Lynn Schweinfurth - IR Doug Brooks – President, CEO Chuck Sonsteby – EVP, CFO Guy Constant – VP, Operations Analysis

Jeffrey Bernstein - Lehman Brothers John Glass - CIBC World Markets David Palmer - UBS Steven Kron - Goldman Sachs Jeff Omohundro - Wachovia Capital Joe Buckley - Bear Stearns Paul Westra - Cowen Matthew DiFrisco - Thomas Weisel Partners John Ivankoe – JP Morgan

Good morning, ladies and gentlemen and welcome to theBrinker International first quarter fiscal 2008 earnings release conferencecall. (Operator Instructions) It is nowmy pleasure to turn the floor over to your host, Lynn Schweinfurth, VicePresident of Investor Relations. Ma'am, the floor is yours.

Thank you, Kate. Good morning and welcome to the October23rd Brinker International first quarter fiscal 2008 earnings conference call. During our management comments and in our responses to yourquestions, certain items may be discussed which are not based entirely onhistorical facts. Any such items should be considered forward-lookingstatements within the meaning of the Private Securities Litigation Reform Actof 1995. All such statements are subject to risk and uncertainties which couldcause actual results to differ from those anticipated. Such risk anduncertainties include factors more completely described in this morning's pressrelease and in the company's filings with the SEC. Upcoming calendar dates include the filing of the company'sfirst quarter SEC Form 10-Q on or before November 5th; and the company'ssecond quarter comparable sales and earnings results currently scheduled to bereported on January 23 before the market opens. As noted in our press release this morning, Macaroni Grillhas been presented for the first time as a discontinued operation in our first quarterfinancial statements. A deal is expected to close late in the current fiscalyear. Consequently, we have defined our annual fiscal year 2008 guidance totarget EPS growth from continuing operations. Posted on our website under the Financials tab is a summaryby quarter of fiscal 2007 continuing operations before special items, for yourinformation. As a point of reference, the comparable fiscal year 2007 EPSnumber from continuing operations, excluding special items, was $1.49. With me today are Doug Brooks, Chairman and Chief ExecutiveOfficer; Chuck Sonsteby, Chief Financial Officer; and Guy Constant, VicePresident of Operations Analysis. Doug will start us off this morning with someopening comments. Chuck will follow with key financial highlights. We will thenopen up the call for questions.

Thanks, Lynn.Good morning, everyone. Thanks for joining us on this morning's call. Progresscontinued in several areas of our operations during the first quarter,reflected by growth in earnings per share from continuing operations of 17%. As you know, Brinker is in the process of evolving itsgrowth strategy. In past years, the company successfully generated growth,primarily through new company restaurant development. Gong forward we will bemore focused on building profitable sales to generate ongoing earnings growthwhile shifting a greater proportion of new restaurant development to ourexpanding franchise network. This is priority #1. As we continue to reinvest in our business to meet thelong-term strategic and financial goals laid out at our investor conferencelast month, we see several leading indicators and aspects of our business thatmake us optimistic about the future. First, our portfolio strategy is improving financial returnsand optimizing development opportunities throughout the United States and overseas, which is apparent withthe flowthrough we are seeing on our top line growth. Additionally, systemrestaurant growth was an impressive 12% this past quarter. Chili's continues to be a high return growth vehicle for thecompany and our franchise partners. We continue to serve more guests perrestaurant than the competition, generating an enviable return on investment.This financial performance allows the company and our franchisees to enter newand existing markets throughout the world. Chili's unique positioning in the grill and bar segment isbeing accentuated by ongoing culinary and hospitality enhancements, as can beseen in our quarterly sales results. The current re-image program at Chili's isdriving incremental traffic now in the mid single-digits. We continue to invest in making hospitality a competitiveadvantage across the portfolio through our staff selection, our operationalexcellence, culinary development, technology improvements and new restaurantdesigns. Lower turnover of our restaurant team members and managementis benefiting the guest experience and lowering training costs. Restaurantmanagement turnover improved 3 percentage points to 25%, and team memberturnover improved 37 percentage points to 100% in the first quarter. A focusedset of elements that drive guest loyalty at each of the brands has beenidentified and are being used to deliver an elevated guest experience. Last, but certainly not least, incremental layers of revenueare being built through new ways to assess our brands like delivery service atMaggiano's, a concerted program to build to-go sales across our portfolio ofbrands; and a potential for retail sales of licensed products in theforeseeable future. While each of these parts of the business is important in itsown right, the whole of their combination gives us confidence in the directionof the overall business and our ability to meet the expectations underlying ourstrategies. Now turning to some particulars regarding the first quarter,our culinary marketing teams focused on meeting the guest value orientationwith new flavorful offerings that build on our core menu and brand positioning.These efforts drove improved sequential sales trends of 2% from our precedingquarter. Chili's was on-air during July and August with its Fired UpFavorites promotion. The promotion featured favorite menu items with spicy newflavors, such as the very popular new Honey Chipotle Chicken Crispers. Buildingon the spiced up, flavorful and fun reputation of the brand, Chili's launchedan advertising campaign earlier this month. The new campaign is our first withour new agency, Hill Holliday, and emphasizes the iconic nature of the brand's signaturered pepper. As part of the campaign, the brand is currently advertisingits Baby Back Rib Bonus, a three-course meal that includes a dinner salad, ahalf rack of ribs with home-style fries and a choice of desert for $10.99, agreat value. At On The Border, the new sizzling Fajita Flavors promotionlaunched earlier this month, featuring the brand's signature fajitas servedwith an extra side of premium sauce. This promotion follows the launch of a newmenu in July, which introduced guests to spicy Buffalo Chicken Tacos and ChickenChipotle Fajitas. The order incidence of the New Border Smart Menu items alsocontinues to grow. Macaroni Grill featured the Overstuffed Ravioli platformduring most of the recent quarter. At the end of September, Mac initiated itspromotion of Brick Oven Creations, including layers and layers of lasagna,their signature lasagna offering. Throughout the month of October, Maggiano's is featuring itsFall Harvest Celebration including dishes like Butternut Squash Ravioli and AsiagoCrusted Shrimp. Top one of those incredible offerings off with a new Spumonidessert. The marketing programs across all the brands built off of thesignature successful menu offerings reinforce the established position of eachof the brands by staying true to who they are and demonstrate their ability toprovide value to the guest for their hard-earned dollar. Demonstrating our commitment to grow Brinker brands bothdomestically and internationally, we built 27 new system restaurants during thequarter. 22 of those new locations were Chili's restaurants, 13 company-ownedand nine operated by our domestic and international franchisees. Companylocations were primarily added in domestic, metropolitan markets where we wantto deepen our presence, improve convenience for our guests and generateefficiencies of scale. Franchise locations were added in accordance withdevelopment agreements with experienced domestic operators, such as Shoot TheMoon, which opened our very first restaurant in the State of Montanaon September 27. In addition, longtime franchisee, HMS Host, opened our firstOn The Border airport location in Atlanta Hartsfield Airport,demonstrating incremental opportunities to enter new markets. HMS Host alsosigned an expanded agreement to develop 26 new restaurants over five yearsunder the Chili's, On The Border and Macaroni Grill names at airports and tollroads throughout the United States. Internationally, Brinker's strengthened its presence insuccessful Latin America markets adding two locations inMexico duringthe quarter and one in Lima, Peru.These latest openings bring our total number of international restaurants to 156, in 23 countries and oneterritory outside the United States. The company continues its commitment to support worthycauses, encourage community involvement, value diversity and inclusion andengage our guests and team members to work together for the common goal ofhelping those in need. In September, Chili's conducted another record-breakingcampaign to benefit St. Jude Children's Research Hospital. In October, On The Borderkicked off its first Fiesta For The Cure promotion to benefit Susan G. Komenfor the Cure. Across the country On The Border team members and guestshave rallied together to raise funds for Komen's ongoing research and educationto fight breast cancer. Community involvement has been a cornerstone of ourculture at Brinker for almost 33 years and is a responsibility we take veryseriously throughout our organization. I cannot emphasize enough how engaged bothour team members and guests are in these efforts; certainly driving loyalty andaffinity to our brands and our company, but even more importantly, to thecommunities they serve. The overall economic environment continues to presentchallenges to the casual dining industry. Recent moves by the Federal Reserveand other entities to provide support to the economy and to mitigate futureproblems related to the housing industry should prove helpful over time. In themeantime, Brinker remains focused on our long-term strategies while realizingthe immediate benefits of successful restructuring efforts. We are encouraged by the momentum we are achieving withinitiatives that address our guest need for value, pacing, convenience and a varietyof menu options. We have also reignited our focus on hospitality with a goal ofproviding outstanding guest experience that differentiates our brands from thecompetition. We are optimistic about the future of casual dining and thestrategies we are deploying to remain an industry leader. Throughout ourhistory, Brinker has successfully responded to tough operating environments andproviding shareholders with a quality level of return. We are in the process ofbetter understanding our guests, as well as engaging and developing teammembers with the goal of increasing guest loyalty and driving the businessforward. At the same time, we are scrutinizing all aspects of thebusiness from a shareholder perspective. We are optimizing the use of capitalby continuing to be disciplined about new restaurant development, closingunderperforming locations, selling company restaurants to strong franchisees,and remain committed to returning capital directly to shareholders in the formof increasing dividends or buying back stock. Just as important as running the business efficiently is managingoperating expenses, including G&A which in turn allows us to deliver thebest possible value to our guests. Our team has done a good job keeping costsunder control as we navigate through this challenging environment. However, tobe clear, our number one priority is increasing profitable traffic over time.Management and our team members are aligned with this priority and hard at workto make it happen. Now Chuck will provide a bit more detail on the financialresults of the quarter.

Thanks, Doug and good morning. The first quarter resultswere very solid. 17% EPS growth from continuing operations, excluding specialitems, is a good quarter. We accomplished those results from 10% growth inoperating income and the benefits of our aggressive share buybacks. Revenue growth was modest, as expected, due to newrestaurant capacity being partially offset by the refranchising of restaurantsand quarterly comparable sales that were even with last year. This change isreflected in our franchise revenues, which increased 33% to $14.1 million. Whilethe soft demand by consumers continues to grab headlines, we drove improvedtrends at Chili's in July and August by offering new, cravable products ontarget with the Chili's brand promise. Higher operating income flowthrough was achieved byincreased high return franchise revenues, better average restaurant margins dueto the sale of lower margin company restaurants and lower corporate overheadexpenses. As you heard Doug say, strengthening business fundamentalsand growing traffic over time remains a top priority for the company and salesand traffic performance in the first two-thirds of the quarter demonstrate ourculinary pipelines helping us drive improved trends. Now let's get into some of the details for the quarter andwhat drove our results. First, as Lynnmentioned, we are now reporting the net financial impact of Macaroni Grill as adiscontinued operation, therefore the following comments on income statementline items pertain to the continuous operations and exclude Mac Grill, unlessspecifically mentioned. Again, our first quarter EPS growth from continuingoperations was 17%, excluding the net impact of special items of $322,000consisting of charges related to restaurant impairments, and loss on the saleof land associated with prior restaurant closings. EPS including continuing anddiscontinued operations was $0.39 and it grew 8% excluding those special items. Special items from discontinued operations included the net impactof $5.1 million after-tax, consisting primarily of impairment charges andstock-based compensation expense resulting from the expected sale of MacaroniGrill. Revenues increased 3% to $895 million in the first quarterversus prior year. The increase is primarily attributed to the net increase of123 company-owned restaurants and partially offset by the decrease of 97restaurants sold to franchisees, subsequent to the first quarter of fiscal2007. All of this resulted in capacity growth of 2.6%. On a consolidated basis and excluding Macaroni Grill,Brinker comp sales were even with the prior year, driven by almost 2% in price,increased mix but offset by softer traffic. As I stated earlier, franchise revenues grew 33% due to anet increase of 143 franchise restaurants in the system. Chili's increased compsales by 0.7% in the first quarter. Our Fired-Up Favorites promotion ran inJuly and August and drew improved sequential sales and traffic trends. However,there was a timing difference of when we were on-air this year versus last,positively impacting August but negatively impacting September results. Whilewe expected a softer comparison in September due to the unfavorable advertisingcomparison, September comp results were lower than we anticipated. Quarterly sales at Chili's included the impact of priceincreases of 2% and strong mix shift driven by sales of new appetizers anddesserts. The other factor continuing to negatively impact traffic trends atChili's is cannibalization from new Chili's restaurants. We previouslyquantified self-cannibalization impact to the system results over 1% in fiscal2007, and that estimate is still valid. Even though comp sales are negatively impacted,overall shareholder value continues to grow because cannibalization is includedin our return projections for new restaurants. As we slow restaurantdevelopment during fiscal year 2008 and beyond, this will become less of a dragon comp sales. Chili's continues to offer great everyday value withattractive price points for high-quality fare delivered with hospitality in acomfortable setting. We are accentuating the value in our latest advertising atChili's with the Baby Back Bonus meal Doug described. This abundant threecourse meal is offered at a very compelling price of $10.99 and offers newproduct extensions to a signature platform, ribs. The new flavors include honeychipotle, blazin' habanero and brown sugar chili rub which support Chili'sunique positioning and flavor profile. Additionally, we have added a great new seasonal dessertthat will be offered through the holidays, the All Fruit Cobbler. Last week,Chili's rolled out its latest menu with an adjusted layout carrying bigger categorypictures, new grilled rib flavors and a lunch menu on the back. The lunch menufocuses on already popular lunch selections, including soup, salad, sandwichesand burgers. These items are ones which can be prepared more quickly to helpincrease the pace of the experience. Additionally we took about 50 basis pointsof price with this new menu rollout which still keeps us well below currentindustry averages and the increases in food away from home. Romano's Macaroni Grill reported a decrease in same-restaurantsales of 4.8%, driven by a decrease in traffic and partially offset by pricingand mix. On The Border same-restaurant sales decreased 5.3%, driven bydecreased traffic and mix and partially offset by pricing. We ended the quartercarrying 1.6% in price. The On The Border team continues to focus on improvingexecution through its new Mucho Gusto hospitality program. It was developed tobuild an emotional connection to the guest, correctly pacing the desiredexperience and ensuring order accuracy each and every time. We continue to beenthusiastic about our new restaurant design and see opportunities to leverageour learnings to improve speed of service, as well as improvements in kitchendesign efficiencies for the system. Maggiano's comparable store sales were up 0.5% for the firstquarter, driven by increases in traffic and price and partially offset by adecrease in mix. The team continues to focus on operational excellence and menuvariety for each occasion, whether it is in the dining room, the banquet roomor delivery service. We are pleased traffic trends continue to improve. Morepeople are enjoying the unique experience Maggiano's offers. The deliveryservice rollout to the system has been successful, adding a new revenue layerto brand performance. The Fall Harvest Celebration is giving guests a reason tocome to Maggiano's and experience freshly prepared seasonal dishes. Brinker's cost of sales came in better than we had expected,holding even with the prior year at 27.4% of revenues despite higher prices inmost commodities. Unfavorable commodity prices, particularly in beef, cheeseand cooking oil and unfavorable product mix shifts were offset by favorablemenu price increases and increased franchise revenues. Our operations team has continued to focus on the improvedactual versus theoretical forecasting tools and the purchasing team has done anoutstanding job managing our input costs. Restaurant expense increased 80 basispoints to 56.1% in the first quarter of fiscal 2008 compared to the prior year,driven by higher wage rates, primarily due to increased State minimum wages. Weanticipate these higher wage costs to continue in the second quarter until welap the State mandated minimum wage increases passed last January. Higher restaurant supply expenses were partially offset bydecreased pre-opening costs as we opened 16 fewer restaurants during thequarter versus the prior year and lower stock-based compensation expense. Inaddition, the sale of company restaurants to franchise partners and the ensuingroyalty stream contributed a benefit to restaurant expense as a percentage ofrevenues. Depreciation and amortization was $38.5 million, a $1.7million improvement from last year due to the required suspension ofdepreciation expense for restaurants held for sale to franchise partners, closedrestaurants and fully depreciated assets. The benefits were partially offset bynew restaurants and remodel investments. G&A was 4.6% versus 5.6% a year ago, an improvement of100 basis points year over year. The $7.2 million decrease was due to reducedstock-based compensation expense from forfeitures and the expiration of priorplans and reduced performance-based compensation expense in the current year. Interest expense was $12.9 million versus $6.2 million ayear ago due to the use of a $400 million, one-year unsecured committed creditfacility to fund our accelerated share repurchase of $297 million of commonstock and for general corporate purposes. The effective income tax rate for continuingoperations decreased to 30.8% excluding restructuring charges versus 32.5% lastyear. The lower tax rate for continuing operations was primarily due to anincrease in the federal tax credits, 70 basispoints of which came from the Work Opportunity Tax Credit and a decreaserelated to the impact of incentive stock options. Cash flow from continuing operations decreased $14.7 millionto $77.9 million this quarter over last, primarily due to the timing and amountof income taxes. Capital expenditures for continuing operations were $15.5million less than the prior year, due to 16 fewer restaurants being builtduring the quarter than last year. We ended the quarter at 3.2 times adjusted debt to EBITDARand continue to target a debt level to fall below three times by the end of thefiscal year. Due to the change in reporting for Romano's Macaroni Grill as adiscontinued operation, our fiscal 2008 guidance will be EPS growth fromcontinuing operations. Our expectation for EPS growth from continuing operationsis unchanged and is still in the low to mid double-digits for fiscal year 2008over our fiscal year 2007 earnings from continuing operations of $1.49. Again, Lynntold you where you can find that number. The expansion of Chili's reimage program continues with 31restaurants complete. This new look helps contemporize the Chili's experiencein restaurants which are more than 10 years old. Results continue to beexciting with sales increases in the mid single-digits. Excluding routinelyscheduled capital improvements, returns are in the mid-teens based on anaverage traffic lift that I said right now is in the mid single-digits. Our focus on returns continues with the latest projectionsfor new company restaurants in fiscal 2008 going from a range of 80 to 93restaurants to 75 to 85 restaurants, including Mac Grill. This will result inlower capital expenditure expectations from a previous range of $385 million to$405 million, down to $360 million to $380 million. Estimates have been reduced based on the reduction in projectednew company restaurants for this year and our expectation of lower developmentin 2009, as well. Additionally, projections for franchise restaurantdevelopment increased from a previous estimate of 68 to 82 restaurants infiscal year 2008 to 78 to 92 restaurants, driven by increased franchiseprojections for new Chili's and On The Border franchise restaurants. We continue to make progress on the sale of Mac Grill; also,the debt markets seem to be settling down a bit. While we have not seen adirect impact of the tightening credit markets negatively impacting our salesprocesses, this gives us increased comfort that we will successfully concludethe Macaroni Grill transaction and continue to make progress with our ongoingrefranchising program. To that point, our previously announced transaction with ERJDining to buy 76 Chili's restaurants in the Midwestremains on track and should be completed in the second quarter. Given thecontinuation of our franchising program with all Brinker brands and moreaggressive franchising goals for the OTB brand, we'll continue to evaluaterefranchising transactions in the foreseeable future, though they will probablybe smaller deals. While our next milestone target is to have a franchise mix ofat least 35% by the end of fiscal 2008, we will continue to assess ourportfolio strategy and goals on an ongoing basis. To wrap up, our system continues to grow at a healthy pace.In fact, system restaurants increased 12% this quarter over last year. Increasedfranchise presence in our system intentionally improves company returns,flowthrough and focus while allowing the system to grow our brands quickly inthe global marketplace. This portfolio strategy will produce a different kindof revenue growth from past years and as a result, growing profitable, ongoingcomparable sales is the number one priority for Brinker and its franchisees. Growth will be achieved through exceptional brandmanagement, franchise support, culinary and operations innovation and mostimportantly, extraordinary hospitality at a great value. We are investing in the long-term health of our brands andour stakeholders with a number of initiatives, tests and research in play thatwill help us achieve consistent long-term shareholder value over time. With that, I would like to turn the call over to Kate tofacilitate the question-and-answer period.

(Operator Instructions) Your first question comes from JeffreyBernstein – Lehman Brothers. Jeffrey Bernstein - Lehman Brothers: A question on the importance of traffic, and at what cost? Iknow you mentioned that improving traffic is pretty much your #1 priority in thischallenging environment. It seems that the trend by some of your peers as wellas yourselves most recently is to really promote more significant valueofferings. An example would be the current rib bundling promotion. I'm wondering if you can provide your thought process interms of your willingness to offer such promotions and at what point thebenefit from greater traffic might diminish? I am thinking back to people lookat the burger wars in fast food where everyone got into significantdiscounting. I'm wondering to what degree you are willing to do something likethat and at what point the benefit from such might diminish? Thanks.

Sure, Jeff. I thinkas we've seen over the years it is about balance. When we talk to consumers now,casual dining still represents a social occasion, and so the capabilities thatcasual dining has always had has been about that experience -- the service, theatmosphere, the music. But there is a tightening on the pocketbooks right now,so some of those experiences also have a lot to do with how much they canspend. So a lot of it is balancing great value offerings in still a casualdining environment. If you look atpromotions or menu rollouts over a 12 month basis, it probably will includesome value ideas and obviously expansion of lines like the Chipotle Crispersthat we rolled out earlier this summer. We've also learned that value, of course, is not always justwhat you pay for the food. It is the total experience, and what you get is whatyou pay for, not just discounting. It is not just the price point, it is thetotal experience that goes with the product that you are buying.

Jeff, when you talk about our $10.99 rib bundle, that wassomething that was specifically engineered to have both a good return for usand offer a compelling value to customers. I think it is important that wemaybe look at what are things on our menu that can be tweaked in a slightlydifferent way such that we are not discounting the everyday price that we haveon the menu -- not putting food on sale, which I think is a very dangerous pathto go down -- but maybe looking at something that we don't normally carry andputting a slight twist on it so it can deliver good value to the guests. I think you'll see us try to do those kinds ofthings more and more often. Jeffrey Bernstein - Lehman Brothers: The rib bundling andsome of your other value promotions in terms of profitability, that is stillseeing enough of a profitability that you are willing to offer it to drive thetraffic?

Yes, the $10.99 rib bundle offers a compelling value bothfor the guest and a great return for us. Jeffrey Bernstein - Lehman Brothers: One follow-up on the menu pricing. I think you recentlynoted a boost to pricing would be likely and necessary to help protect margins,it looks like you're currently running 2%. I think you said you were boostingit maybe by half a point earlier this month. I am just wondering, is 2.5something we should assume going forward? Is that enough to offset the ongoingcommodity and labor cost pressure? I am justtrying to figure out that balance between pricing and traffic and whether ornot 2.5 is what you guys see as necessary.

That is where westand right now, Jeff and again, we will continue to look at it as we gothrough the rest of the fiscal year and see where we are in terms of inputprices and also where the consumer is. So right now all I can tell you is we are at 2.5%, and wewill continue to take a look as we go through the fiscal year. Jeffrey Bernstein - Lehman Brothers: Do you have commodities locked in for the rest of this yearthat you can get greater clarity or where does that stand?

Yes, we certainly have the majority of our commodity costsembedded in the contracts. Some of those contracts do include some escalatorsrelated to feed, as well as our distribution contract also includes some fuelsurcharges. However, we have those costs embedded in our current forecast.

Your next question comes from John Glass – CIBC WorldMarkets. John Glass - CIBC World Markets: I wanted to clarify your guidance. $1.49 in this new base year should grow low tomid double-digits, so say $1.65 to $1.70. Are you making any assumptions onbuybacks in those numbers? It seems like you're penalizing yourself forremoving Mac Grill, but you're not getting any benefit to the potentialbuyback. To that end, do you feel that the sale of Macaroni Grill would beaccretive when you factor in buybacks?

John, it will beaccretive after the impact of reduction of the share count. It will be anaccretive transaction once we get to a full quarter of the buyback. You areright, we are putting out a number that excludes the Mac Grill simply becausethe timing of when we do the deal, John, and also the proceeds and the shareprice make three variables in that assumption. I think that makes a lot of “ifs” to go intothe calculation. We think when we do that, that will help us get some upsidefor the balance of the year. John Glass - CIBC World Markets: Should I read fromyour comments, are you negotiating with a bidder? Do you have a deal that youare just finalizing or are you just negotiating with a bunch and you believethere is enough sufficient interest you can get it done through somebody?

I think the second is closer than the first.

Your next question comes from David Palmer - UBS. David Palmer - UBS: On The Border, you talked about the hospitality program andyou have talked about the new restaurant design and some exciting changes thatyou've made with regard to kitchen systems. I guess we could be patient and wait for someof these things to be something that could help the overall chain. However, thesame-store sales trends seem more and more troubling. I am wondering if there is any sort ofnear-term help there for sales. Obviously we are seeing some other brands beingsold, and this would be one that that would be a potential option. I am justwondering how you are thinking about the near term and whether this isstrategically something that it is off the table that this might be sold, OnThe Border? Thanks.

It is off the table that it will be sold. I think we'relooking at a number of things to offer some excitement for us right now, David.These options give us something that appeals to franchise partners and again,we have been discussion with people and find that there is an active market offolks that are very interested in On The Border. It does carry scale in that itis the largest sit-down casual dining Mexican restaurant and that is also apretty compelling platform to work from. So with those two things going for it, I think as we look atit, it still continues to look to be able to deliver returns well in excess ofwhat we need to stay in the portfolio. So we are very excited about it. David Palmer - UBS: Any guidance about the refranchising pace that could beachieved, roughly speaking?

We've already said that we would be at 35% by the end of thefiscal year. Obviously we are going to exceed that target, and we continue totalk to potential partners about a number of deals. You won't see anything asbig as the deals we did both in New England and also inthe Midwest; those where huge deals on a relative basis.We would look to do things that were a little bit smaller in size, but we arevery encouraged by the response we've been getting from potential partners andfeel like we can continue to actively refranchise the restaurants that are inthe marketplace now.

Your next question comes from Steven Kron – Goldman Sachs. Steven Kron - Goldman Sachs: If I could just go back to guidance real quick and theguidance that you guys laid out in the fourth quarter and then reiterated atthe analyst day as far as the algorithm to get that growth. The revenue growthat 1%, same-store sales at 2% to 2.5%, margins positive, G&A around 200. You are eliminating a seemingly lower margin business and abusiness that I suspect had revenue perhaps decline during the quarter. Are youholding true to those specific line items still and essentially in essence theexisting business that you are retaining, the expectations have been slightlyreduced here? How should we think about those pieces?

I think when you gothrough that metric of looking at things, you probably come to a wider rangethan what we demonstrated. We said the low double-digits to mid on EPS growth.You probably come in somewhere on the higher end of that. So I wouldn't saynecessarily we have lowered our numbers because we're going to have additionalcosts related to going through the transaction. We've had some costs that havehit continuing operations related to existing Macaroni Grill restaurants. So suffice to say I think we're still pretty much on track withour business model such that if we hit those metrics we will still continue thesame kinds of earnings growth that we had said back at the investor conference. Steven Kron - Goldman Sachs: So you're sticking with those types of targets. Secondly, if I think about a bigger picture question and Iam just curious as to how you guys assess the cyclical pressures that certainlyyour industry is seeing due to secular pressures potentially, particularly someof the things that have driven casual dining and bar and grill in the past -- dualincome households, women in the workforce, seems to have kind of stabilized abit more recently in the last couple of years. How do you assess the pressuresthat you are seeing and determine whether or not for Chili's in particular andmaybe a more significant brand repositioning might be necessary or might not?

As I mentioned in some of my prepared comments and we talkedabout in Jersey, we are trying to figure out ways tobuild the business outside of the traditional casual dining experience. We'reworking on all of the things inside the box, but the delivery and cateringbusiness is growing. We are trying some retail products in the grocery stores.We are working hard on some better systems on our to-go business, so there are alot of other ways that consumers can use casual dining than they havehistorically, as well as what goes on inside the box. So we are not looking at this short term, as we never do,and a company that has been around 33 years has seen times like this wherethere were short-term pressures based on supply and demand and sometimespressures on the consumers' pocketbook. So right now it does feel like there area lot of things going on we can't control but the things we can control are theguest experience in the restaurant and figuring out ways to use our branddifferently maybe than in the past. Steven Kron - Goldman Sachs: Chuck, you made a comment that September sales were lowerthan you guys had anticipated. Is there any color that you could providewhether that was macro driven from your assessment or competitive reasons,anything you could share?

I think everybody onthe retail side saw September be somewhat strange, too. I think we reportedthat macro trend.

Your next question comes from Jeff Omohundro – Wachovia. Jeff Omohundro - Wachovia: Another question on the Baby Back Bonus promo. Curious aboutsome of the details around the price increase against that promo year over year.It looks pretty significant but still an attractive value. I am also wondering about the productenhancements. I did notice the new flavors look pretty interesting, but in thisenvironment maybe you can talk a little bit about the thinking behind the priceincrease on that?

We tested theproduct. We ran it last year at $9.99. We did tests on the product earlier thisyear at $10.99. We didn't see any change in the amount of sales. So we feltpretty comfortable that it was an outstanding value. It is a salad, a half arack of ribs, your choice of a side and a full dessert. So when you look atthat, even at $10.99 that is pretty darn compelling. I know some of our competition has been on-air operating avery similar type of item for $12.99. So again on a comparative basis, both topeople in the industry and then from the results we got when we tested it at$10.99, it is a pretty good value. Jeff Omohundro - Wachovia: Is that the majorpart of the 50 basis point overall price increase at Chili's?

No, that would be inmix. Price increase would just be on an items that we had on the menu last yearthat we have on the menu this year. That Baby Back Bonus would show up ineither mix or traffic.

Your next question comes from Joe Buckley – Bear Stearns. Joe Buckley - Bear Stearns: First on the comments about the on-air/off-air influences onsales, does it change your thoughts at all in terms of maybe in thisenvironment that you need to be on-air more consistently at Chili's?

We are excited to getsome lift in July and August and so I think we will continue to look at how wecan get effectiveness from our marketing spending, Joe. We have got a newagency, Hill Holliday, who is really working around the brand differentiationfor Chili's. The pepper is something that is an icon that really does representsomething different, something bold, something spicy and it is something thatour competition really doesn't have. So if we can get out there with a messagethat can move people in and move profitability, we definitely will continue tomarket more and advertise more. Joe Buckley - Bear Stearns: As of right now, no plan to be on-air more consistently? Youwill still be driven by timing and product?

As of right now, thatis where we are at. Joe Buckley - Bear Stearns: Macaroni Grill, just looking at the information on thewebsite and then looking at the data reported with Macaroni Grill included aspart of Brinker, it looks like the EBITDA contribution from Macaroni Grillmight have been about $78 million last year. That is a lot higher than I wouldhave guessed on my own, or a lot higher even than some of your pie chart datafrom the analyst day might have suggested. Going again to that number, I am just taking your operatingincome number off the website, adding back D&A and then doing the same forthe originally reported numbers and it is about a $78 million difference.

Yes, I think it is hard to do that because when you do thatyou don't have any standalone cost for G&A. That would be slightly reducingthat $78 million that you stated. There would have to be some implied rentrelated to the owned properties that they have. So when we would be shoppingthat deal, there would be a haircut for those two items.

Joe, I think the other consideration as well isunfortunately we've seen declining traffic. So you will want to incorporatethat into your financial projection. Joe Buckley - Bear Stearns: One more question on the Mac Grill in terms of potentialaccretion. As someone else pointed out, the'08 guidance doesn't reflect any of that. Will the '09 numbers be changedmaterially? I am asking whether or not '09 estimates would change much one wayor the other if Mac Grill is included in the business or not included in thebusiness assuming proceeds are used to buy back stock?

It would be helpfulto us, we would have reductions in G&A. We would also have the reduction inshare count for a full year. The other thing is it is tough to get any impacton '08 because of just the timing. So as we look out into '09 there should be abenefit from that.

Your next question comes from Paul Westra – Cowen. Paul Westra - Cowen: I think there is still a lot of confusion on this. I have afollow-up question on the Mac Grill and your guidance for earnings andaccretion or dilution. When you say you hope it to be accretive you're talkingabout getting basically that $0.28 of earnings back that Mac earned in fiscal2007 back into your continued operation earnings. Is that what you mean bysaying you hope it is earnings neutral or accretive?

Maybe I can say itthis way, Paul. Now that we are guiding to continuing operations in the low to middouble-digits, with the sale of Mac Grill we expect the impact to be oncontinuing operations related to share count to be flat to accretive for thatnumber. Paul Westra - Cowen: I may have to go through it with you a little bit again. Butjust to walk through, when you break out that earnings in your quarterly as youallocated G&A without supportservices, so you only allocated $9 million in G&A and I think that relatesto the question prior. So you only allocate $9 million in G&A, which means yourcontinued operation's G&A in your restated number jumps significantly. WillG&A increase as a percent of the sale dramatically from the sale? Or do youthink you can maintain roughly the same G&A savings or G&A levels thatyou had as a combined entity?

In the macro P&Lthere is G&A, but there is also, as Chuck mentioned earlier, there are stand-alonecosts at Brinker. So that number of $9 million that you talk about, talks aboutmore than Mac specific G&A. There also are standalone costs at Brinker inaddition to that. The G&A savings would be larger than that $9 million. Paul Westra - Cowen: Considerably, you would think, yes. From an accountingstandpoint you're coming up with $0.28, but clearly that is moving all thestandalone Mac G&A into the continued operations G&A number. So itlooks obviously that $0.28 number is inflated because it doesn't include thatstandalone G&A. Now you think you can save a significant portion of thatstandalone G&A? In other words, if your total G&A was 4.4% of revenues infiscal '07 as a combined entity as a continued operation in '09, is that thetype of G&A level you would like to get back to?

Absolutely. Paul Westra - Cowen: That answers a significant question. I think people were really confused on that soI'm sure you might still have some follow-ups later. A last question just for clarification as well, justdouble-checking, you have the assets for sale, that went from $93 million lastquarter to $407 million. I assume that entire delta is just Macaroni Grill. Youhad $93 million which is the ERJ transaction in your last balance sheet, andnow it moved to $407 million. Is that good to assume that delta of $314 millionis entire Macaroni Grill?

Yes.

Your next question comes from Matthew DiFrisco – ThomasWeisel. Matthew DiFrisco - Thomas Weisel Partners: That $407 million versus the $93 million, so the $407 millionstill includes assets for sale going to ERJ or is the $407 million just completelyMacaroni Grill?

It includes ERJ. Matthew DiFrisco - Thomas Weisel Partners: Just to bring it out even more I guess, looking back at thelast quarter's guidance you specifically said 10% growth and then getting tolow to mid single-digit, double-digit growth. I think what we are all trying to figure outis 10% growth would have been $1.94 off of your base of $1.76. Now you are onthe upper end saying $1.70. So we are all just trying to figure out if it wasas of the first day of the fiscal year '08, when you say earnings neutral oraccretive, we are all presuming then you're going to do if it was as of thebeginning of fiscal '08, ashare repurchase to the magnitude that would offset the $0.22 or so going outthe window with Macaroni Grill. Is that correct?

Hold on. I'm trying to follow your math. The hard part is weare not going to have much share repurchase done in this fiscal year because wewon't get the proceeds until toward the end of the year. So I think when we aretalking about being neutral, Matt, we are really talking about when we get tofiscal year '09. Matthew DiFrisco - Thomas Weisel Partners: Can you just remind us, you said basis points in pricing youjust took an incremental 50 basis points of price, so you are running nowcurrently 2.5?

That would be atChili's, yes. Matthew DiFrisco - Thomas Weisel Partners: You are going to manage that around 2.5, would that becorrect for the rest of '08 just as a proxy?

We will just continueto take a look as we go through the year and figure out what pricing isnecessary based on input costs and the competitive situation. Matthew DiFrisco - Thomas Weisel Partners: You mentioned a couple times a reference to some of the MacGrills that are still in continuing operations. Are you going to hold onto someMac Grills; you're not selling all of the Mac Grills?

There's a few restaurants that were being closed between Q1and Q2 that will be closed, and those had to be carried in continuingoperations because they won't be held for sale. Then we do have one restaurantin the UK thatis a company of Mac Grill that will be reimaged. Matthew DiFrisco - Thomas Weisel Partners: But the brand will leave you; it is just that these are onesthat aren't going to be sold that are closed?

They are better closed than sold. EBITDA, was sufficiently poorin order to do that. Matthew DiFrisco - Thomas Weisel Partners: Then you mentionedSeptember being an overall macro trend that everyone else experienced as well.Is this the underlying fundamentals that drove that, or are you seeing thatcontinue into October?

I wouldn't necessarily make that logic leap.

Your next question comes from John Ivankoe – JP Morgan. John Ivankoe - JP Morgan: I would ask the same thing regarding guidance as everyoneelse has regarding '09. I'll just askyou one simple one. What is your CapEx going to be in fiscal '09? That was anumber that caught a lot of us by surprise on the high end, and it sounds likethat might be coming down a little bit. Do you have a firm number for us toupdate from the analyst conference?

I think the analyst conference number was about $300million, and it will be down from there in '09. I don't have a specific numberto call out for you right now. John Ivankoe - JP Morgan: Presumably and hopefully the next time we speak, we can gothrough growth versus maintenance and remodel CapEx, but should we expect itdown at least in the magnitude relative to what '08 was down relative toprevious expectations, or perhaps even more than that?

What number are youtalking about, John? John Ivankoe - JP Morgan: The '09 CapEx numberof $300 million, it looks like the '08 number is down about $25 million. Soshould the '09 number be down $25 million or more or less than that numberrelative to where you're thinking right now?

It is going to bemaybe about $50 million lower than what we had previously presented. John Ivankoe - JP Morgan: $285 million?

Yes, right now andagain, that number changes with various initiatives and as we proceed throughthe year in our development pipeline.

Your next question comes from David Palmer - UBS. David Palmer - UBS: I am just going to go a different direction here. Maybe youwould want to give another couple thoughts on your marketing direction onChili's. Obviously we have the new advertising out. You're emphasizing thepepper icon, but perhaps there is something more, something a little deeperabout the insights around the type of consumers that you are trying to get tovisit more frequently -- lapsed users, certain day parts, something about thisinitiative that might give us a sense of the detail behind the initiatives andthe marketing? Thanks.

David, I think withthe association with Hill Holliday, in fact we even had a press release acouple weeks ago regarding this idea of the icon and the pepper, and the pepperrepresenting -- in the past it has been sort of a noun, I guess it has beenthis spicy vegetable -- and we arelooking at it representing the whole experience. The types of food we serve,the attitude of the team members and even the guests that we talk to callthemselves everyday adventurers. They are looking for something just a littlebit different to break out of the rut, to break out of the everyday experience. So the blocking and tackling of casual dining is the same ithas always been, but we do talk to guests that tell us that Chili's is just alittle bit different. The food is just a little bit more flavorful, and theexperience inside is a little bit more fun and so we are going to build on newproducts that live up to the legacy of the pepper as well as just try toimprove the experience for the casual dining guests.

And really tie together the marketing both in the restaurantand the advertising. It is more about, as Doug said, the experience that whenyou walk into the restaurant you see something that really is depicted on TV. Itreally does match up to the same kind of sense of adventure and sense of funthat you would see in a commercial, you would also experience when you walkinto the restaurant. Maybe sometimes those things can be disconnected and theidea is really to start connecting it through a lot of the things that Dougmentioned. David Palmer - UBS: Chuck, just a follow-up on the proceeds. You believe thatthe proceeds on the Macaroni Grill, I mean obviously you have to close on thisand decide on a bidder. But do you really believe this will happen in the finalquarter? That the cash proceeds will be realized in the final fiscal quarter?Is that around the timeframe that we should be expecting?

That is our currentestimate, yes.

Ladies and gentlemen, there are no further questions in thequeue. Do you have any closing comments you would like to finish with?

Thank you, Kate. Ijust want to thank everyone for their continued interest in BrinkerInternational, and I'll look forward to speaking with many of you later thismorning.