 million with $40      million allocated to the development of 15 new restaurants, $20 to $25      million attributable to Chili's reimages, $25 to $30 million invested      primarily in kitchen technology and the remainder primarily relating to      capital expenditure maintenance programs.    

As far as timing considerations, there are two important calendar shifts for fiscal 2009. First, Christmas Day will trade from the second quarter into the third quarter in fiscal 2009 which will benefit the second quarter. Also, Easter will trade from the third quarter into the fourth quarter of fiscal 2009 which will negatively impact the fourth quarter.

While the company is unable to provide specific guidance for fiscal 2009 including Macaroni Grill due to the inability of the company to forecast the expected results of an entity which will not be under the management and control of the company for the entire fiscal year, the company would anticipate earnings per diluted share growth to be lower if Macaroni Grill was included.

Web-cast Information

Investors and interested parties are invited to listen to today’s conference call, as management will provide further details of the quarter. The call will be broadcast live on the Brinker web site (http://www.brinker.com/) at 9 a.m. CDT today (August 5). Additional financial information is also included on the Brinker website under the Financial Information section of the Investor tab. For those who are unable to listen to the live broadcast, a replay of the call will be available shortly thereafter and will remain on the Brinker web site until the end of the day on September 2, 2008.

   Forward Calendar   -- SEC Form 10-K for fiscal year 2008 filing on or before August 25, 2008;      and   -- First quarter earnings release, before market opens, on October 21,      2008.    

At the end of fiscal year 2008, Brinker International either owned, operated, or franchised 1,888 restaurants under the names Chili’s Grill & Bar (1,452 restaurants), Romano’s Macaroni Grill (226 restaurants), On The Border Mexican Grill & Cantina (168 restaurants), and Maggiano’s Little Italy (42 restaurants).

The statements contained in this release that are not historical facts are forward-looking statements. These forward-looking statements involve risks and uncertainties and, consequently, could be affected by general business and economic conditions, the impact of competition, the impact of mergers, acquisitions, divestitures and other strategic transactions, the seasonality of the company’s business, adverse weather conditions, future commodity prices, fuel and utility costs and availability, terrorists acts, consumer perception of food safety, changes in consumer taste, health epidemics or pandemics, changes in demographic trends, availability of employees, unfavorable publicity, the company’s ability to meet its growth plan, acts of God, governmental regulations, and inflation.

                        BRINKER INTERNATIONAL, INC.                     Consolidated Statements of Income                  (In thousands, except per share amounts)                           Thirteen Week Periods      Thirteen Week Periods                              Ended June 25,              Ended June                                   2008                    27, 2007                                       Adjusted                      Adjusted                     Brinker  Macaroni Brinker   Brinker   Macaroni  Brinker                      Intern-  Grill    Intern-   Intern-   Grill     Intern-                     ational            ational   ational             ational                     (Unaud    (Unaud   (Unaud    (Unaud    (Unaud    (Unaud                      -ited)    -ited)   -ited)    -ited)    -ited)    -ited)                                 (a)      (a)                 (a)      (a)    Revenues        $1,073,569 $147,293 $926,276 $1,142,954 $169,848 $973,106   Operating Costs    and Expenses:     Cost of sales    306,534   42,382  264,152    318,616   48,751  269,865     Restaurant      expenses        599,562   91,700  507,862    627,200   98,671  528,529     Depreciation      and amortization 41,275        -   41,275     46,072    7,274   38,798     General and      administrative   44,593    1,436   43,157     52,691    2,385   50,306       Other gains        and charges (b) 8,106    2,104    6,002    (17,646)     (24) (17,622)         Total          operating          costs and          expenses  1,000,070  137,622  862,448  1,026,933  157,057  869,876    Operating income    73,499    9,671   63,828    116,021   12,791  103,230    Interest expense     9,671        -    9,671     11,632        -   11,632   Other, net            (576)       -     (576)    (2,444)       -   (2,444)    Income before    provision for    income taxes       64,404    9,671   54,733    106,833   12,791   94,042    Provision for    income taxes       21,759    2,838   18,921     23,186   3,675    19,511    Net Income         $42,645   $6,833  $35,812    $83,647  $9,116   $74,531    Basic net income    per share           $0.42             $0.35      $0.73             $0.65    Diluted net    income per share    $0.41             $0.35      $0.71             $0.63      Basic weighted    average shares    outstanding       101,267           101,267    114,606           114,606    Diluted weighted    average shares    outstanding       102,717           102,717    118,032           118,032    a) Non-GAAP information excluding the impact of Macaroni Grill is provided      to allow the reader to gain insight into the company's ongoing      operations.    b) Current year gains and charges primarily includes:        a. Impairment of long-lived assets and lease reserves of $6.8 million        b. Expenses related to the potential sale of Macaroni Grill of $1.4           million.       Prior year other gains and charges primarily includes:        a. Franchising gains of $17.4 million.        b. Gain on the sale of real estate of $0.5 million.                             BRINKER INTERNATIONAL, INC.                       Consolidated Statements of Income                    (In thousands, except per share amounts)                Fifty-Two Week Periods Ended    Fifty-Two Week Periods Ended                       June 25, 2008                  June 27, 2007               Brinker    Macaroni   Brinker   Brinker   Macaroni  Brinker               Intern-     Grill     Intern-   Intern-    Grill    Intern-               ational               ational   ational             ational             (Unaudited)(Unaudited)(Unaudited)                            (a)        (a)                 (a)        (a)   Revenues   $4,235,223 $637,991 $3,597,232 $4,376,904 $690,916 $3,685,988   Operating    Costs and    Expenses:     Cost of      sales    1,200,763  183,145  1,017,618  1,222,198  194,337  1,027,861     Restaurant      expenses 2,397,908  391,853  2,006,055  2,435,866  409,266  2,026,600     Depreciation      and      amorti-      zation     165,229    6,372    158,857    189,162   30,656    158,506     General and      admini-      strative   170,703    7,370    163,333    194,349    8,767    185,582     Other gains      and      charges(b) 133,589  122,750     10,839     (8,999)  10,799    (19,798)     Total      operating      costs and      expenses 4,068,192  711,490  3,356,702  4,032,576  653,825  3,378,751    Operating    income       167,031  (73,499)   240,530    344,328   37,091    307,237    Interest    expense       45,862        -     45,862     30,929        -     30,929   Other, net     (4,046)       -     (4,046)    (5,071)       -     (5,071)    Income before    provision for    income taxes 125,215  (73,499)   198,714    318,470   37,091    281,379    Provision for    income taxes  29,308  (31,600)    60,908     88,421    9,734     78,687    Net Income    $95,907 $(41,899)  $137,806   $230,049  $27,357   $202,692    Basic net    income per    share          $0.93               $1.34      $1.90               $1.67    Diluted net    income per    share          $0.91               $1.31      $1.85               $1.63    Basic weighted    average    shares    outstanding  103,101             103,101    121,062             121,062    Diluted weighted    average    shares    outstanding  104,897             104,897    124,116             124,116    a) Non-GAAP information excluding the impact of Macaroni Grill is provided      to allow the reader to gain insight into the company's ongoing      operations.    b) Current year gains and charges primarily includes:        a. Fair value impairments related to Macaroni Grill long-lived assets           of $82.3 million.        b. Impairment of long-lived assets of $58.5 related to restaurant           closures.        c. Asset write-offs resulting from the company's reduced development           schedule of $13.2 million.        d. Severance of $5.4 million.        e. Severance and other expense related to the sale of Macaroni Grill           of $4.8 million.        f. Gain on the sale of 76 Chili's restaurants to a franchisee of           $29.2 million in second quarter.       Prior year other gains and charges primarily includes:        a. Franchising gains of $19.1 million.        b. Gain on the termination of swaps of $3.2 million.        c. Restructuring and impairment charges totaling $13.8 million.                            BRINKER INTERNATIONAL, INC.                     CONDENSED CONSOLIDATED BALANCE SHEETS                                (In thousands)                                                      June 25,      June 27,                                                       2008          2007                                                  (Unaudited)   ASSETS     Current assets                                 $294,438       $250,478     Assets held for sale                            204,463        404,692     Net property and equipment (a)                1,531,016      1,482,736     Total other assets                              207,385        180,115     Total assets                                 $2,237,302     $2,318,021    LIABILITIES AND SHAREHOLDERS' EQUITY     Current installments of long-term      debt                                            $1,973         $1,761     Current liabilities                             506,508        519,375     Liabilities associated with assets      held for sale                                   17,688         22,328     Long-term debt, less current      installments                                   901,604        826,918     Other liabilities                               170,260        142,550     Total shareholders' equity                      639,269        805,089     Total liabilities and shareholders'      equity                                      $2,237,302     $2,318,021    a) At June 25, 2008, the company owned the land and buildings for 282 of      the 1,265 company-owned restaurants.  The net book values of the land      and buildings associated with these restaurants totaled $241.2 million      and $1,214.6 million, respectively.                          BRINKER INTERNATIONAL, INC.                             RESTAURANT SUMMARY                                  Fourth       Fourth                                 Quarter      Quarter               Projected                     Total       Openings/    Closings/              Openings                  Restaurants  Acquisitions    Sales    Restaurants   Fiscal                    March 26,  Fiscal 2008  Fiscal 2008   June 25,     2009                      2008                                 2008    Company-Owned    Restaurants:     Chili's           881           10          (2)        889        9-11     On The Border     133            2           -         135           1     Maggiano's         42            -           -          42           2     Macaroni Grill    193            -           -         193           -     International(a)    6            -           -           6           2                     1,255           12          (2)      1,265       14-16    Franchise    Restaurants:     Chili's           401           10          (9)        402       30-40     On The Border      29            1           -          30        9-12     Macaroni Grill     18            1           -          19         4-6     International(a)  165            7           -         172       31-36                       613           19          (9)        623       74-94    Total    Restaurants:     Chili's         1,282           20         (11)      1,291       39-51     On The Border     162            3           -         165       10-13     Maggiano's         42            -           -          42           2     Macaroni Grill    211            1           -         212         4-6     International     171            7           -         178       33-38                     1,868           31         (11)      1,888      88-110    a) At the end of fourth quarter fiscal year 2008, international company      owned restaurants by brand were 5 Chili's and one Macaroni Grill.      International franchise restaurants by brand were 156 Chili's, 13      Macaroni Grill's and 3 On The Border.  

Brinker International, Inc.

CONTACT: Stacey Sullivan, Media Relations, 1-800-775-7290, or MariePerry, Investor Relations, +1-972-770-1276, both of Brinker International,Inc.

Web site: http://www.brinker.com/




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