Flash Note

August 22, 2014

Brinker International Inc.
EAT: Increases Quarterly Dividend by ~17% and Increases
Share Repurchase Authorization; Maintaining Buy
Our Call
After the close yesterday, Brinker announced that the Company's Board of
Directors approved a quarterly dividend of $0.28 (yield of 2.3%), representing
an increase of ~17%. The Board also approved the authorization of an additional
$350 million for the Company's repurchase program, bringing the outstanding
authorization to $3.9 billion. We are maintaining our BUY rating on EAT given
strong free cash flow generation, improving casual dining industry trends and an
attractive valuation.
Dividend Increased from $0.24 to $0.28; Represents Increase of 16.7% and
Yield of 2.3%: The Company announced after the close yesterday that it would
increase its quarterly dividend 16.7% to $0.28 per share. While the dividend
growth was at a slower pace than the last two years (20% increase in 2013
and 25% in 2012), we believe the dividend will likely increase at a faster pace
in FY16 and FY17 as the Company's free cash flow accelerates following the
completion of its remodel program. We are projecting ~$4.00+/share in free cash
flow in FY16 vs. ~$2.88 in FY15.
Casual Dining Industry Sales Slightly Better in Recent Weeks: Based on
recent channel checks and commentary from Malcolm Knapp (from July), we
believe casual dining industry same-store sales moved into positive territory in
late July and that improvement has continued into August. Thus far, in 2014,
every month has posted a decline in same-store sales, as measured by Knapp-
Track. However, we believe August has the potential to be the first month of
positive same-store sales growth since November 2013.
Valuation Attractive vs. Peers: Shares of Brinker are currently trading at
~15.8x consensus NTM EPS and ~8.5x NTM EBITDA. While multiples are
slightly above the 3-year historical average, the Company is currently trading at
a discount to peers such as CAKE (18.9x NTM EPS) and DRI (21.1x NTM EPS)
and the Company's valuation is the lowest out of our restaurant coverage list.
Companies mentioned:
The Cheesecake Factory Inc. (CAKE - $44.60 - Buy)
Darden Restaurants Inc. (DRI - $47.45 - Buy)
Buy
EAT
Price $48.67
Price Target $55.00
Restaurants
Lynne Collier
(214) 702-4045
lcollier@sterneagee.com
Wesley Carmichael
(214) 702-4004
wcarmichael@sterneagee.com
Company Data
52-Week Range $38.40 - $55.45
Market Capitalization (M) $3,146.9
Shares Outstanding (M) 65.0
Avg. Daily Vol. (000) 971.0
Estimates Q1 2015E 2016E
EPS 0.49 3.08 3.50
For the latest company report:
EAT Company Report
Any Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and any potential conflicts of interest begin on Page I of the Appendix
Section. Past performance is no guarantee of future results.
800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
APPENDIX SECTION
Company Description:
Headquartered in Dallas, Texas, Brinker International, Inc. is a leading world-wide casual dining restaurant company. The company
owns, operates, and franchises restaurant brands under the names Chili's Grill & Bar and Maggiano's Little Italy. The Company owns
884 locations and franchisees operate 731 locations.
IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Lynne Collier and Wesley Carmichael, hereby certify the views expressed in this research report accurately reflect my personal views
about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by me in this report.
Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne,
Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a
company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense
and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain
competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of
a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.
Company Specific Risks:
Investment risks include: slowing domestic economic growth; pressures on consumer spending and sentiment; increased competition,
particularly in the bar & grill segment of casual dining; and commodity and labor inflation.
Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.
Company Specific Valuation:
Our price target of $55 assumes a multiple of ~18x our FY15 EPS estimate of $3.08.
Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
IB Serv./ Past 12Mos.
Rating Category Count Percent Count Percent
Buy 264 50.38% 36 13.64%
Neutral 246 46.95% 26 10.57%
Underperform 14 2.67% 0 0.00%
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Past performance is no guarantee of future results.
Appendix Section, Page I
August 22, 2014
For UK Professional Clients
This research report is disseminated in the UK by Sterne Agee UK LLP which is authorized and regulated by the Financial Conduct
Authority. This research report is intended for distribution in the UK only to, and should be relied upon only by, persons who or may be
classified as eligible counterparties or professional clients pursuant to the FCA's rules or who are investment professionals as defined in
Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
Copyright 2014 Sterne, Agee & Leach, Inc. All Rights Reserved.
Appendix Section, Page II
August 22, 2014
To receive price charts or other disclosures on the companies mentioned in this report that are not the subject of this report
which Sterne Agee continues to cover, please visit our website at https://sterneagee.bluematrix.com/sellside/Disclosures.action
or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.
Appendix Section, Page III
August 22, 2014


Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders
prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee
Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
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