Step Away From the Brinker

Cutting Back on Capex

The company is cutting back capex by about $35 million from its original estimate to $425 million for fiscal year 2007. Because of a more modest growth plan for fiscal year 2008, EAT now expects $50 million less capex in that year vs. the original estimate, to a range of $250 million to $275 million.

Now EAT expects to open 80 to 90 company restaurants in fiscal year 2008 vs. 145 company restaurants in '07. So far, 101 net new company-owned units were opened since third quarter of '06, increasing sales capacity by 7.9%. Total systemwide openings are expected in the range of 200 to 220 units in fiscal year 2007.

Cost of sales increased from 28.1% to 28.3%. Cost pressures continue for salmon and produce, while the rising cost of corn will impact protein (i.e., beef and chicken) prices in fiscal year 2008. Utility costs were better vs. the prior year. G&A was 3.9% vs. 4.9% due to lower performance compensation. The effective income tax rate was 29.4% vs. 30.9% in the year-ago period.

Repurchase of Shares Continues

EAT repurchased 3.2 million shares in the quarter and 7.7 million year to date. In addition, the company announced that it was entering into an agreement to repurchase $297 million of common stock with a broker-dealer under an accelerated share-repurchase transaction. Since 2001, EAT has repurchased 61.5 million shares, reducing outstanding share count by nearly 20%.

EAT is focused on growth and achieving 15% annual EPS growth.

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