Lynn Schweinfurth - IR Doug Brooks – Chairman, CEO Chuck Sonsteby - CFO

John Glass - CIBC Andrew Barish - Banc of America Jeffery Bernstein - Lehman Brothers John Ivankoe – JP Morgan Paul Westra - Cowen Will Hamilton - SMH Capital Steven Kron - Goldman Sachs Jeff Omohundro - Wachovia Mark Wiltamuth - Morgan Stanley Joe Fischer - Bear Stearns Jake Bartlett - Thomas Weisel David Palmer - UBS

Good morning, ladies and gentlemen and welcome to the fourth quarter earnings release conference call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Lynn Schweinfurth. Ma'am, the floor is yours. Lynn Schweinfurth: Thank you, Janice. Good morning and welcome to the August 9th Brinker International fourth quarter fiscal 2007 earnings conference call. During our management comments and in our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and certainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. Upcoming calendar dates include the filing of the company's annual report or SEC Form 10-K on or before August 27. As noted in our press release last night, the company's first quarter comparable sales and earnings results will be reported on October 23 before the market opens. With me today are Doug Brooks, Chairman and Chief Executive Officer; Chuck Sonsteby, Chief Financial Officer; and Guy Constant, VP of Operations Analysis. Doug will start us off this morning with a strategic overview; Chuck will follow with key financial highlights of fiscal 2007, a financial overview of the completed fourth quarter, expectations for fiscal 2008 and then we will open up the call for questions.

Thanks, Lynn. Good morning to everyone. We are pleased to report to our shareholders fiscal year results that exceed our stated goal of 15% earnings per share growth. While Chuck will go into more financial details during his comments, fiscal year EPS from continuing operations of $1.76 represents a 19% increase versus the prior year on a comparable basis. Additionally, earnings per share for the fourth quarter improved 24% over the same quarter last fiscal year. I especially want to thank our hard-working brand and corporate per team members for their yeoman efforts throughout the year, particularly in the face of a tough operating environment for the restaurant industry. Just as importantly as the successful bottom line performance, Brinker has all over the country delivered on their promise in fiscal year 2007 to build the business for the long term by driving progress on the following key strategies: growing our base business through industry-leading brand building; innovation and operational performance; developing, operating and franchising profitable restaurants worldwide and leveraging customer's business relations, infrastructure and expertise across the company's portfolio of brands. 2007 marked Brinker's renewed commitment to elevating our guest experience. Noteworthy accomplishments include implementing a new process for gathering and analyzing guest feedback, a new process for hiring hourly employees, as well as new programs for recruiting and developing our restaurant managers. Our new guest feedback tool goes beyond gathering information about the basics of customer satisfaction with wait times, food temperature and taste to helping us better understand the emotional elements that create an outstanding experience for our guests. We are using questions that target key attributes defined by our guests. We now look for opportunities to deliver a tailored experience that makes our guests feel special and motivates them to return. This new feedback system was rolled out across our system in July and is transforming the way we view guest comments and operational initiatives. In a related effort, we are investing in employees by implementing new hiring and development practices that enhance the guest experience, decrease team member turnover and reduce costs for hiring and training. Our new selection process for hourly team members enhances our ability to screen candidates for skilled positions and better identifies those that have a natural affinity for connecting with guests, teammates and working in the community. In restaurants where this new selection process has been implemented, it has contributed to a 30% reduction in turnover at the hourly level, helping reduce our overall turnover for the fiscal year by 18% across all of our brands. A similar selection process for hiring restaurant managers and even our home office positions is scheduled for implementation in the fall of 2008 and will enable Brinker International and its brands to better identify skilled management talent with potential for future leadership. Our investment in Brinker team members is also evident in our customized development programs for high potential restaurant managers, home office directors and officers. In these programs, future leaders again gain valuable feedback on their leadership strengths and opportunities and complete in-depth learning sessions on Brinker and its positioning within the restaurant industry. Because our loyal, long-term team members are often role models for providing an outstanding guest experience, we consider it a wise investment to develop and retain them. It is our hope these talented individuals will continue to lead the way in renewing our commitment to hospitality. These and other brand building initiatives are expected to result in greater guest loyalty that will in turn drive enhanced bottom line results. By demonstrating the commitment to growing Brinker bands both domestically and internationally, we built 195 new system restaurants during the fiscal year, including 51 in the fourth quarter alone, a new record for Brinker International. The company locations were primarily added in domestic metropolitan markets where we want to deepen our presence, improve guest convenience and generate efficiencies from scale. We also strengthened our presence in successful international markets such as the Middle East, Latin America and Mexico where the Chili's brand is already very well known. In addition to building our brands presence in markets where we are strong, we also took steps to enter new markets domestically and internationally by signing development agreements with experienced franchisees. The company also advanced its goal to balance systemwide ownership from 80% company-owned and 20% franchise locations to a milestone of 70/30 by the end of calendar year 2007. We will accomplish this mix by actively pursuing our programs to sell company restaurants and accelerate development commitments with our experienced operators worldwide. At the end of the fourth quarter, franchisees operated 27% of the Brinker system and throughout the year, we announced several pending transactions, which will result in new franchise restaurant development over the coming years. Support for the favorable performance during the year came from progress also on marketing and culinary initiatives at all four brands. By integrating valuable consumer research, better decisions and positioning, advertising and innovation were made throughout the year. Guests responded well to core menu innovation of all Brinker brands and we will continue looking for ways to introduce new items that build on the strengths of our brands while appealing to our guests' needs for satisfying meals at a good price value. Part of our commitment to innovation includes testing new menu solutions. In fiscal 2007, Romano's Macaroni Grill expanded catering services in key markets, bringing its delicious meal and signature service to new guests all over the country and because we understand that our guests enjoy serving quality meals at home, but don't always have time to shop and prepare a complicated recipe, we began testing a new line of refrigerated meals inspired by menu items from Chili's and Macaroni Grill. The products are currently offered in over 3,000 grocery stores nationwide and the initial response from consumers looks promising. In addition to our innovation with core menu enhancements and brand extensions, Brinker continues to successfully grow and refine our industry-leading gift card program. The ability to leverage our portfolio with innovative gift cards is a unique driver for us in this area. We also significantly increased our consumer reach by expanding relationships with our third-party retailers, including Wal-Mart and Safeway and Kroger grocery stores and by increasing online corporate sales. As a result, the Brinker system sold a record of $255 million in gift cards redeemable across our restaurant portfolio. Now it takes exemplary service and steadfast support to run a successful restaurant company. At Brinker, we believe the same principle holds true as we approach our responsibility to the communities from which we do business with and benefit. That is why we are committed both at the corporate level and within each one of our brands to giving back to those communities in a variety of ways. Through a combination of corporate contributions, national charity partnerships with each brand, team member volunteer efforts, in-kind donations and fund-raising at the local restaurant level, Brinker provided for contributions of approximately $10 million in fiscal 2007 to various community causes. Our strong relationship with the Dallas area organizations such as the Salesmanship Club, the Texas Scottish Rite Hospital for Children, the Limbs for Life Foundation and the Dallas Center for the Performing Arts continued to engage our home office employees. Across the country, restaurant team members are inspired by our involvement in volunteer efforts for St. Jude's Children's Research Hospital, the Meals on Wheels Association of America, the Make a Wish Foundation and the Kenny Can Foundation. For more than 30 years, charitable involvement has been a cornerstone of our culture at Brinker and we will continue to nurture and grow these relationships in the future. Now our investment in team members will gain even more momentum in 2008 as we look for opportunities to empower our team members to better serve restaurant guests. With this goal in mind, we will fully implement across all our brands the selection and development programs mentioned earlier, infusing every step of the team member experience with a clear focus on consistent, high-quality service and hospitality. Additionally in fiscal year 2008, Brinker International will continue to pursue strategic restaurant development in both domestic and international markets. We will achieve this goal by building new company-owned locations, increasing franchise ownership with carefully selected partners and by exploring appropriate joint venture opportunities internationally. The majority of new restaurants will be Chili's locations, which continues to represent the primary growth driver for the business. However, we will also continue to build new company restaurants and sign franchise agreements to bring our other brands to new markets. Particularly overseas, the power of leveraging the Brinker portfolio by developing multiple restaurant brands in a single market represents a tremendous value proposition for many of our franchisees. Our global development team will continue to build its infrastructure and identify qualified business owners who can be catalysts for growth and key international markets for our portfolio. Before ending, I'd like to comment on the announcement related to our Macaroni Grill brand included in this morning's press release. As indicated, we are in the early stages of discussions with a number of potential investors that could ultimately lead to the sale of the Macaroni Grill brand. The brand is led by our very talented hard-working leadership team who has developed a significant amount of talent throughout its organization. The team is implementing a strategy that clarified the brand positioning, has created a fresh new menu, has lowered turnover and improved guest satisfaction scores during the past year. That being said, we believe it is the right, although very tough, decision for our shareholders to explore a sale at this time. Our commitment to increasing shareholder return dictates that for the foreseeable future our resources will be primarily dedicated to our other brands due to their ability to have a greater positive impact on increasing shareholder value. Alternative ownership for Macaroni Grill has the potential to provide that team a greater level of investment to grow the brand and fully implement their strategic plan. Again, we are announcing this action at a very early stage and will keep you updated with any developments should they occur over the next several months. The Brinker leadership team continues to be optimistic about the future of casual dining and the very relevant role it will play in consumers' lives for years to come. We are committed to maintaining a portfolio of highly relevant brands with the ability to expand on a global basis. We will grow our brands through long-term initiatives for strategic development, innovative brand and operational programs and a focused understanding of guest needs and expectations that will enable us to connect with our guests, increase their loyalty and drive our business forward. Thank you. So now let me turn the call over to Chuck who will provide the financial overview as well as some great highlights and expectations for fiscal year 2008.

Thanks, Doug and good morning to everyone. And first of all, I want to welcome back Lynn. It is great for us all to have her back in corporate finance. Doug touched on some of the leading indicators in fiscal 2008 initiatives that we believe will drive profitable growth at Brinker. Our initiatives appear to be taking hold through improving sales and traffic trends at Chili's and Maggiano's. Recent industry performance also provides cautious optimism heading into the new fiscal year. Turning to fiscal year 2007 results, I would like to highlight some of the key financial accomplishments achieved during the year. Excluding special items, the company grew EPS from continuing operations 19% over prior year, exceeding our previously stated goal of 15%. A soft top line and increased labor and commodity costs continue to gain the lion's share of news reports. However, these difficult headwinds were offset by effective cost management, opportunistic share repurchases, successful tax strategies and reduced G&A expenses. Everyone in our organization contributed in order to achieve this growth rate. Strengthening business fundamentals and growing traffic over time remains a top priority for the company, but we can hold our head high about achieving these results in a difficult time. The company generated approximately $485 million in cash flow, exceeding capital expenditures by more than $50 million in fiscal 2007. As a result, our cash flow return on gross investment continues to improve. It increased approximately 150 basis points over the prior year from 16.8% to 18.3%. These results were computed without the benefit of the Pepper Dining transaction, which was completed on the last day of the fiscal year. Please refer to our investor website for details behind this calculation. The difficult decisions we made: closing underperforming restaurants, increasing franchise ownership and development, and continued financial discipline to develop high return restaurants while maintaining an efficient infrastructure all contributed to improved returns. In addition, our continued commitment to returning excess capital to shareholders was demonstrated by increasing quarterly dividends to 35% in the second quarter and paying out over $40 million during the year. Aggressive share repurchases resulted in the company buying back almost 19 million shares of our stock. Combined, we delivered over $600 million back to shareholders during the fiscal year as a result of executing our leverage strategy. Moreover, we have been actively purchasing shares in the first quarter. Since the beginning of the new fiscal year, we have purchased approximately 5 million shares of our stock for about $140 million through August 6 using the sales proceeds received from the sale of restaurants. As Doug mentioned, tremendous progress was made on our franchising goals to transition the ownership profile of our system. Today, franchisees currently own about 27% of the system, an increase of 7 percentage points from last year and we expect this number to grow to about 35% by the end of the current fiscal year. We achieved this shift in a year where we opened more company restaurants than ever before. As we said in the past, reaching 35% is more of a mile marker then an end game as we continue to look at the best way to balance risk and return and optimize shareholder returns. Gross proceeds received from selling 112 company restaurants to franchisees totaled $174 million, a material portion of which funded share buybacks during the year. Our most notable transaction was the agreement with PDI, an affiliate of Olympus Partners. This agreement, the largest transaction in Brinker history, involved the sale of 95 Chili's restaurants in the Northeast and mid-Atlantic, as well as a development agreement to build between 14 and 38 new locations over the next few years. Expanded franchise and development agreements with existing domestic franchisees were also achieved. More specifically, during fiscal 2007, commitments to build 130 to 154 restaurants worldwide over the next ten years were signed. Ongoing incremental investment in new restaurants by our existing franchisees further demonstrates their confidence in the long-term viability of our brands within the US casual dining segment. In addition to our domestic development efforts, fiscal 2007 was a milestone year for international growth. The global business development team added 30 new system restaurants during the year, including seven in the fourth quarter, bringing our total number of international system restaurants to 152. As Doug mentioned, we gained strength in our key markets such as the Middle East, Latin America and Mexico and also entered a new international market, opening our first restaurant, a Chili's, in Ecuador during the fourth quarter, expanding our presence to a total of 24 countries outside the United States. The acceptance of our brands worldwide and the strength of our global business development, or GBD team, will provide future growth opportunities. To facilitate this growth, Greg Walther, our President of GBD, added two key members during the quarter. John Reale, the new COO of Global, brings an incredible amount of experience with Brinker brands, as well as an understanding of international markets, having formerly been a key architect of the TGI Friday's international development strategy. His partner in growing the international business at TGI Friday's was Jean Jacques Annaud who has joined us as VP of International Development. Now, let's get into some of the details of the quarter and what drove our results. Brinker reported fourth quarter EPS growth of 24%, excluding the impact of special items and after-tax gain on the sale of company restaurants of approximately $11 million and a tax benefit from favorable settlement of tax audits totaled over $5 million. Income from continuing operations before special items increased 13%. Revenues increased 6.5% to $1.143 billion. Capacity increased 8.7% as a result of 117 more company-owned restaurants than last year and that is prior to the sale of the 95 Chili's to PDI on the last day of the quarter. On a consolidated basis, comparable sales decreased 2% driven by a 0.8% increase in price, a 0.4% increase in mix and a 3.2% decrease in traffic. Franchise revenues for the quarter totaled over $15 million representing an increase of about 40% due to 62 more franchise restaurants in the system and about $4 million collected in initial franchise and development fees from PDI. Chili's posted negative 1.6% comp sales in the fourth quarter. This decrease was composed of a 0.7% price increase, a 0.3% increase in mix and 2.6% decrease in traffic. Now one factor impacting negative traffic at Chili's is cannibalization from new restaurants. Our strategy to build dominant markets has reduced current comps by more than 1% due to cannibalization. Expected cannibalization is factored into our new restaurant investment model and sales projections must meet our required return hurdle rate for the proposed capital investment to be approved. Therefore, while comp sales are negatively impacted, overall shareholder value continues to grow and as we slow restaurant development during fiscal 2008 and beyond, this will become less of a drag on comps. Price increases during fiscal 2007 have been modest at Chili's, partially due to price increases taken in fiscal 2006 and other ongoing considerations. Our pricing strategy defines restaurants within multiple tiers throughout the country and also incorporates several factors, including traffic, consumer sentiment, the overall value proposition, competition, signature offerings and operating cost pressures to name a few. July's menu rollout contained a price change resulting in a year-over-year cumulative increase of almost 2%, still below the industry norm. Currently, Chili's is on media promoting their new Fired-Up Favorites, which drove the positive July comps sales results reported this morning. New items include honey chipotle chicken crispers, blazing habanera baby back ribs, buffalo chicken fajitas and Texas cheese fries, supporting Chili's unique positioning and flavor profile. The culinary team has done a tremendous job enhancing choices for our guests that offer value and variety to key menu platforms and the success and preference of these new menu offerings exceeded our expectations. Throughout the year, we will build on the success by adding compelling product extensions to Chili's signature menu platforms. Romano's Macaroni Grill for the quarter reported a decrease in same-store sales of 2.1% driven by a 1.8% increase in pricing, a 2.1% increase in mix and a 6% decline in traffic. Mac Grill continues to roll out new product features and menu items displaying their robust product pipeline. The overstuffed ravioli platform features, new crab stuffed mushrooms appetizer and signature soups helped drive a healthy mix of 2.1% during the quarter. Mac Grill's new Sizzling Sensations, currently featured at our restaurants, really play on the senses. Hot, sizzling Tuscan chicken or shrimp scampi is delivered to the table in steaming cast-iron skillets where the toppings are poured over fresh linguini right in front of the guest and it has become a real crowd pleaser. On the Border same-store sales decreased 4.7% driven by a 0.2% increase in price, a 0.1% decrease in mix and a 4.8% decrease in traffic. On the Border has rolled out a new menu, including new offerings like the spicy buffalo chicken tacos, chicken chipotle fajitas and the grilled steak salad. The brand new Border Smart section of the menu offers healthful entrees with less than 800 calories and less than 30% fat, including chicken salsa fresca and the new jalapeno BBQ salmon, grilled fajita chicken tacos and pico shrimp tacos. Maggiano's comparable store sales were down 1.3% for the fourth quarter driven by a price increase of 0.9%, a 1.4% decrease in mix and a 0.8% decrease in traffic. The new Little Italy favorites from around the country, added to the Maggiano's menu earlier in the calendar year, continue to be popular with guests. Additionally, the brand has been testing delivery, providing a convenient way to access the brand for both new and existing customers and building top line sales in the process. The results look positive so far. Brinker's cost of sales as a percentage of revenues increased 80 basis points to 27.9% for the current quarter as compared to 27.1% a year ago, driven by unfavorable commodity prices, particularly on salmon and produce, and mix changes driven by higher sales of Chili's triple dipper appetizer and premium margarita selects and On the Border, which carry a higher cost of sales. Menu price changes had a 50 basis point favorable effect on cost of sales during the quarter. Restaurant expense increased 20 basis points to 54.9% in the fourth quarter of fiscal 2007 compared to the prior year period, primarily driven by increased state minimum wages that negatively affected margins by about 45 basis points and higher pre-opening expenses of almost $2 million. These impacts were partially offset by lower performance-based compensation expense and our expense management. Utilities year-over-year were flat. Depreciation and amortization was $46.1 million, a $1.5 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% versus 5.1% a year ago, an improvement of 50 basis points year over year. The $1.8 million decrease was due to lower performance-based compensation expense in the current year versus the prior year and other intended cost savings, including those related to increased franchising and decreased development goals. For the full year, G&A was down almost $13 million. Interest expense was $11.6 million versus about $5.7 million a year ago, due to the use of a $400 million, one year, unsecured committed credit facility to fund our accelerated share repurchase of $297 million worth of common stock and for general corporate purposes. Other net was $2.4 million versus $500,000 last year for an improvement of $1.9 million for certain realized investment gains and increased interest income. The effective income tax rate for continuing operations decreased to 24.7% excluding restructuring charges and a tax benefit from the completion of certain tax audits versus 32.3% last year. The lower tax rate from continuing operations was primarily due to the impact of incentive stock options, which are deductible when exercised, and benefits from state income tax planning. While the favorable effective tax rate for both the quarter and the year are not sustainable long term, the tax team did a great job executing solid tax strategies to greatly benefit both the quarterly and annual results for fiscal 2007. As mentioned in our press release, we expect our tax rate to be about 30% in fiscal 2008. The end of year adjusted debt to capital was about 72% and adjusted debt to EBITDAR was under 2.9 times, in line with our previously communicated leverage goals. Turning to fiscal 2008 expectations, in our release, we announced expected fiscal 2008 EPS growth to be at least 10%, which is lower than our previously stated goal due to our transitioning business model that is affected by increasing franchise ownership of the system through our active program to sell company restaurants to franchisees and reduced new restaurant development plans. From a capital allocation perspective, the current plan is to build 80 to 93 company restaurants during the year. Capital expenditures for new restaurants are expected to range from $250 million to $275 million leaving about $50 million for maintenance and other capital. We continue to expand the Chili's reimage program. Currently, the expected investment cost for the reimage package is over $400,000 per restaurant excluding the ongoing maintenance capital improvements completed along with the remodel. Our development and operations team continue to look for ways to decrease the costs while retaining the elements and functionality which improve the overall guest experience. 18 restaurants have been completed to date and results look promising. The program is confined to 180 restaurants for $80 million in capital during fiscal 2008 and we will provide progress reports throughout the year. Our previously announced transaction with ERJ Dining to buy 76 Chili's restaurants in the Midwest remains on track to close by calendar year-end. Closing this transaction will exceed our communicated goal of 30% franchise ownership of the system by the end of calendar 2007. Meanwhile, we are actively marketing our worldwide franchise program for all Brinker brands with continued interest from a strong pool of potential franchisees and joint venture partners. Additionally, our franchising strategy has become more aggressive for On the Border. Based on the expected pace of transactions in the second half of the year and increased franchise development, I am still anticipating the Brinker franchise mix to increase to at least 35% by the end of fiscal 2008. As was noted in our press release, we assumed the ERJ transaction would be completed in the second quarter of the fiscal year, but did not include any other sales transactions in our 2008 outlook details. However, we expect a combination of buying back shares with proceeds received from selling company restaurants will at least offset the net reduction of profitability, positively impacting EPS growth in fiscal 2008. Additionally, these transactions will improve company returns and provide an increasing royalty stream with incremental franchise development and sales momentum over time. Strong cash flow generation through improved and sustained business fundamentals, including disciplined capital stewardship, will allow us not only to generate incremental returns to reinvest back into the business, but to also return capital to shareholders in the form of quarterly dividends and share repurchases, resulting in long-term shareholder value creation over time. The major changes we have put in place over the past few years are beginning to bear fruit and the start to the fiscal year gives us confidence we can repeat the success of 2007. With that, I would like to turn the call over to Janice to facilitate the question-and-answer period.

Your first question comes from John Glass – CIBC. John Glass - CIBC: On Mac Grill, how would we look at this transaction versus maybe a refranchising transaction? Would the same rule apply that you would expect it to be at least neutral to earnings? If you could just go a little deeper: at this juncture, are you willing to talk about operating profit contribution or maybe SG&A expense that is in the P&L? Chuck Sonsteby: We would expect it to be accretive once we close the transaction and we don't want to get into too much detail on EBITDA contribution and G&A expenses. Some of it is going to matter on who the purchaser is and how quickly they want to do a transaction or if we can get the expected price that we would like to get. So I don't want to get too much into disclosing all of those details just pending the discussion. John Glass - CIBC: Just to be clear, when you say accretive, is that including the share repurchase that would go along with it or is that excluding that? Chuck Sonsteby: I'm sorry, John. John Glass - CIBC: Does the accretion depend on you buying back stock with the proceeds or is it accretive just selling the brand? Chuck Sonsteby: It would have to have some kind of activity with the proceeds, either paying down debt or buying back stock. John Glass - CIBC: In your discussion with franchisees and maybe lenders, does the current change in the credit markets, is that going to impact the ability of franchisees to buy your stores from you? Do you have any sense if that is impacting that lending market? Chuck Sonsteby: That's a great question. We have not had any sense that we have seen reduced interest. I think our brands have not been on the market that long and people on the lending side have been anxious to lend into the Chili's brand particularly, and so a couple of the deals we have had in place, we've gone back and talked to the franchisees. They say that their financial commitments are still in place. So we have not yet been affected by that nor do we really anticipate that to happen. I think strong quality franchisees will continue to find funding. John Glass - CIBC: Just a clarification on the share count. You talked about buying back 5 million shares this quarter. You were supposed to have I think completed an ASR either fourth quarter or the first quarter of this year, so is the 5 million on top of that ASR completion or did you not do that? Chuck Sonsteby: We did complete the ASR and then in addition to that, we bought another 5 million shares on top of the ASR.

Your next question comes from Andrew Barish – Banc of America. Andrew Barish - Banc of America: Just on the number side of things, can you give us, first of all, the base number that you are growing or expecting to grow 10% off of for '08? Am I reading this correctly? It sounds like you are looking for operating margin improvement, but restaurant level margin decreases of about 100 basis points, so it seems as if there is a 150 basis point swing just in G&A and D&A. Is that possible or am I missing something there?

Well, Andy, let's start with your first question and the answer to that. I think our net income growth baseline number is about $124 million for fiscal year '07. In terms of some of the margin influences, certainly we will have some positive flow-through associated with the pricing. We also had improved average performance for restaurants in our base now that we've sold PDI, which had margins that were below the average for the Chili's system. We are also going to achieve a little bit of a benefit on advertising expenses for fiscal year '08. So we have a few positive things happening in the P&L more than offsetting the commodity and labor cost increases we've talked about. Andrew Barish - Banc of America: I'm sorry if I confused you there. Are you working off $1.85 or $1.76 for the 10% EPS growth?

$1.76.

Your next question comes from Jeffrey Bernstein – Lehman Brothers. Jeffery Bernstein - Lehman Brothers: A couple of questions. First, you ended your talk, Chuck, talking about shareholder value. I am just wondering your need for additional leverage versus using the proceeds from the ongoing refranchising, whether future proceeds are going to satisfy your need or desire for share purchase or do you anticipate taking on incremental leverage for repo or other means of returning capital? Just wondering where the board stands on your leverage ratio. Chuck Sonsteby: Thus far, we still remain investment grade and our discussions with the board have asked us to stay at that point in time where we are right now at 2.9 times EBITDA. So we will sit down with the board as we always do at the end of August and revisit that and see if it still makes sense. We will have to take a look at where credit markets are, what spreads look like to see if it make sense to be less than investment grade, but right now, we don't have any current plans to change. Jeffery Bernstein - Lehman Brothers: On your franchising business, currently your financials blend all the revenues and don't provide any real color in terms of the franchising margins and related expenses. Just wondering if you can give us some specific detail in terms of the performance of the franchise business, perhaps the impact you'd expect on the margins with the transfer of ownership? Just wondering perhaps when we would see a change in your method of reporting to provide greater franchising detail?

It's a good question, something we have had a lot of internal discussion about because we have become a much larger franchisor recently, we are catching up on some technology, so we have data we can share across the systems. Also we have differences in reporting periods. Many of our franchisees have different ends of months, ends of periods so those will have to get blended so it will make a little bit more sense. One thing that gives us lots of confidence is in almost all these most recent deals some very tenured, very experienced leaders from our corporate systems have moved over into key roles in those franchise relationships and there's great communication already going on. Todd Diener I know recently was spending quite a few days with one of our largest new franchisees, touring restaurants, talking about initiatives and sharing best practices. Again, we have great confidence that their margins will be similar to ours and in the future we'll probably have a lot more information about their sales as well as their results moving forward. Jeffery Bernstein - Lehman Brothers: Obviously the expiration of Macaroni Grill now official in terms of looking for a sale. I'm looking for your broader thoughts. I know you continue to mention the portfolio, just wondering where your other two non-core brands stand in terms of earning the right to remain in the portfolio and whether or not you'd perhaps be inclined to pursue an additional brand?

We're committed to being a portfolio restaurant company and I hope some of my comments in our prepared statement represent that. Would we consider acquisitions? Absolutely. We're always looking at the marketplace and the conditions and other brands. Particularly as we get into the global development we're starting to have great luck with partners who are very interested in multiple brands. A couple of things we're doing, we're getting more aggressive on the franchising side of the business in On the Border. There are some really nice things going on with On the Border brand. We've been testing an alternative footprint which we do think we can leverage both domestically and internationally, a little bit more efficient operating platforms, some reduced investment costs and they've had some tremendous culinary innovation this past year, so current top line sales may not represent the excitement and the great work being done by the On the Border team. Maggiano's, of course if you look at July, gives us a lot of excitement, positive not just sales but also guest traffic, and we still believe that brand is in a class of its own the way dining room business works, the banquet business. There's a lot of great work going on with the brand with technology to help get better sales throughout the banquet business across the country. We're working on some delivery revenue layers. So we're very excited about On the Border and Maggiano's and we do believe that we're a portfolio restaurant company, the Mac Grill decision notwithstanding that.

Your next question comes from John Ivankoe – JP Morgan. John Ivankoe - JP Morgan: To get back to the store margins for 2008, I mean, you do compare store margins to total revenue not just company restaurant revenue in your commentary, is that correct?

The numbers we've quoted are based on revenue. John Ivankoe - JP Morgan: Okay. How much does the switch from company revenue to obviously franchise revenue help you in and of itself in 2008? Have you done that calculation or can you share it with us?

Let me state it in such a way that the increase in franchise revenue should benefit margins by about 40 basis points. John Ivankoe - JP Morgan: Secondly, Chuck, I think you said something about $4 million of initial franchise fees. Was that recognized in fourth quarter revenue? Chuck Sonsteby: It was. John Ivankoe - JP Morgan: Because that actually does matter, should we expect similar types of fees going forward in 2008? Chuck Sonsteby: Yes. Every time we have a refranchise transaction, John, we would receive the initial fees. John Ivankoe - JP Morgan: I'll make sure to pay attention to that. Chuck Sonsteby: Yes, we should have that in the second quarter too when we close the ERJ deal. John Ivankoe - JP Morgan: Perfect. On July, if I may ask, actually you had some really nice mix at Chili's of 2%, it's reversed the trend there. With the new menu would you expect positive mix to continue or is it more specific to the promotions?

Well, I think a lot of the new products that we put out in the new menu are driving up mix, in particular appetizers and also desserts. Our Sweet Shot dessert sales and the Texas cheese fries have been very successful. They are core menu items which will stay on the menu. John Ivankoe - JP Morgan: The final question is actually on your comp guidance for fiscal '08. It is running a couple of points ahead of where Brinker as a corporation was in July. Could you walk us through why you think things are going to get better for Brinker or why you think things are going to get better for the industry over the next 12 months?

I think we're starting to lapse some easier comparisons on a year-over-year basis. As you look out to the casual dining industry and even within our own shop things appear to be looking a little bit better. We think as a result too, we've been pretty light on price over the last six months. We think we probably still have a little bit of pricing opportunity, but we'll be judicious as we look at that going through the year. I think the Chili's remodel program will have some influence on comps. Our slower development too; we've seen some cannibalization at the Chili's restaurants and that's hurt us by about a point, John. As we continue to go through the year we're slowing down development. Last year we did 147 restaurants. This year we'll do between 80 to 93. But as we look into '09 we'll be down in the 50 range. So we're almost cutting our development in half year by year so we've been tapping the brakes on that. So as we start to get through the year we'll start to lap and have less of an impact from the cannibalization in new restaurants. I think that's going to help our systemwide sales too. John Ivankoe - JP Morgan: After you're done with the Chili's remodels for 2008 do you think that program will continue at a similar level in '09 and the future years?

Well, we've got to take a look and see first of all what we've got. This is doing everything prior to our [inaudible], so we'll take a look and see what kind of elements and success we've seen in this program and see if there are things that we can put back into that [inaudible]. So I wouldn't want to put anything in stone right now, but I think we do want to refresh and make sure that the Chili's image always stays current.

Your next question comes from Paul Westra – Cowen & Co. Paul Westra - Cowen & Co.: Just following up again on the 2008 margin outlook. If we just look at company store margins, it looks as though your guidance versus company revenue is about flat. Hence your guidance of 50 or 60. It sounds like 40 or more is coming from the increase in franchise fees on the way you calculate it. Can you just quantify again where the 90 or 100 basis points of leverage is coming to offset the labor and food costs again? I know you mentioned lower marketing, but can you kind of list them again for us?

Well, let me clarify. The improvement in operating income margins will be 50 to 60 basis points for 2008. So the improvements we are seeing in certain categories are more than offsetting 90 to 100 basis points related to increased labor and commodity costs. So the other categories that are offsetting those costs include taking price, franchise revenue, selling company restaurants to franchisees that had lower average margin, a reduced pre-opening expense amount versus 2007 because of the reduced development and a slightly lower advertising accrual. Paul Westra - Cowen & Co.: Have you guys considered perhaps changing your P&L for the statement where you can break out revenue from the different franchisees on a quarterly basis and quote margins just off company sales in the future, now that franchising is becoming more and more part of your P&L? Chuck Sonsteby: I think you are right. As Doug mentioned, we are transforming some of our financial reporting metrics as we go forward. We're going to have to look at things like systemwide sales, other types of information that we can get out to the public. So as we go through the year, we will be looking for ways that we can better communicate how our business is running and better be able to communicate our financial performance. So we will definitely take that into consideration. Paul Westra - Cowen & Co.: Great. And then one more clarification. On your 10% or minimum EPS growth or goal off $1.76, there is nothing in perhaps this interest income or expense or other net line that is maybe of any one-time nature? I know we had a $1.9 million or so with the majority of that gain came from sales of some investments, but are you kind of looking at a normalized number?

There is a little bit of a one-time item in the amount we saw in the fourth quarter. So you might want to adjust down your number from 2007. Maybe $1.5 million is what we are estimating, so for a total of about $3.5 million for 2008. Paul Westra - Cowen & Co.: Lastly, just curious, because it comes up on a couple of different companies, how are you doing your gift card accounting? Obviously you have a pretty large number there. Can you just review that for us again? As far as recognizing breakage. Chuck Sonsteby: We recognize breakage based on historical pattern and we record part of that on a yearly basis. Paul Westra - Cowen & Co.: What line item does that hit? Chuck Sonsteby: The breakage amount comes into revenues. Paul Westra - Cowen & Co.: Comes into revenues? Okay. Chuck Sonsteby: Yes. Paul Westra - Cowen & Co.: On the fourth quarter franchising fees, so you are collecting full fees even on the sales of large blocks of stores and that should be a practice continued going forward? Chuck Sonsteby: Yes.

Yes, as a point of clarity, we collect both initial fees for the restaurants we sell to franchisees and then potentially development fees if we are entering into a development agreement with a franchisee. So in the fourth quarter, we recognized about $4 million associated with the PDI transaction. Chuck Sonsteby: That is consistent with our accounting policy.

Your next question comes from Will Hamilton – SMH Capital. Will Hamilton - SMH Capital: Given the success you've seen in selling franchise or refranchising stores and the positive impact you are seeing whether beyond the 35% target at the end of fiscal '08 whether there is any discussion to increase that further? Chuck Sonsteby: We will continue to look at that as we go forward. We do a market-by-market comparison to see is it better for shareholders if it is a company restaurant or a franchise restaurant and when those lines cross that is when we begin marketing to that market. So there is not a stake in the ground that says it has got to be 65/35. I think it is a mile marker where we always look to see what can happen. The good news too is we have increased franchise development both internationally and domestically and that is going to help that percentage too. Will Hamilton - SMH Capital: Any concern given IHOP's acquisition of Applebee's and their strategy to franchise or sell the company stores there whether that will create sort of an oversupply of company stores being sold? Chuck Sonsteby: Well, again, we love our brand. We think that the average volumes of our restaurants are a compelling investment for potential franchisees. We have had a lot of interest and we continue to get more interest, so I think that is a good thing. Will Hamilton - SMH Capital: Lastly, I was just wondering with regard to the operating income improvement, how much benefit do you expect from the depreciation decrease?

Not a whole lot, Will. It will be fairly minimal. Will Hamilton - SMH Capital: So on a percentage basis, it should be rather flat, you are saying?

Yes, pretty much flat. Now the one thing to be aware of is we do suspend deprecation for restaurants that we hold for sale. With the large ERJ transaction, we should see a benefit from that of about $4 million to $5 million and that is assuming we sell it in the second quarter.

Your next question comes from Steven Kron – Goldman Sachs. Steven Kron - Goldman Sachs: First, on the breakage question, is there any notable increase year-over-year from the gift card sales? Chuck Sonsteby: It would be proportional with the amount of gift cards that we have been selling. Steven Kron - Goldman Sachs: And what percentage did that grow at?

I think 20% year over year, somewhere in that 20%, 25%, Steven, '07 versus '06. Steven Kron - Goldman Sachs: On the 2% to 2.5% same-store sales guidance, how much price are you guys assuming in that at this point? Chuck Sonsteby: A couple of points. Steven Kron - Goldman Sachs: Doug, just a big picture question as we think about Chili's and the direction of the brand and you think strategically, if I look at two of your bigger kind of bar and grill competitors, certainly Applebee's being bought by a strategic buyer and Ruby Tuesdays has for the past year looked to move the brand a bit more upscale. I guess how do you see kind of the evolving strategies there affecting the competitive landscape going forward for Chili's and how you approach strategically how you are looking at a category that many have talked about as being somewhat having oversupply if your competitors are moving in different directions potentially?

Steven, first, we have to pay attention to our core consumer and what their needs are. I think we talked about this last quarter. Convenience is more important than ever. It is time, value, choice and health and wellness continues to grow. So I don't see us taking a drastic shift in the positioning of Chili's; we've just got to be more targeted about how you take this 30-year-old brand and apply it to consumers needs today. The most recent menu rollout is a great example of sort of the taste profile that Chili's has always had, some new relevant versions of that which are perfect for Chili's. If you look at the new remodel, the 18 restaurants that Chuck was talking about, it is just this new contemporary version of this old favorite. So we don't see positioning any great difference, but we are going to capitalize on the consumer of 2007's needs and keep driving great innovation. In my prepared comments, I talked a lot about the things going on in our restaurants with our team members, on hiring and training. We think we have some pretty new, different ways to get the right people in the door and the way we are training them and teaching them how to be great restaurateurs and we think that will give us a competitive advantage in the marketplace as well. Steven Kron - Goldman Sachs: Chuck, following up on the cannibalization comments, I just wanted to make sure my math is right. You said cannibalization may have impacted same-store sales, I think you said greater than 1% for the year. Unit growth was around 10%, 12%? So in those stores that were cannibalized, is it fair to assume that the same-store sales were impacted in those units by 8% to 10%? If so, after the initial shock of cannibalization, what have you seen from those units as they have built up or attempted to build back up the guest counts? Chuck Sonsteby: That is an accurate estimate. We do see anywhere from 8% to even low double digit declines and it stays down for a few months, but then gradually builds back over time. But the tough part is the restaurants that get cannibalized are the ones that are in the same-store sales computation and the new restaurants aren't. Steven Kron - Goldman Sachs: If I look at unit development on the company side of things, I think roughly 7% to 8% growth expected for '08. Geographically or density-wise, how should we be thinking about where those new units will be going, vis-à-vis the cannibalization comments and where you have existing units? Chuck Sonsteby: It would be very similar to where we went this year. Again, we are still trying to build out markets, but again that starts to dampen that effect as we reduce the number of new restaurants that we build on a year-over-year basis.

Your next question comes from Jeff Omohundro - Wachovia. Jeff Omohundro - Wachovia: I wonder if you could elaborate just a bit on On the Border. In particular some of the initiatives you might be pursuing to improve operating results at the brand.

Jeff, I think back to the comments on made to Steven about Chili's. We're looking at the brand. It still is the number one casual dining Tex-Mex brand and there are some pockets where we have great success with that. So you look at convenience and time, affordability, choice, health and wellness. Recently, the On the Border brand expanded a Border Smart category on their menu that has a number of less than 800-calorie items. I think there are four new items to change a little bit the perception of Mexican dining. This new footprint that I am speaking of takes a whole different look at the back of the house, the way we invest in the marketplace and even gets us closer to the consumer. It's a little bit more of a neighborhood strategic approach to be more convenient to the guest and they have done some other great menu innovations at the table Peso Live which got rolled out last year, which is theater at the table, the server is actually preparing items with the guest, upgraded that experience. So we are also reviewing the marketing of the brand, looking at different ways to reach out to those customers. So you still see the growth in Mexican food across the US population and we still think it is a very exciting brand, we are just going to get more laser-like in how we grow it and how we develop the brand to the guest.

Your next question comes from Mark Wiltamuth – Morgan Stanley. Mark Wiltamuth - Morgan Stanley: Chuck, I wanted to ask about the valuations you are receiving on your refranchising deals. It looks like your first wave of refranchising, you got about $1.6 million per store and I know it costs you about $2.8 million to open a new one. If you could talk about how you feel about the valuations you received and how much should we be thinking about refranchising accretion in the 2008 number? Chuck Sonsteby: When you are looking at valuations, Mark, first of all, we are still in the process of selling restaurants, so I'd hate to start getting too detailed about valuations. It is going to depend upon how much real estate is under those restaurants when we look at the sales price and the thing that I think many people miss is we are selling a long-term annuity, 4% of sales on let's say $2.8 million. So there is a continuous cash flow and if you net present value back that amount, I think you have got to look at what that has to do with the total sales price. Mark Wiltamuth - Morgan Stanley: So you are factoring that into your valuation thinking, like the long-term annuity and also maybe the new development? Chuck Sonsteby: I think when people look out in the marketplace, we have seen some folks try to compare the sale of a franchise restaurant to the sale of an entire company. What I think those folks miss is the fact that we are getting a 20-year annuity of 4% of sales from that restaurant we sold, plus we are selling the development territory that will continue to get ongoing franchise fees and development fees from that territory. So I think people are missing that. Mark Wiltamuth - Morgan Stanley: If we think about accretion and its contribution to the overall 2008 number, is it slight or is it a meaningful number? Chuck Sonsteby: The accretion? It is meaningful. It is a couple cents.

Your next question comes from Joe Fischer – Bear Stearns. Joe Fischer - Bear Stearns: I just wanted to see if you wouldn't mind breaking down that 90 to 100 basis point increase in commodity and labor into those two components.

Commodities are about 70 to 75 basis points of an expected increase in 2008 over 2007 and then labor is expected to be 20 to 25 basis points. If you recall at the beginning of calendar 2007 was when we saw a lot of state's minimum wage increases. So as we start lapping those increases, you will see the effect go down in the latter half of the fiscal year. Joe Fischer - Bear Stearns: On the 2% decline in restaurant capacity, is that just the effect of refranchising or are there store closures built into that?

Yes, there is also store closures, which we performed I think in the early part of calendar 2007, as well as refranchised restaurants. Joe Fischer - Bear Stearns: So not many closures going forward necessarily?

We haven't built many closures into our model, no. Joe Fischer - Bear Stearns: At what point does Macaroni Grill go into discontinued operations? Chuck Sonsteby: When we make a decision about whether we are going to sell it or not. So it is primarily going to be based on the indications of interest we get from the parties we are discussing it with. Joe Fischer - Bear Stearns: Just one more quick one, can you give us a sense of what the Chili's franchise revenue is going to be up year over year, what you would expect? Chuck Sonsteby: Total is going to be up 44%. Joe Fischer - Bear Stearns: 44%? And that is primarily Chili's?

Right. The franchise revenue line item.

Your next question comes from Jake Bartlett – Thomas Weisel. Jake Bartlett - Thomas Weisel: I had a question about the contemplated sale of the Mac Grill. Is that sale built into your estimate of 35% franchise stores? So is that part of the calculation when you give that goal?

No, it is not. Jake Bartlett - Thomas Weisel: Maggiano's, the development plan for that, it looks like they are outperforming the other brands on a relative basis and it looks like growth is being slowed a bit in 2008. Could you just talk about your thinking about development at Maggiano's?

Yes, some of that is a little bit just timing in the marketplace. Maggiano's building, because of the size, is just much more complicated and many times our development schedule doesn't become the same as the landlord or the shopping center that we are working with. So over the past few years, we have opened three to four almost every year. '08 coming -- unfortunately there are some that just got delayed. In fact, we opened four in '07. Looking into '09, that number will probably increase so that between the two years, you will get about the same number. So there is no desire to slow down; it is just timing with deals. Maggiano's locations are usually big developments and sometimes we can't control what we can't control. Jake Bartlett - Thomas Weisel: A question about G&A. Much of the pullback appears to be from reduced bonuses. As the comps start to recover in 2008 do you expect that to come back? I am trying to get an idea of where you think G&A is going to go on a relative basis? Chuck Sonsteby: Well, I think as we look at G&A on a relative basis, we're still looking to flat to slightly up. We certainly hope bonuses come back next year, but we are also looking at reduced headcount primarily around the sale of brands. We sold Corner Bakery last year, so headcount came down as a result of that and also our increased franchising needs has moved some folks out of that group and then also development. So we will look to have less headcount on a year-over-year basis also.

Your final question comes from David Palmer - UBS. David Palmer - UBS: What factors, if you can mention any specific ones, led you to potentially decide to sell Macaroni Grill today versus On the Border?

Honestly, looking at the shareholder return on investment. When you look at whether the brands in the portfolio are still accretive, looking at the marketplace, looking at the competitive set, the management team has done an outstanding job with Macaroni Grill, but On the Border currently is the largest Tex-Mex casual dining brand. So as you go across it, we think On the Border has a better opportunity to be a growth vehicle for us in the portfolio and we just had a much tougher time getting traction with Macaroni Grill. It's a tough decision, but we are very excited about On the Border and we are disappointed that we haven't been able to make Macaroni Grill be more successful. David Palmer - UBS: Just looking at the simple math of it, you have $80 million of reimaging CapEx together with $400,000 per store. It implies something like 200 Chili's restaurants. How are those going to be staged or timed throughout fiscal '08 or is that going to be evenly by quarter? I assume that is all going to be company restaurants? Chuck Sonsteby: It is going to be company restaurants, David. I can't give you the details because I just don't know the rollout, but I know we are aggressively working on those restaurants now.

My guess, David, with the amount of work it takes that they will be evenly spread out. There's some manpower in that organization to do that size of a refurbishing.

As a point of clarification in terms of total stores to be touched during the fiscal year, I think we are looking at plans for something less than 200 that you quoted. It should be closer to 180 at most, which does on average bring the investment cost a little bit higher than 400,000 and we are working to reduce that cost as we move forward. David Palmer - UBS: One last one, you mentioned the server training and the slowing unit growth and the reimaging, but I am wondering if there is anything on the marketing and the innovation side that you are maybe thinking internally that you could be doing better to perhaps meaningfully accelerate particularly the Chili's brand for fiscal '08?

Well, we are in the journey of finding a new advertising agency partner right now. At the end of August, we will have that decision made, but we have had a summer of talking to some very powerful, very good ad agencies and we haven't quite made that decision. So we think they will bring some assistance for us. Other than that, we are excited in all the brands with a lot of culinary work that has been done over the past year that will roll out throughout '08. So we have a great food pipeline and I would have to kill you if I told you right now what those things were, but some of the items we rolled out in the fourth quarter of '07 and in July, I think speak to the consumer knowledge and applying that to our culinary team.

Do you have any closing comments you would like to finish with?

No, I just want to thank everyone for participating on the conference call and please feel free to give me a call later today if you have any follow-up questions. Thank you so much.