* Q1 EPS of 20 cents excluding items matches expectations
* Still sees 2009 earnings down 15 percent to 25 percent
* Cuts 2009 capital spending forecast by $40 million
* Will use Macaroni Grill stake sale proceeds to pay debt
* Shares fall more than 5 percent (Adds executive comments, byline; updates share price; changes dateline, previous NEW YORK)
By Lisa Baertlein
LOS ANGELES, Oct 21 Brinker International Inc (EAT.N), owner of Chili's Grill & Bar, posted a lower quarterly profit on Tuesday because of higher costs and a sharp decline in business in September.
The company's shares fell more than 5 percent.
Brinker, whose other chains include On The Border Mexican Grill & Cantina and Maggiano's Little Italy, said its business had been on track until September, when U.S. customer traffic deteriorated due to two hurricanes and a U.S. financial crisis that caused many consumers to rein in discretionary spending.
The company and other restaurant operators in the mid-tier casual dining segment are among the hardest hit by the U.S. economic downturn, which has prompted consumers to cut back on meals away from home and contributed to the worst restaurant industry downturn since the early 1990s.
Brinker's net income for the fiscal first quarter ended Sept. 24 fell to $23.8 million, or 23 cents per share, from $37.6 million, or 34 cents per share, a year ago.
Earnings before special items and excluding Romano's Macaroni Grill were 20 cents a share, matching analysts' expectations according to Reuters Estimates.
CHILI'S SALES FALL
The company, based in Dallas, said earlier in October that it expected lower earnings in the quarter because of higher commodity costs and a greater-than-expected decline in comparable restaurant sales.
Revenue fell 6.7 percent to $984.4 million after the sale of 76 restaurants to franchisees and 49 restaurant closures. Sales at restaurants open at least 18 months fell 4 percent, the company said. Same-store sales at its flagship Chili's brand were down 3 percent.
Restaurant expense as a percentage of revenue increased to 58.8 percent from 57.1 percent because of costs such as labor and utilities.
Brinker said it is still on track to close the $131.5 million sale of a majority stake in Macaroni Grill to private equity firm Golden Gate Capital by the end of this quarter.
Asked whether Golden Gate had sought to renegotiate the deal's price given weak market conditions, Brinker executives said the subject had not come up and that the chain was performing as expected.
Chief Financial Officer Chuck Sonsteby said that Brinker would use Macaroni Grill sale proceeds to pay down debt and that it has a moratorium on share buybacks.
He also reassured investors that Brinker was "well within compliance of all debt covenants" at the end of the first quarter.
The company cut its 2009 forecast for capital spending by $40 million to a range of $135 million to $145 million, a move Sonsteby said should "substantially" increase free cash flow.
Brinker stood by its recently lowered forecast for 2009 earnings excluding items to show a decline of 15 percent to 25 percent compared with fiscal 2008.
Shares in Brinker, which owns, operates or franchises more than 1,900 restaurants, fell 54 cents to $9.68 on Tuesday, down from nearly $20 at the beginning of the year. (Additional reporting by Aarthi Sivaraman in New York; editing by Dave Zimmerman and Susan Kelly)