Marie Perry - VP of IR and Treasurer Doug Brooks - Chairman and CEO Chuck Sonsteby - CFO and EVP Guy Constant- SVP of Finance

John Glass - Morgan Stanley Joe Buckley - Bank of America Jeffery Bernstein - Barclays Capital Brad Ludington - KeyBanc Capital Markets Chris O'Cull - Suntrust Jeffrey Omohundro - Wachovia Securities Joe Fisher - Goldman Sachs John Ivankoe - JPMorgan Lynne Collier - KeyBanc Capital Markets Chris Bowen - MTB Investments

Welcome to the Brinker International Second Quarter 2009 Earnings Release Conference Call. (Operator Instructions). It is now my pleasure to turn the floor over to your host, Marie Perry. Ma'am the floor is yours.

Thank you, Janet. Good morning everyone and welcome to Brinker International's second quarter fiscal 2009 earnings call, which is also being broadcast live on the internet. Today, with us from management are Doug Brooks, Chairman and Chief Executive Officer, Chuck Sonsteby, Chief Financial Officer and Guy Constant, Senior Vice President of Finance. Before turning the call over, let me quickly remind you of our Safe Harbor regarding forward-looking statements. 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 uncertainties, 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. On the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. Reconciliations are provided in the tables in the earnings release and on Brinker's website under financial section of the investor tab for your review. This morning, Doug will start us off with company highlights, Chuck will follow with the financial recap of the quarter's operating results. Following the comments, we will open up the call for your questions. Now, I will turn it over to Doug.

Thank you, Marie. Good morning and thanks for joining us on the call this morning. The second quarter of our fiscal year 2009 has been marked by many of the same challenges Brinker faced in the first three months of the fiscal year. Externally, the volatile financial market, rising unemployment and the housing crisis continue to put significant pressure on consumer spending in the US and overseas. The holiday season brought low relief for retail and restaurant companies including Brinker, as consumers remained cautious about discretionary spending. As a result, our traffic trends indicate the guest choices to limit restaurant dining occasions or scale back on check totals during their visits. While there are multiple efforts to reenergize the economy and encourage consumer spending, we realized that lasting change will only happen overtime. At Brinker, we are not waiting for external actions to strengthen our company instead we have taken considerable steps to remain competitive and position our brands for accelerated profitability once the economy eventually does improve. Although the ongoing economic downturn is not ideal for our industry, we remain confident in the relevance of casual dining and the long-term viability of Brinker brands. The consumer still desires dining options that offer high quality food in a comfortable setting delivered with outstanding hospitality. We will continue to meet that need by investing in strategies that strengthen our brands and as the economy stabilizes, I fully expect the return in the growth of guest visits. In the meantime, we are bolstered by a strong cash flow, commitment to fiscal responsibility and our ongoing dedication to hospitality and guest satisfaction. An ongoing area of focus for Brinker and its brands is food and beverage excellence. Our goal is to continue to satisfy the live guest with delicious menu items that align with our brands unique positioning. And because we understand our guests desire to manage expenses during these challenging economic times all three brands are focused on delivering great food at the best possible bag. Our brands are also improving core menu execution by increasing training and recertification of managers and our part of house team members and by tightening product specs for our supplier partners. Additionally, periodic reviews of recipes, ingredients, and processes for signature menu items help our restaurant teams ensure consistent execution and quality across the system. Chili's capitalized on some of its most popular menu items in the second quarter by introducing kicked-up new flavors of guest favorites. The Kickin' Crispers promotion with a starting price of $7.99 introduced new menu items such as Buffalo Chicken Crisper Bites, Crispy Chicken, Crisper Tacos and new Crisper flavors such as honey barbeque, sweet chili glazed and habanero chipotle. The promotion was supported by media throughout the quarter. Guests also enjoyed the new Chocolate Chip Molten Cake and the new Red Velvet and Key Lime Pie sweet shots. Support for the brands right and right on time to-go messaging continued during the quarter, promoting the brands process improvements in the execution of to-go orders. Looking ahead to the third quarter of fiscal 2009, Chili's has introduced and expanded Triple Dipper dinner menu for $9.99, with three new options and endless combinations for the guests. Also launching this month, are four new additions to the Guiltless Grill menu, featuring dishes that appeal to our guest interests and their lifestyle of health and wellness. Early guests reaction to both of these expanded menu categories has been very positive. To support the successful launch of new menu items, Chili's continues to hold quarterly all team member training sessions. In these meetings, our early team members learn the details of upcoming promotions, review execution of core menu items, and reinforce hospitality principles. On The Border probably serves the world's favorite Mexican food and is focused on delivering cravable new dishes and incredible value. In late October, the brand began featuring the On The Border classic five, which includes five Mexican flavors at a value price of $8.99. The promotion was supported by media in key markets. The brand also promoted its Fajita Revolution, a commitment to offering the perfect fajita grilled to order for each guest. This promotion features create your favorite fajita where guests are invited to choose their favorite protein, veggies and sauce to create a fully customized version of the brand's best selling menu item, with more than 125 possible combinations. This menu enhancement is supported by training to ensure each customized order is delivered flawlessly to the guest. The brand's grilled enchiladas also continue to be popular and became part of the core menu during the quarter. Now this month, the On The Border team introduced their new Border Lunch menu starting at $6.49, which addresses our guest priorities for value, speed, and health and wellness. With a combination of new offerings and guest favorites, the menu focuses on menu items that can be prepared and delivered to the table quickly. The brand will also feature its popular endless enchilada promotion in the third quarter, also value priced at $8.99. Maggiano's Little Italy opened its 44th restaurant during the second quarter in the Rim Shopping Center in San Antonio. In keeping with its commitment to delivering food and beverage excellence, the brand introduced three new Little Italy favorites, including Lobster Fettuccine, Chicken Francese and Beef Braciole. New items were promoted with online advertising and radio in selected markets. During the holidays, the brand also featured seasonal specials including the very popular Chicken Tortellacci. In addition to delivering food and beverage excellence, the brand continues to emphasize outstanding hospitality by investing in ongoing leadership training for managers and coaching all team members to make every guest feel special. As we shift our focus to increase franchise development both domestically and internationally, our growth will be driven by a combination of franchising and equity investments or joint venture investments. During the second quarter, Brinker's franchise partners around the world opened 27 new restaurants. We opened two company owned restaurants, 12 more domestic franchise and 13 more international franchise locations. All totaled, these new restaurants bring our system presence to 1,704 restaurants in 25 countries worldwide. Our global development team remains focused on discipline and aggressive international expansion of Brinker brands in key markets around the world. In the third quarter, we will enter three new countries and one new territory with the first Chili's restaurant in El Salvador, Turkey, India and Guam. With the completion of the sale of Macaroni Grill, our global development team has revised our stated goal for international expansion to 260 restaurants outside the US by the end of calendar year 2010. In December, Brinker closed the sale of the majority interest in the Romano's Macaroni Grill to Mac Acquisition LLC, a subsidiary of Golden Gate Capital. Cash attributable to the transaction has been or will be used to pay down outstanding bank debt. While we will no longer being involved in the day-to-day operation of the brand, we will continue to support the Macaroni Grill team as a minority partner and through the provision of on going transition services for at least one year. In addition, I will serve on the brands Board of Directors lending my support to our new President Brad Blum. Brad brings an excellent track record of leading some of the countries best known restaurant brands and we look forward to partnering with him. Our guests will be able to redeem Brinker gift cards at Macaroni Grill as they always have and Chili's, On the Border and Maggiano's will continue accepting Macaroni Grill gift cards as well. Although the sale of the brand has been a long process of hard work and negotiations for all those involved in the sale, we are proud to have met our goal of closing the sale by the end of the calendar year. It's a great brand and we wish them continued success. As we look forward to remainder of fiscal year 2009, Brinker and the entire restaurant industry remains challenged by a highly competitive environment and an uncertain economy. Despite the challenges, we are more focused and motivated than ever, to produce positive results for our shareholders We will continue to optimize the use of capital by being disciplined about new restaurant development in order to preserve capital, lessen manager churn and hold the line on hourly team member turnover, which in turn, has created a more consistent guest experience within our restaurants. Our act of refranchising, existing domestic restaurant locations has enabled us to produce a stable revenue stream and reduce volatility in our P&L. By emphasizing international expansion, with a primarily franchised model in high growth areas, with little competition, we are creating a stable revenue stream with vast potential for the future. Our discipline in closing underperforming locations has enabled us to focus on restaurants that produced the strongest return for our investment. Likewise, we have made the decision to divest Corner Bakery and Macaroni Grill in order to focus on our core brands. By renewing our focus on core menu items and their extensions, burgers at Chili's, Fajitas of On the Border, Little Italy Favorites of Maggiano's, we continue to differentiate our brands from the competition and retain all our guests. Despite tough economic times, guests can trust Brinker brands to deliver outstanding hospitality. Chili's continues to outperform the industry, beating the casual dining comp sales growth as measured by Knapp-Track for the sixth consecutive quarter. And On the Border has now beaten the Knapp-Track casual dining composite for the fifth consecutive month. These accomplishments speak to the ability of our brands to connect with our guests and deliver the food and hospitality they prefer. In addition, Chili's continued investment in a national advertising provides a competitive advantage in the space, where only a handful of restaurant brands can compete. This was important as these initiatives are our efforts to run the business efficiently by managing operating expenses including G&A. Our decision to play some moratorium on our share repurchase program pay down debt, reduce our capital expenditures, and increase cash flow are all evidence of our commitment to proactive balance sheet management. Although, we're challenged by a variety of external factors, our experienced leadership team had seen tough times before and has successfully managed through those challenges to emerge stronger and more competitive than before. Our top priority as an organization remains increasing profitable traffic over time. Through concentrated actions aligned with our strategies, we are confident Brinker is well-positioned to deliver profitable growth over the long-term. Thank you. With that, I'll turn the call over to Chuck to share the financial details of the quarter.

Well, thanks, Doug and good morning. Well, today's unprecedented economic times are contributing to continued pressure on the consumer. And as a consequence, our margins have also been impacted in large part driven by deleverage on lower sales. But, we've adapted throughout past year. Our management team will not fall victim to the current environment, but rather we look upon these times as an opportunity to create change to the business model and to drive sales and profits. The team's attention is fully tuned to reinforcing our current positions of strength and bolstering our long-term success. In fact, we expect not only to survive but emerge from this economic recession as a stronger leader in casual dining. Our team reacted to the declining markets sometime ago paring back new restaurant development and balancing our G&A costs to help weather an economic storm. The second quarter saw the lack of available and affordable credit, declining stock and home prices, and rising unemployment which has led to an all time low in the consumer confidence index and has impacted many of your businesses as well as ours. These factors contributed to comparable restaurants sales of negative 4.5% in the second quarter excluding Macaroni Grill results. And turning to the second quarter please note, unless otherwise stated, the Mac Grill results are included in Brinker results, up through the date of the sale which occurred in the last week of the quarter. At closing, Golden Gate Capital and its affiliates will own 80.1% of the new entity, while Brinker affiliates hold a 19.9% ownership interest. So, going forward, an entry will be made each quarter to record 19.9% of the Macaroni Grill entities results in restaurant expense, as well as rental income on 12 properties retained by Brinker as part of the transaction will be recorded in other net. And prior quarters will reflect Macaroni Grill in continuing operations. To offer similar year-over-year comparison, a reconciliation of the consolidated income statement is provided on the website to adjust prior quarters for both the Macaroni Grill results and special items. Looking at the top line, revenue decreased by 7.8% over prior year or 4.5% excluding Macaroni Grill. The decline was due in part to a decrease of 5.4% comp sales along with a 3.3% decline in capacity, due to the closing underperforming restaurants in fiscal 2008 and the majority of those were Macaroni Grills, and also, the sale of restaurants to franchise partners in fiscal 2008 and the sale of the brand Macaroni Grill in the last week of quarter two this year. So, excluding the Macaroni Grill items, the capacity decline was only 0.3%. The comparable sales decrease was driven by lower traffic as consumers felt the pinch of this economy, and was somewhat offset by 2.9 price and the benefit of about 100 basis points from Christmas shifting into our third quarter this year. As Doug said, this comp performance was well above the industry average throughout the quarter even after the adjustments for holidays. In addition, total system-wide sales were up 1.7% excluding Macaroni Grill. Franchise royalty revenues increased 9.7% up to $15.8 million for the second quarter of 2009. This improvement was driven by both the growth and the number of domestic and international franchise locations compared to a year ago and comparable restaurant sales gains at our international franchise locations of approximately 5.6%. This was partially offset by comparable restaurant sales decline in domestic franchise locations. Initial development and franchise fees totaled $1.3 million this year, down $5.2 million, and that was mainly attributable to the proceeds from the sale of 76 company-owned restaurants to our franchise partner ERJ last fiscal year. Brinker maintains an open relationship with its franchisee. And as the historical practice, we've monitored the financial health of our franchise system. In the second quarter, one of our On The Border franchisees filed for bankruptcy, resulting in the closure of four restaurants in Southern California. So with that in mind, we wanted to update you on the strength of the Brinker's franchise system. Overall, our franchise base is strong and features an excellent group of restaurant operators. In fact, Chili's comparable sales in the second quarter were 220 basis points better in the franchised territories as compared to our company-owned locations, as those restaurants are located outside of the regions that are heavily impacted by some prior pressures. Our franchise partners are great operators, who are well-capitalized and work closely with us as we implement our key brand initiatives. And a large part of our franchise system is also based outside of the United States, where they have continued to see strong comparable restaurant sales growth and continuing demand for new restaurants. The second quarter is our largest quarter for gift card sales with almost half of our total annual gift card sales. Brinker did not escape the phenomenon, which impacted many retailers, and did experience a reduction in gift card sales compared to last year. Third-party and corporate business-to-business gift card sales continue to be solid and it increased year-over-year with third-party sales setting weekly records for our cards in December. However, this was offset by declines in our in-restaurant gift card sales. In part, as a result of our elimination of our bounce back program, which we determined last year did not have driven the incremental gift card sales required to offset the cost of the bounce back. The result was a year-over-year decline in second quarter of total gift card sales of approximately 14%. As for quarterly sales comparisons, there are some important calendar shifts to be considered. First, as I previously mentioned, Christmas Day shifted from our second quarter into our third quarter, which benefited second quarter but will negatively impact third quarter. Also, Easter will shift from our third quarter into our fourth quarter in fiscal 2009, which benefits the third quarter and adds detriment to the fourth quarter. So, we're estimating the net result of the Christmas and Easter shifts to have a 50 basis point unfavorable impact to the third quarter. Cost of sales was 10 basis points favorable for last year. Menu pricing and improvements in actual versus theoretical food costs offset commodity prices, which were higher year-over-year, primarily due to chicken, oils and produce prices. Our teams have responded to the challenge with a new round of tools and focus, to eliminate waste and maintain guest satisfaction. We also see some encouraging signs of abatement commodity pressures, which are down from their peaks and they further materialize in calendar 2009. Commodity pricing is certainly moving in the right direction. But it still remains to be same for the supply concerns offset these favorable trends. Restaurants expenses increased from 56.8% in the second quarter of fiscal 2008 to 58% in the second quarter of fiscal 2009. The 120 basis point increase is the cumulative result of many factors, for the impact of Macaroni Grill and sales deleverage being the biggest single drivers. Without Macaroni Grill restaurant expenses would have been 57.5%, 70 basis points higher than last year. The biggest changes were 40 basis points of higher utility expenses and 20 basis point increases in restaurants and to-go supply costs, unfavorable labor costs and advertising expenses. These were somewhat offset by 50 basis points of favorable pre-opening expense. Depreciation and amortization increased by $1.6 million to $40.6 million for the quarter and new restaurant openings and reimages in the past year are driving the modest dollar increase. General and administrative expenses continue to be inline with our stated goal to hold G&A flat to prior year as a percent of revenues even with the divestiture of Mac Grill and the closures of restaurants. For the quarter, G&A expenses were $39.1 million or 4.1% and that's $2.3 million less than the prior year with the decline being mainly due to lower payroll resulting from continuous actions we have taken over the past year to control G&A spending. Other gains and charges for the quarter were $85.1 million. In the second quarter, we completed an evaluation of our restaurant base making the decision to close 35 underperforming restaurants. The evaluation included both financial performance as well as lease renewal considerations across all brands. As a result, we expect to see a 30 basis point improvement in operating margins, as a result of these closures. The majority of these closures will occur in the third quarter and our second quarter results reflect a $44.2 million asset impairment charge. During the second quarter a $43.3 million loss was recorded for the Mac Grill sale. Second quarter results created a tax rate benefit of 51.1% versus the tax expense of 30.2% a year ago. Driven to a large extent by the items recorded in other gains and charges. Adjusting for the changes in both years, the tax rate would have been 22% versus 28.4% last year due primarily to the increased benefit of FICA tax credits. Cash flow from continuing operations for the first six months was $94.8 million, a $146.3 million decrease over the prior year quarter primarily due to a decline in operating profitability, a reduction in gift card sales and the timing of income tax payments as well as operational payments and receipts, as well as the sale of Macaroni Grill. Generating strong cash flows has been a long hallmark of Brinker. In the second quarter we took further steps to strengthen our cash flows in order to provide the flexibility necessary to address current challenges and drive the business forward, securing our competitive strength. Besides paring our asset base of underperforming restaurants as previously mentioned, we also made the decision early in the quarter to further reduce our fiscal 2009 capital expenditures. This was done to provide flexibility for slower sales or potentially another delay in the Mac Grill transaction. At that time, we slowed the pace of Chili's reimages and discretionary projects, initially scheduled throughout the fiscal year. Spending on these items have been delayed till the end of the fourth quarter. As a result we are now projecting to spend $110 million in the fiscal year, excluding Mac Grill, which is down $147 million from last year and $30 million from our previous guidance. Also in the second quarter, we received the cash proceeds from the divestiture of Macaroni Grill at a purchase price of $88 million and approximately $44 million, related to a tax cash benefit from the sale, which will be realized in the back half of the year. The balance sheet is a primary focus. We have committed to reducing our leverage allowing us to retain the investment grade rating from Standard & Poor's, and ultimately regain our investment grade rating for Moody's. This commitment is supported by our use of free cash flow and cash proceeds for Macaroni Grill to pay down debt. In fact, we paid down the uncommitted lines of credit of $60 million in the second quarter, leaving the remainder of the Macaroni Grill cash proceeds to fund our short-term working capital needs. We are committed to our long-term strategies and initiatives centering around our five areas of focus. Previously we provided and have since updated our financial covenants calculation on our website and we are in full compliance with all of our covenants. In fact we anticipate our ratios to improve going forward with our commitments to pay down debt with available free cash flow while still investing in the business. As previously mentioned, we are in the midst of refinancing our revolving credit facility that expires in October of 2009, and expect to have the transaction closed in a matter of weeks. Spread over LIBOR on the revolver will increase the refinancing, due in part to market conditions, but our expectation is to have little utilization on that line. So the increased spread will still provide lower year-over-year interest expense. Our focus on maintaining a strong balance sheet and liquidity coupled with our work on the initiatives, Doug outlined as well, we are also seeing the continued balancing of industry supply, and those all give me a great deal of confidence that Brinker is in excellent condition to remain an industry leader. Now, I would like to turn the call over Jena to facilitate question and answer period.

(Operator Instructions). Our first question is coming from John Glass from Morgan Stanley. Your line is live. John Glass - Morgan Stanley: Hi, thanks very much. Couple of questions, first, Chuck if you just look at the restaurant margin sequentially, your revenues were lower, your comps were lower and yet you got over 100 basis points improvement in margins. I hear what you are saying about changing the business over the past year. What happened specifically in this quarter versus say last quarter, which got you the improvement in restaurant expenses?

Again, we did a good job with actual versus theoretical on our food costs. We got some benefits on the food cost line versus last quarter. We also worked on labor and labor efficiencies; we did a better job there too. Then you also saw the increase in franchise restaurants on a year-over-year basis helped us get better margins. That's a year-over-year benefit. We have controlled the G&A spending, so it has really been good cost control. John Glass - Morgan Stanley: So, if you think about the 15% restaurant margin that you guys were in this quarter roughly, you think that's even given the negative mid-single digit comps, its been running that's a sustainable level for the next couple of quarters? I guess that's what I am getting at.

Well, John, I think we have adapted to being down this much in comp store sales. If it continues for several quarters, obviously we can not maintain that. I think in the short-term, we have made the necessary adjustments throughout the system to try and hold margins where they are. John Glass - Morgan Stanley: Okay. A question on the cash flows. I think just backing into it, you generated about $40 million from cash from operations this quarter. Can you talk about, what the impact year-over-year was on gift cards? Was that a negative to the cash flow? I know it has been generally a source of cash during this quarter? And I guess you said during the commentary it does not include the tax benefit. Last quarter you talked about generating roughly $380 million in cash. Including that tax benefit in 2009 - fiscal 2009, is there any update to that number given this quarter?

So, you are asking if there is an update to the cash. John Glass - Morgan Stanley: Yes $380 million, you thought you could generate $380 million in cash flow last quarter for the full year. What do you think it is now? Did you expect the decline in cash flow from operations this quarter in factoring in that number or is it going to be a lower number now?

No, I think we are relatively close to that same number, we are down a little bit in terms of operating income maybe from where we had guessed, but we have also made some adjustments to cap spending sort offset those and still end up with the same net number. John Glass - Morgan Stanley: Great, thank you.

Hey John, you asked specifically about gift cards, put it down by $20 million on gift cards; but again, that's only a cash flow difference from second quarter to third quarter. We usually see those redeemed fairly quickly, so we think we have recycled through most of that impact already. John Glass - Morgan Stanley: Great, thank you.

Thank you. Our next question is coming from Joe Buckley from Bank of America, Merrill Lynch. Your line is live. Joe Buckley - Bank of America: Thank you. A quick question on the margins as well. I think you had told us previously, maybe last call or two calls ago, that you had about 30% or 32% of your food contracts cutting, kind of, running off in the December quarter. Given this better-than-expected food cost experience, will you able to renew at lower prices? Is this food cost experience sustainable going forward? And maybe in conjunction with that if you talk a little bit about your menu pricing. You gave us [good] detail in the release, but what happens going forward if some of that runs off?

Joe, hi, this is Marie. In terms of the commodity question to your point in the second quarter, we did have over 30% of our contracts come due. And we did see actually, it was slightly higher than prior year but it was actually favorable from what we were projecting. And so, as commodity prices continue to hopefully decline, we do expect to realize some of those savings. Now, I mean just to kind of give you one stat for the third quarter, we're only expecting about 3% of our commodities come due and that's to be in sea food primarily. So, we're not going to be able to capture it completely there but in the fourth quarter, we'll have approximately 17% of our contracts come due.

And if you remember, Joe, last year in the second quarter when commodity prices really spiked up, so we're starting to lap these higher numbers from last year or so. We think there is the opportunity for continued favorability on cost to sales on a year-over-year basis as we look out in the third and fourth quarter. Joe Buckley - Bank of America: Okay. And then just a question on the sales trends. Can you talk a little bit about how sales trended during the quarter? There's a lot of talk of December being very weak and then maybe, also, just talk about regional differences, particularly interested if Texas continues to be good for you.

Well, Texas has continued to be very good for us and that's been a strong market. It's one of our home markets, so we perform very well here. If you look at the quarter, December was weak, Joe. We saw the same kind of thing. And for us, we have the holiday flip as we got into January. And so the first week or so because of the flip and we think also because we eliminated the bounce back on gift cards contributed thus having pretty weak first couple of weeks. But things seem to have firmed up and are starting to look a little better here, the last two weeks for sure so. I know that that's a short trend and things have changed pretty dramatically in the economic environment. So, I am not here predicting things are going to get better, but I think we've seen some stabilization, seen things kind of looking like they get into some sort of normal thing. Joe Buckley - Bank of America: Okay. And last one. Christmas, you said is a 100 basis points, is that for the quarter or for the month of December?

That's for the whole quarter. Joe Buckley - Bank of America: For the whole quarter. Thank you.

Thank you. Our next question is coming from Jeffery Bernstein from Barclays Capital. Your line is live. Jeffery Bernstein - Barclays Capital: Great, thank you. A couple of questions. First just high level on the fiscal '09 guidance for half of the year and now complete. I know it wasn't necessarily referenced in the release. I recall last time those earnings down 15% to down 25% comps down 2 to 4. Seems like this quarter the comps were a little worse, but the earnings were little bit better. I am just wondering if you can give some updated thoughts on fiscal '09 guidance in terms of earnings/comps expectations, then I have a couple of follow-ups. Thanks.

Well, we really have not told folks. We don't want to get into the guidance game. I think we have done a very good job of balancing our cost. Thanks for reminding folks to that. I think that we're pretty confident on where our cash flows are. We have been making changes to the business as we're seeing softer sales, maybe somewhat better than what we would have originally anticipated. So, we'll just leave it with that. Jeffery Bernstein - Barclays Capital: But this is your own internal expectations, I know you didn't give quarterly guidance, so I am assuming this quarter was better than you had, perhaps internally expected in terms of cost control perspective?

I would say, yes. We did a really nice job better than what we had first thought we would. We made some real changes as we start to get into this quarter, really start watching cost, really got focused on fact that this could be a protracted economic downturn and really tried to react to the environment. Jeffery Bernstein - Barclays Capital: Net-to-net.

It's just been a short-term blip. Jeffery Bernstein - Barclays Capital: Okay. So net-to-net disclosure is little bit better so that guidance you had previously offered towards anything that would be slightly better than what you had previously offered not worse? Is that fair to say?

I don't want to get into guidance. Jeffery Bernstein - Barclays Capital: Okay. Then just a follow-up kind of broader – I think last quarter, Doug, you talked a little bit about industry consolidation. We've seen recent unit data numbers that don't necessarily show a significant slowdown in openings or actually net closures. I am just wondering if you could talk about, what you are seeing kind of whether anecdotally or more factually in terms of the chains and independents on the outlook for growth?

So I think, Jeff, NPD came out with some information recently about actually being less restaurants at the end of 2008 and end of 2007. They spoke more to independent family restaurants causing that phenomenon. So, anecdotally, it looks like there will be some more contraction. I know some other competitors have mentioned closing some restaurants. We, of course, announced today, we will close some restaurants. I think everyone is going to be smart about looking at the things we can do so that our – all the inertia that Chuck mentioned is to the restaurants are going to provide the biggest gain to our stakeholders. So as always, I think there will be more contractions throughout the year as people try to deal with this projected long economy. Jeffery Bernstein - Barclays Capital: And just lastly, you mentioned I think restaurant closure is 35 units in the quarter. I think you just said kind of under performance in terms of profits, but is that now review totally complete or is that something that you would expect additional closures in the next couple of quarters. Just wondering if you can give some color by concept or what the comp list was at the neighboring stores, just kind of a re-impact from that?

Well, Jeff, again, these are spread out all across the country. Maybe these restaurants have not closed yet, many of them are leases that are expiring. And so, even in a great economy, we always go through leases and make decisions in individual markets about whether individual one-off restaurants, how are they contributing to the total brand awareness in that market. So there is a real diversity of restaurants across some from each one of the brands, and don't see closing more again very quickly but we'll continue to evaluate it. And we see about a 30 basis points improvement by these closures. Jeffery Bernstein - Barclays Capital: Great, thanks very much.

Thank you.

Thank you. Our next question is coming from John Ivankoe from JPMorgan. Your line is live. Our next question is coming from Brad Ludington from KeyBanc Capital Markets. Your line is live. Brad Ludington - KeyBanc Capital Markets: Good morning. I just want to get some clarification on the closures. I missed a little bit of that. Did you guide to 35 closures in maybe third and fourth quarter, and did you say what brands that would consist of?

Well, its 35 restaurants. Some of which will close in the third quarter, some of which will close on the lease expirations, which could be spread out over a longer period of time. We did not give a brand-by-brand break-down and really would prefer not to. Brad Ludington - KeyBanc Capital Markets: Okay. So then the 30 basis point improvement on operating margin is more of a long-term further out fiscal '10 and beyond may be?

It is, but most of the restaurants will close this quarter. Brad Ludington - KeyBanc Capital Markets: Okay. And then on your closures the nine Chili's and two On The Border's this quarter, were those off closures or were any of them sale to franchisees?

Some of those were sale to franchisees. I think I believe we sold nine restaurants.

Yes, Brad, this is Guy. We did have a small franchise transaction we completed in the second quarter for nine Chili's restaurants. Brad Ludington - KeyBanc Capital Markets: Okay. And there is there anyway that you can quantify the impact of lower energy costs on restaurants expenses and lower diesel on COGS this quarter? What was there?

They really wasn't for us. Well, utility expenses were up 40 basis points year-over-year, but we are starting to see some improvement in that. We are starting to see, as we look forward, some of those lower energy costs are starting to flow through on utilities and utility looked to be better as we go forward. I don't know if that will be better year-over-year that just won't be 40 basis points worse. Brad Ludington - KeyBanc Capital Markets: Okay. Then last thing, CapEx down $30 million to 105 to 115?

Yes. Brad Ludington - KeyBanc Capital Markets: Okay. Thanks a lot and congratulations on the cost controls.

Thanks.

Thank you. Your next question is coming from Chris O'Cull from Suntrust. Your line is live.

Thanks. Just a follow-up question on the restaurant expense lines. What is the opportunity for better labor cost management? I mean can you quantify the variance you are seeing between what you think you should run and what you are actually running right now, for labor in the restaurants? Cull - Suntrust: Thanks. Just a follow-up question on the restaurant expense lines. What is the opportunity for better labor cost management? I mean can you quantify the variance you are seeing between what you think you should run and what you are actually running right now, for labor in the restaurants?

In what sense, Chris?

I mean theoretical versus actual. Cull - Suntrust: I mean theoretical versus actual.

Well, we did see better efficiency. We measure that in number of ways. We measure it both in dollars and also on a per 100 guests. We are doing a good job just by staying focused. I think the teams have adjusted to sales being down. We got people watching and looking at the models and sort of anticipating what the environment might bring us, and so it's done a much better job of just bringing that in line. In terms of the gap between actual and theoretical, I do not have that at my fingertips, but we could certainly talk about that later…

Okay. And then when you look at the gross margin or the cost of sales line, a similar question. I mean, you seem to be running better theoretical food cost. Is that just more attention to detail? Better tools in the field? What is allowing you to get some of those improvements? Cull – Suntrust: Okay. And then when you look at the gross margin or the cost of sales line, a similar question. I mean, you seem to be running better theoretical food cost. Is that just more attention to detail? Better tools in the field? What is allowing you to get some of those improvements?

Both those things again and again, times are tough and I think everybody's ears are wide open right now in our restaurants. While I would not say that we have not looked at that area, I think we have just increased the focus on it, people are ready and willing to serve this back and watch waste and everything else they can in this environment. I think, the same thing we are seeing going with our consumers also go with our restaurant employees and team mates. Everybody understands that every penny is precious.

So, there has been no changes to the recipes or anything? Cull – Suntrust: So, there has been no changes to the recipes or anything?

No, we have looked at some side items and things that people might order upon request and looked at those, but we have not changed or degraded the recipes of the basic food items.

Okay. Doug it appears the company is kind of recycling some of the promotional platforms that they ran last year. Do you guys expect Chili's to come out with some new platform ideas during the back half of '09? Cull – Suntrust: Okay. Doug it appears the company is kind of recycling some of the promotional platforms that they ran last year. Do you guys expect Chili's to come out with some new platform ideas during the back half of '09?

We are always looking for innovation, we have some items in test now that are actually doing quite well and we are probably going to balance value messaging with new product innovation in some cases those will be combined. If you look at the Triple Dipper dinner, which I say that three times, and that has been a very popular item we have added in bites, three different bites, which were one the greatest innovative items over the last year the small burgers and now we have chicken versions of those. So, when you add that to the Triple Dipper dinner, you get the opportunity for the burger, which is one of the base Chili's historical cold items, in kind of a new format. So, the reformulation of the Guiltless Grill, which happened in this current menu, we have four great new products that speak to, not just value, but also to healthy eating and all the publicity about the restaurant's owning part of the obesity problems. So, trying to be balanced, but there is innovation within value and there is innovation on its own I think you will see both of those in the coming quarters.

So, most of the back half of '09 will be product extensions of some of these existing platforms or will it be new platforms? Cull – Suntrust: So, most of the back half of '09 will be product extensions of some of these existing platforms or will it be new platforms?

Well, I think certainly we are going to always continue to highlight items that the brand is famous for. Guests tend to think about Chili's, and they think about burgers and fajitas and historically as you bring out totally new items that are not based on historical preferences with brands and consumers, it's more difficult to get guests that give you credit for those items. So, yes, we are going to probably, we are going to innovate or we are going to certainly going to provide new products that guests are comfortable dining in those brands, whether it'd be Maggiano's or On The Border or Chili's.

Okay. And, then one last question just related to interest expense, it was higher in the second quarter compared to the first and I may have missed that if you provided any comments on that Chuck. Given the debt balance was down, what was the explanation for that? Cull – Suntrust: Okay. And, then one last question just related to interest expense, it was higher in the second quarter compared to the first and I may have missed that if you provided any comments on that Chuck. Given the debt balance was down, what was the explanation for that?

Well, we did do some borrowing to make sure we had liquidity through the quarter. One of the things that we did was typically a quarter in which we used cash and the first part of October when the financial markets started looking pretty dicey, we took down some additional debt just to provide us to make sure we had liquidity. We stayed that down as we got through the quarter and with the proceeds from Macaroni Grill, but again that was late in the quarter and that is why interest expense for the quarter was higher year-over-year. As we get to the third quarter, we expect to have interest expense to be lower both the third and fourth quarter.

Okay, great. Thanks. Cull – Suntrust: Okay, great. Thanks.

Sure.

Thank you. Our next question is coming from Jeffrey Omohundro from Wachovia. Your line is live. Jeffrey Omohundro - Wachovia Securities: Thanks. Just one question. I was wondering if you would give few more details on the changes in the gift card program. What was the reason for the shift in that program and maybe you can talk about new initiatives around gift cards?

Hi, Jeff its Guy. Last year when we ran our gift card program, actually for the past two years, we offered a bounce-back within the restaurants that basically said, purchase a $25 gift card receive a $5 bounce-back that you can use on your next visit. As with any marketing initiative that we take on with the company we evaluate whether its makes sense and is providing a return that it should. Last year at this time we made the assessment that we did not believe that that was providing us the return that we needed. So, we made the choice that during this holiday season we would not go for with that promotion. At the same time we are seeing a shift in mix as we get our gift cards into more third party retail locations. We are seeing just more gift cards being purchased in third party distribution channels than we have within our own restaurants. So that just further confirmed to us that staying with the bounce-back program didn't make sense going forward. Jeffrey Omohundro - Wachovia Securities: There was $20 million impact related to that. Was that as expected confirming your analysis?

Well I think it's consistent with what you just saw and what you have seen in retail in general during the holiday period that there has just been an overall decline in gift card sales to begin with. Yes, we continue to see the trend, we started to see last year, which were less sales within the restaurant and more at third party locations. Overall, a decline has been part of what's going on in macro economic circumstance. Jeffrey Omohundro - Wachovia Securities: Very good, thanks.

Thank you, the next question is coming from Joe Fisher from Goldman Sachs. Your line is live. Joe Fisher - Goldman Sachs: Hi, guys thanks. I am calling for Steven here. I was curious, Chuck in the commentary I thought you said, that labor was unfavorable in the quarter and then when you answered John Glass's first question I thought you said it was better. Did I misunderstand you?

Well no, I think what he was talking about was improvements from first quarter to second quarter. Joe Fisher - Goldman Sachs: Okay.

It was unfavorable year-over-year, but we did get margin improvements sequentially, because labor was not as bad as it was in the first quarter. Joe Fisher - Goldman Sachs: Okay fair enough. I was also wondering when you guys roll off price going forward here?

We just took a new menu but I know we did take little bit of price, its coming out for the Chili's right now. You will get the numbers there. Joe Fisher - Goldman Sachs: Just while you are looking at that, I am wondering, I think in the last conference call, you guys mentioned that, you are maybe up a little bit on advertising spend as a percent of sales. Kind of curious if you guys are seeing kind of better bang for the buck if you are actually getting more, a better buy in this environment then maybe you were last year and you are also spending more?

We are spending more we had couple more weeks this quarter than we did last year. We primarily brought most of our media in the upfront market. So, while we are seeing some benefits maybe on some spot buys. The majority of our media was purchased at the beginning of the year. Joe Fisher - Goldman Sachs: Okay. Then lastly for – I am sorry?

Joe, to answer your question, we do not have a lot of price rolling off in the third quarter, but quite a significant price roll off that would occur in the fourth quarter, if we chose not to increase prices to offset. Joe Fisher - Goldman Sachs: Okay, thank you. Then just lastly, Chuck, I believe you made the comment in this environment, something about an opportunity to change the business model. I was just wondering if you could elaborate on that a bit?

Well, I think we are sitting down and trying to figure out. Obviously, values key the consumer and trying to evaluate our model from up really from time a guest enters the door until they leave, what can we do to increase turns? What can we do to decrease labor? We know that is the cost that goes up every year. What can we do really in terms of exciting new food products and value, where is the gap between QSR and casual dining? Now it has expanded over the years in terms of check averages. So, we think we have got to figure out our cost model and lay that against what consumers want and really make some changes to the way we have always done business and so. Go ahead. Joe Fisher - Goldman Sachs: What are consumers out there telling you? Are they saying they want to be able to get in and out faster or they just want the price points to be more reasonable, is there anything meaningful that you can say to that I know that mix shift was a bit more negative in this quarter than last?

Well, faster and cheaper is always the American way it seems. So, that is consistent with what we find, folks saying and -- as Doug talks about the five areas of focus, those are based around pace and convenience, trying to get things in and out. A better quality food and beverage, which means that better value, and value is not just price, value is the number of things. So, Doug I do not know if you want to talk about what consumers are looking at in terms of value.

Sure, Chuck. There is a quote that was made by somebody recently that we have kind of grabbed on to crisis it is a terrible thing to waste. So as we talked to people from hourly team members in the restaurants to executives here at our restaurant support center. This is an opportunity as Chuck just said to reexamine things, we have done forever because the economy is different, the market is different, the consumer are asking for faster and cheaper, but still in a casual dining environment, value does mean more than just price. So we actually have an equation we created and all of five areas of focus connect to this and even the questions we ask our guest in our guest experience measurement. It is about the quality of the product, it is about the relevance of the facility, which is why we are doing reimages. It is about the service or hospitality and we are even trying to push now this emotional connection, teaching our team members how to find out more about the guest, the table and make an emotional connection. So, those are the new monitors and denominators are price and time. So, we are evaluating the way we talk about the experience for the guest, but balancing that with how to do it, maybe cheaper. How to do it faster? How to read the guest? How to use clues to help us understand what their needs are? Because as Chuck said right now the consumer is looking for faster and cheaper or to-go right and right on time? We do think, has responded to a strong consumer need, higher quality food. They can take with them, but making it accurate and making it faster. But inside the restaurant, we are really focused on, as Chuck said, the business model but manifested in a guest causal dining experience. So wonderful atmosphere, high quality food, incredible hospitality, but at higher value, and if they want to get onto that faster, how we can pull that off for them. So it's a shift, but a crises is a terrible thing to waste is the mantra that we've grabbed onto during this economy. Joe Fisher - Goldman Sachs: Sure. So, have you seen the to-go business grow faster than the rest of the traditional sit down?

We haven't seen it grow faster. Again, we were fighting maybe the parts of the industry that do have faster and cheaper experiences. QSR is really built more high definition to be faster and cheaper. So in this economy, we are doing some advertising right now about to-go, trying to remind guests that you can get a great meal at a great value and get it fast. But we haven't seen it grow as much, but we do think the initiatives we're doing are keeping it flat and keeping interest in that. Joe Fisher - Goldman Sachs: Sure. Thanks a lot, guys.

Thanks, Joe.

Thank you. Our next question is coming from John Ivankoe from JPMorgan. Your line is live. John Ivankoe - JPMorgan: Great. You, guys there?

Yes, yes. John Ivankoe - JPMorgan: All right, sorry, I have lost you when I was picking up the handset in this hotel. So just a couple of follow-ups from me and I do apologize if they were asked, but I was off for just a couple of minutes. First, just a quick one. On the reduction in CapEx fiscal '09 to a $110 million deal that's down $30 million from your previous guidance, I mean what is that $30 million? And I know previously you've discussed or at least I remember you discussing that 2010 will be lower than 2009, should we still consider that as we begin to look out into next year's plans?

Well, John, we did slide some dollars out from, yes, as you said 2009 into 2010. It was primarily Chili's reimages. And then as we look at next year's spend, right now, it looks like it might go up a little bit because of that shift on a year-over-year basis. But again, we'll reevaluate that CapEx commitment as we get through the year and see how sales are…. John Ivankoe - JPMorgan: Okay.

….and what the environment looks like. John Ivankoe - JPMorgan: Okay, fair enough. Normally, when you see negative menu mix, well firstly, you normally don't see negative menu mix as big as it is for you now and obviously about just what's happening in the economy. But normally, at least when you think about negative menu mix, you would think about that hurting your gross margins as people maybe get less appetizers or less drinks. And I know in your press release, you actually discussed that menu mix was positive or a benefits of COGS. So could you put some context around that negative menu mix: a, in terms of how we should think about the second quarter and maybe more importantly how you think it might affect margins as we move throughout the year?

Well, John, we were selling more burgers. The Burger Bites have been a great item that we have had. So that has really helped our menu mix. And there is also not a lot of waste with that product too. So, it helps both our efficiency and also it's a lower product just in terms of cost of sales. John Ivankoe - JPMorgan: Maybe it's just something as simple as people trading from steaks to Burger Bites, for example?

Yes. John Ivankoe - JPMorgan: Okay. And in terms of appetizer and drink sales, I mean are you seeing, I mean is that a more pronounced trend year-over-year or is that stable?

What's happening in some cases, John, is as guests find a value entrée, some guests were actually adding on the check with appetizers or beverages. So, as we look at value over the coming quarters, these are some of the things that our operators and chefs are looking at. It's also to have more value in the appetizer category. Maggiano's sells some flat bread down their appetizer line that can be shared by a group of people at a cost lower than some of the other appetizers. So it maybe a way to add value, but still not be quite so negative on menu mix. But in a time when our goal is to get more guests in the restaurants and to offer value, that mixed category maybe a little bit more challenging to stay positive year-over-year when before you were selling fajitas or items that might have been a double-digit $10, $11, $12. Now, you are trying to get someone like On The Border to get excited about a lunch value menu at $649. John Ivankoe - JPMorgan: Right.

We're bringing more guests, but the mix maybe negative year-over-year. John Ivankoe - JPMorgan: And in terms of the overall, what I am fearful of is that having a double effect on your business right, both average ticket and reported margin. But as you think about the actual gross margin going forward, do you think it will contract on the negative mix as you think about your business, I mean is that a low risk or do you think you have the menu management in place that the gross margin as a percent can hold on negative mix?

Well, I think we can hold on negative mix for the short-term. I think the issue becomes, how long do you have negative guest counts? And at some point of time, you will lose that John. But we think we got pretty good visibility in this quarter and next quarter and feel pretty good about where we are. Doug talked about the Triple Dipper dinner. It comes on TV on Monday and I know the Chili's team is incredibly excited about that product and what we've seen on soft-roll, hope everybody gets out and gets a chance to try it. We've also… John Ivankoe - JPMorgan: We enjoyed it yesterday by the way.

Good. John Ivankoe - JPMorgan: It is a great product. And like that for example wouldn't necessitate -- I mean if someone is trading up from big mouth burger to that, that could theoretically have positive mix.

That could have positive mix and that would be a nice thing. We think that $9.99 for those options, that's one of the things Doug talked a little bit about, people look for convenience and choice every time.

Also John, sharing food, it expands sort of the experiential part of a brand like Chili's. because you take a number of appetizers and turn it into a meal at a higher price point than what entrée might have been and the guest can share those products. So, we just have to be a lot more creative about how we send value messages but continue to have innovations with food items and our goal certainly is not to have negative mix long-term. John Ivankoe - JPMorgan: Right.

Because as I was saying before you got on a call to the previous caller Joe, this whole casual dine experience still is a social relevance to it and part of that is having an alcoholic beverage and having an experiential meal more so than just a quick burger and a fast satisfaction of hunger. There is a real social part to our casual dining. We're not walking away or backing away from that one bit. John Ivankoe - JPMorgan: Okay, all right, thank you very much.

Thanks, John.

Thank you. Your next question is coming from Lynne Collier from KeyBanc. Your line is live. Lynne Collier - KeyBanc Capital Markets: Hi, this is Lynne. How are you?

(inaudible). Lynne Collier - KeyBanc Capital Markets: Hey, a quick question, I wanted to expand a little bit on that the original Texas question. I realize that Texas is a very strong market for you, but are you seeing any sort of sequential deceleration or some weakness in terms of the sales trends in this particular market?

Well, one of the unique facts, Lynne, has been since the hurricane, Houston has been a fantastic market for us. I don't know if that's tradesman or whatever has happened or we've even theorize that maybe some of the independents took their insurance proceeds and said, you know what, let's go open something else or let's go take our cash and do something else. But Houston has been an incredibly strong market and Dallas has still hung in there fairly well. So, I do not know if I am giving any more color on that Lynne or if I could answer your question any better. Lynne Collier - KeyBanc Capital Markets: No, that's great. I am just hearing from a couple of companies that I follow that Texas maybe showing a little bit of weakness here in the last 30 to 60 days. So, I was just checking. Thank you.

Okay, thanks, Lynne.

Thank you. Our last question is coming from [Chris Bowen] from MTB Investments. Your line is live. Chris Bowen - MTB Investments: Thank you. Congratulations on good execution in a difficult environment. I was wondering if you could give us a little bit more fine print on the Chili's reimaging, i.e., the number of stores. How much you have planned to spend on each store and your return on investment, you've experienced thus far and kind of what you expect going forward?

Hi, Chris. We've done about 95 Chili's reimages to-date. In the first go-round that we did with the Chili's reimages, most of which were in fiscal 2008, the average spend on the reimage components was about $260,000. And we had a return of sort of mid-single digits on sales. Since that time though, we went back, we revisited the program, we looked at the elements and what was resonating with consumers and the more recent reimage is, we've been doing at a cost of about a $100,000 less or around a $160,000 and seeing pretty much the same sales lift. So if you do that math, what was once probably a mid 20% return on the reimage is probably now north of 30%, if you do the math on those numbers. Chris Bowen - MTB Investments: OK, great. Just kind of a financial question then, I mean, given this higher returns, not to be too cynical, but why would you reduce the number of reimages that you get? It seems to make financial sense to continue on that path?

It does and I think what we are trying to do is, maintain flexibility. When we made those decisions at the first part of the second quarter, we're not sure how long this economic downturn would last. And so for us, we're not backing away, we're still bullish about prospect, still want to do it, but we also want to maintain our liquidity and make sure that we had the financial resources to continue to operate the business. Chris Bowen - MTB Investments: Right. Okay, thanks. Great.

Sure.

Thank you. There are no more questions in queue.

We just want to thank everyone for joining us today. This concludes our earnings call and Q&A session. We look forward to talking to everyone again for our third quarter conference call in a couple of months. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phones lines at this time and have a wonderful day. Thank you for you participation.