                                EXHIBIT 13

BRINKER  INTERNATIONAL, INC. SELECTED FINANCIAL DATA (In thousands,  except
per share amounts and number of restaurants)
<TABLE>
                                                  Fiscal Years
                                    2002      2001        2000          1999(a)       1998
<S>                              <C>         <C>          <C>          <C>           <C>
Income Statement Data:
Revenues                         $2,887,111  $2,406,874   $2,100,496   $1,818,008    $1,528,908

Operating Costs and Expenses:
   Cost of sales                    796,714     663,357      575,570      507,103       426,558
   Restaurant expenses             1,591,367  1,303,349    1,138,487      984,027       820,637
   Depreciation and                  130,102    100,064       90,647       82,385        86,376
     amortization
   General and administrative        121,420    109,110      100,123       90,311        77,407

     Total operating costs and     2,639,603  2,175,880    1,904,827    1,663,826     1,410,978
       expenses

Operating income                     247,508    230,994      195,669      154,182       117,930
Interest expense                      13,327      8,608       10,746        9,241        11,025
Other, net                             2,332        459        3,381       14,402         1,447

Income before provision for          231,849    221,927      181,542      130,539       105,458
  income taxes and cumulative
  effect of accounting change
Provision for income taxes            79,136     76,779       63,702       45,297        36,383

Income before cumulative             152,713    145,148      117,840       85,242        69,075
  effect of accounting change
Cumulative effect of                       -          -            -        6,407             -
  accounting change

Net income                          $152,713   $145,148     $117,840      $78,835       $69,075



Basic Earnings Per Share:
  Income before cumulative             $1.56      $1.46        $1.20        $0.86         $0.70
   effect of accounting change
  Cumulative effect of                     -          -            -         0.06             -
   accounting change
  Basic net income per share           $1.56      $1.46        $1.20        $0.80         $0.70



Diluted Earnings Per Share:
   Income before cumulative            $1.52      $1.42        $1.17        $0.83         $0.68
    effect of accounting change
   Cumulative effect of                    -          -            -         0.06             -
    accounting change

   Diluted net income per share        $1.52      $1.42        $1.17        $0.77         $0.68


Basic weighted average                97,862     99,101       98,445       98,888        98,648
 shares outstanding


Diluted weighted average             100,565    102,098      101,114      102,183       101,174
 shares outstanding



Balance Sheet Data (End of
 Period):
Working capital deficit            $(160,266) $(110,006)   $(127,377)    $(86,969)    $ (92,898)
Total assets                       1,783,336   1,445,320   1,162,328    1,093,463       968,848
Long-term obligations                504,020     294,803     169,120      234,086       197,577
Shareholders' equity                 977,096     900,287     762,208      661,439       593,739
Number of Restaurants Open
(End of Period):
Company-operated                       1,039         899         774          707           624
Franchised/Joint Venture                 229         244         264          226           182

     Total                             1,268       1,143       1,038          933           806

</TABLE>



___________

(a)  Fiscal  year  1999  consisted  of 53 weeks  while  all  other  periods
     presented consisted of 52 weeks.

Note:  During  fiscal 2002, the Company reclassified sales incentives  from
restaurant  expenses  to revenues (see Note 1(b) to consolidated  financial
statements). Prior year balances have been reclassified to conform with the
fiscal 2002 presentation.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

      For  an understanding of the significant factors that influenced  the
performance of Brinker International, Inc. (the "Company") during the  past
three  fiscal years, the following discussion should be read in conjunction
with   the  consolidated  financial  statements  and  related  notes  found
elsewhere in this annual report.

      The Company has a 52/53 week fiscal year ending on the last Wednesday
in  June.  Fiscal years 2002, 2001 and 2000, which ended on June 26,  2002,
June 27, 2001 and June 28, 2000, respectively, each contained 52 weeks.

RESULTS OF OPERATIONS FOR FISCAL YEARS 2002, 2001, AND 2000

      The  following  table sets forth expenses as a  percentage  of  total
revenues  for the periods indicated for revenue and expense items  included
in the consolidated statements of income:

<TABLE>
                                                   Percentage of Total Revenues
                                                           Fiscal Years

                                                       2002       2001      2000
<S>                                                   <C>        <C>       <C>
Revenues                                              100.0%     100.0%    100.0%

Operating Costs and Expenses:
   Cost of sales                                       27.6%      27.6%     27.4%
   Restaurant expenses                                 55.1%      54.1%     54.2%
   Depreciation and amortization                        4.5%       4.2%      4.3%
   General and administrative                           4.2%       4.5%      4.8%

     Total operating costs and expenses                91.4%      90.4%     90.7%

Operating income                                        8.6%       9.6%      9.3%
Interest expense                                        0.5%       0.4%      0.5%
Other, net                                              0.1%         -       0.2%
Income before provision for income taxes                8.0%       9.2%      8.6%
Provision for income taxes                              2.7%       3.2%      3.0%

     Net income                                         5.3%       6.0%      5.6%

</TABLE>


REVENUES

       Revenue  growth  of  20.0%  and  14.6%  in  fiscal  2002  and  2001,
respectively,  was attributable primarily to the increases in  sales  weeks
driven  by  new unit expansion, acquisitions of units from former franchise
partners and increases in comparable store sales. Revenues for fiscal  2002
increased  due  to a 19.1% increase in sales weeks and a 1.5%  increase  in
comparable store sales. Revenues for fiscal 2001 increased due  to  a  9.9%
increase in sales weeks and a 4.4% increase in comparable store sales. Menu
price increases were 1.8% and 2.2% in fiscal 2002 and 2001, respectively.

COSTS AND EXPENSES (as a Percent of Revenues)

      Cost  of  sales  remained  flat for fiscal 2002  due  to  unfavorable
commodity  price variances for dairy and cheese and product mix changes  to
menu  items  with  higher  percentage food  costs,  offset  by  menu  price
increases  and  favorable commodity price variances for  seafood.  Cost  of
sales  increased  for  fiscal  2001  due  to  unfavorable  commodity  price
variances  for  beef and seafood, produce, and beverages  and  product  mix
changes  to menu items with higher percentage food costs. These unfavorable
variances  were  partially  offset by menu price  increases  and  favorable
commodity price variances for other commodities.

      Restaurant  expenses increased in fiscal 2002  due  primarily  to  an
approximate  $11.0  million expense related to the  settlement  of  certain
California labor law issues, an approximate $8.7 million impairment  charge
related  to the write-off of a portion of the notes receivable from Eatzi's
Corporation, and increased labor wage rates. These increases were partially
offset  by  increased  sales leverage and menu price increases.  Restaurant
expenses  decreased  in  fiscal  2001  due  primarily  to  increased  sales
leverage,  menu  price increases, and labor productivity  gains,  but  were
partially offset by increased labor wage rates and utility costs.

      Depreciation and amortization increased in fiscal 2002 due  primarily
to  new  unit  construction,  ongoing remodel  costs,  the  acquisition  of
previously leased equipment and certain real estate assets, and restaurants
acquired during fiscal 2002 and 2001. These increases were partially offset
by  increased sales leverage, a declining depreciable asset base for  older
units,  and  the  elimination  of goodwill and  certain  other  intangibles
amortization in accordance with Statement of Financial Accounting Standards
("SFAS")  No. 142. Depreciation and amortization decreased in  fiscal  2001
due primarily to increased sales leverage, utilization of equipment leasing
facilities,  and  a  declining  depreciable asset  base  for  older  units.
Partially  offsetting these decreases were increases  in  depreciation  and
amortization  related to new unit construction, ongoing remodel  costs  and
restaurants acquired during fiscal 2001.

      General  and  administrative expenses decreased in  fiscal  2002  and
fiscal 2001 as compared to the respective prior fiscal years as a result of
the   Company's  continued  focus  on  controlling  corporate  expenditures
relative to increasing revenues and increased sales leverage resulting from
new unit openings and acquisitions.

      Interest expense increased for fiscal 2002 as compared to fiscal 2001
as  a  result of amortization of debt issuance costs and debt discounts  on
the  Company's  $431.7  million  convertible  debt.  These  increases  were
partially offset by lower interest rates on floating rate debt, a  decrease
in  interest expense on senior notes due to a scheduled repayment,  and  an
increase  in interest capitalization related to new restaurant construction
activity. Interest expense decreased for fiscal 2001 as compared to  fiscal
2000 as a result of decreased average borrowings and interest rates on  the
Company's  credit facilities, increased sales leverage, and a  decrease  in
interest  expense  on  senior  notes due to a  scheduled  repayment.  These
decreases  were  partially  offset by a decrease  in  the  construction-in-
progress  balances subject to interest capitalization and  an  increase  in
borrowings related to restaurants acquired.

      Other, net increased in fiscal 2002 as compared to fiscal 2001 due to
a  decrease  in the market value of the Company's savings plan  investments
which are used to offset the savings plan obligation, partially offset by a
reduction  in  the  Company's share of losses in equity  method  investees.
Other,  net  decreased in fiscal 2001 as a result of  a  reduction  in  the
Company's share of losses in equity method investees, caused in part by the
acquisition  of the remaining interest in the Big Bowl restaurant  concept,
which is now consolidated in the accompanying financial statements, and the
sale of the Wildfire restaurant concept.

INCOME TAXES

     The Company's effective income tax rate was 34.1%, 34.6%, and 35.1% in
fiscal  2002, 2001, and 2000, respectively. The decrease in fiscal 2002  is
primarily  due  to the elimination of goodwill amortization  in  accordance
with  SFAS  No.  142 and a decrease in the effective state tax  rates.  The
decrease in fiscal 2001 is due to the receipt of a tax credit refund.

NET INCOME AND NET INCOME PER SHARE

     Fiscal 2002 net income and diluted net income per share increased 5.2%
and  7.0%,  respectively, compared to fiscal 2001. Excluding the  after-tax
effects  of the California labor law settlement ($7.3 million) and  Eatzi's
impairment  charge ($5.8 million), net income and diluted  net  income  per
share  increased for fiscal 2002 by 14.3% and 16.2%, respectively, compared
to  fiscal 2001. The increase in both net income and diluted net income per
share,  excluding  the one-time charges, was primarily  due  to  increasing
revenues  driven  by increases in sales weeks and comparable  store  sales,
decreases  in  general and administrative expenses and the  elimination  of
goodwill amortization, partially offset by increases in restaurant expenses
and depreciation and amortization as a percent of revenues.

      Fiscal  2001  net income and diluted net income per  share  increased
23.2%  and  21.4%, respectively, compared to fiscal 2000. The  increase  in
both  net  income  and diluted net income per share was  primarily  due  to
increasing revenues driven by increases in comparable store sales and sales
weeks  and  decreases in restaurant expenses, depreciation and amortization
expenses, and general and administrative expenses as a percent of revenues.

IMPACT OF INFLATION

      The  Company  has not experienced a significant overall  impact  from
inflation.  As  operating expenses increase, the  Company,  to  the  extent
permitted by competition, recovers increased costs through a combination of
menu price increases and reviewing, then implementing, alternative products
or processes.

LIQUIDITY AND CAPITAL RESOURCES

      The working capital deficit increased from $110.0 million at June 27,
2001 to $160.3 million at June 26, 2002, and net cash provided by operating
activities increased from $246.8 million for fiscal 2001 to $390.0  million
for  fiscal  2002 due primarily to the timing of operational  receipts  and
payments.  The  Company  believes  that its  various  sources  of  capital,
including availability under existing credit facilities and cash flow  from
operating  activities, are adequate to finance operations as  well  as  the
repayment of current debt obligations.

       Long-term   debt   outstanding  at  June  26,  2002   consisted   of
$255.0 million of zero coupon convertible senior debentures ($431.7 million
principal  less $176.7 million representing an unamortized debt  discount),
$46.0  million  of  unsecured senior notes ($42.8  million  principal  plus
$3.2  million representing the effect of changes in interest rates  on  the
fair  value  of  the debt), $43.5 million in assumed debt  related  to  the
acquisition  of restaurants from a former franchise partner ($38.8  million
principal plus $4.7 million representing a debt premium), $35.0 million  in
assumed capital lease obligations related to the acquisition of restaurants
from a former franchise partner ($19.5 million principal plus $15.5 million
representing  a  debt  premium),  $63.5 million  of  borrowings  on  credit
facilities,  and  obligations under other capital leases. The  Company  has
credit  facilities totaling $375.0 million. At June 26, 2002,  the  Company
had $311.5 million in available funds from these facilities.

      In  October  2001, the Company issued $431.7 million of  zero  coupon
convertible  senior debentures and received proceeds totaling approximately
$250.0  million.  The Company used the proceeds for repayment  of  existing
indebtedness,  restaurant  acquisitions, purchases  of  outstanding  common
stock  under the Company's stock repurchase plan and for general  corporate
purposes.

     In July 2001, the Company made a $12.3 million capital contribution to
Rockfish  Seafood  Grill ("Rockfish") in exchange for  an  approximate  40%
ownership  interest  in the legal entities owning and developing  Rockfish.
Additionally, in June and November 2001, the Company acquired three On  The
Border and thirty-nine Chili's restaurants from its franchise partners  Hal
Smith  and  Sydran, respectively, for $60.5 million. The  Company  financed
these  acquisitions  through existing credit facilities,  the  zero  coupon
convertible senior debentures and cash provided by operations.

      In  February  2002, the Company acquired the remaining assets  leased
under its $80.0 million equipment leasing facilities and $75.0 million real
estate  leasing facility for $36.2 million and $56.8 million, respectively,
and  terminated  the leasing arrangements. The acquisitions were  primarily
funded by utilizing amounts available under existing credit facilities.

       Capital  expenditures  consist  of  purchases  of  land  for  future
restaurant sites, the cost of new restaurant construction, purchases of new
and  replacement  restaurant furniture and equipment,  the  acquisition  of
previously  leased equipment and real estate assets, and ongoing remodeling
programs.  Capital expenditures, net of amounts funded under the respective
equipment  and  real  estate leasing facilities, were  $371.1  million  for
fiscal 2002 compared to $205.2 million for fiscal 2001. The increase is due
primarily  to  the  acquisition of the remaining assets  leased  under  the
equipment and real estate leasing facilities and an increase in the  number
of  new  store openings. The Company estimates that its fiscal 2003 capital
expenditures  will  approximate $335.0 million. These capital  expenditures
will be funded primarily from operations and existing credit facilities.

      The Board of Directors authorized an increase in the stock repurchase
plan  of $100.0 million in August 2001 and an additional $100.0 million  in
April  2002,  bringing  the  Company's total share  repurchase  program  to
$410.0   million.   Pursuant  to  the  Company's  stock  repurchase   plan,
approximately  5.1 million shares of its common stock were repurchased  for
$136.1  million  during  fiscal 2002. As of June  26,  2002,  approximately
16.0 million shares had been repurchased for $327.6 million under the stock
repurchase  plan.  The  Company repurchases  common  stock  to  offset  the
dilutive  effect of stock option exercises, satisfy obligations  under  its
savings  plans,  and  for other corporate purposes. The repurchased  common
stock  is  reflected  as a reduction of shareholders' equity.  The  Company
financed  the repurchase program through a combination of cash provided  by
operations,  drawdowns on its available credit facilities and the  issuance
of the zero coupon convertible senior debentures.

      In  August  2002, the Company entered into a letter  of  intent  with
Philip  J.  Romano and Eatzi's Corporation to divest its  interest  in  the
Eatzi's concept. As a result, an approximate $8.7 million impairment charge
was  recorded  reducing the Eatzi's notes receivable to $11.0 million.  The
Company expects to collect the remaining balance of the notes in the second
quarter of fiscal 2003.

      The  Company  is  not aware of any other event or trend  which  would
potentially  affect its liquidity. In the event such a trend develops,  the
Company believes that there are sufficient funds available under its credit
facilities  and  from its strong internal cash generating  capabilities  to
adequately manage the expansion of the business.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The  Company is exposed to market risk from changes in interest rates
on  debt  and  certain  leasing facilities and from  changes  in  commodity
prices.  A  discussion of the Company's accounting policies for  derivative
instruments  is included in the summary of significant accounting  policies
in the notes to the consolidated financial statements.

      The  Company  may from time to time utilize interest  rate  swaps  to
manage  overall borrowing costs and reduce exposure to adverse fluctuations
in  interest  rates.  The Company does not use derivative  instruments  for
trading  purposes  and  has  procedures in place  to  monitor  and  control
derivative use.

      The  Company is exposed to interest rate risk on short-term and long-
term  financial instruments carrying variable interest rates. The Company's
variable  rate financial instruments, including the outstanding  borrowings
of  credit facilities and notional amounts of interest rate swaps,  totaled
$224.1 million at June 26, 2002. The impact on the Company's annual results
of  operations  of  a  one-point interest rate change  on  the  outstanding
balance  of these variable rate financial instruments as of June  26,  2002
would be approximately $2.2 million.

      The  Company  purchases certain commodities such  as  beef,  chicken,
flour,  and  cooking oil. These commodities are generally  purchased  based
upon  market  prices established with vendors. These purchase  arrangements
may  contain contractual features that limit the price paid by establishing
certain   price  floors  or  caps.  The  Company  does  not  use  financial
instruments  to hedge commodity prices because these purchase  arrangements
help control the ultimate cost paid and any commodity price aberrations are
generally short term in nature.

      This  market  risk  discussion contains  forward-looking  statements.
Actual  results  may  differ  materially from this  discussion  based  upon
general  market  conditions and changes in domestic  and  global  financial
markets.

CRITICAL ACCOUNTING POLICIES

      Our  significant accounting policies are disclosed in Note 1  to  our
consolidated  financial statements. The following discussion addresses  our
most  critical accounting policies, which are those that are most important
to  the  portrayal of our financial condition and results, and that require
significant  judgment. Property and Equipment Property  and  equipment  are
depreciated on a straight-line basis over the estimated useful lives of the
assets.  The  useful  lives  of the assets are  based  upon  the  Company's
expectations for the period of time that the asset will be used to generate
revenue.  The  Company  periodically reviews  the  assets  for  changes  in
circumstances which may impact their useful lives. Impairment of Long-Lived
Assets  The  Company  reviews property and equipment  for  impairment  when
events  or  circumstances indicate it might be impaired. The Company  tests
impairment  using  historical  cash flows  and  other  relevant  facts  and
circumstances as the primary basis for its estimates of future cash  flows.
This  process  requires  the  use of estimates and  assumptions  which  are
subject  to  a high degree of judgment. In addition, at least annually  the
Company assesses the recoverability of goodwill and other intangible assets
related  to  its  restaurant concepts. These impairment tests  require  the
Company  to  estimate  fair  values of its restaurant  concepts  by  making
assumptions  regarding  future  cash flows  and  other  factors.  If  these
assumptions  change  in the future, the Company may be required  to  record
impairment  charges  for  these assets. Financial Instruments  The  Company
enters  into interest rate swaps to manage fluctuations in interest expense
and to maintain the value of fixed-rate debt. The fair value of these swaps
is  estimated  using widely accepted valuation methods.  The  valuation  of
derivatives involves considerable judgment, including estimates  of  future
interest rate curves. Changes in those estimates may materially affect  the
value  of  the Company's derivatives. Self-Insurance The Company  is  self-
insured  for  certain  losses  related to general  liability  and  workers'
compensation.  The Company maintains stop loss coverage  with  third  party
insurers   to  limit  its  total  exposure.  The  self-insurance  liability
represents an estimate of the ultimate cost of claims incurred  as  of  the
balance  sheet  date.  The estimated liability is  not  discounted  and  is
established based upon analysis of historical data and actuarial estimates,
and  is  reviewed  by the Company on a quarterly basis to ensure  that  the
liability  is  appropriate.  If actual trends, including  the  severity  or
frequency of claims, differ from our estimates, our financial results could
be impacted.

RECENT ACCOUNTING PRONOUNCEMENTS

      In  August  2001, the Financial Accounting Standards  Board  ("FASB")
issued  SFAS No. 144, "Accounting for the Impairment or Disposal  of  Long-
Lived Assets." This statement supersedes SFAS No. 121, "Accounting for  the
Impairment  of Long-Lived Assets and for Long-Lived Assets to  be  Disposed
Of"  and  the accounting and reporting provisions of Accounting  Principles
Board  Opinion  No. 30, "Reporting the Results of Operations-Reporting  the
Effects  of Disposal of a Segment of a Business, and Extraordinary, Unusual
and  Infrequently Occurring Events and Transactions." SFAS No. 144  retains
the  fundamental provisions of SFAS No. 121, but eliminates the requirement
to allocate goodwill to long-lived assets to be tested for impairment. This
statement also requires discontinued operations to be carried at the  lower
of  cost or fair value less costs to sell and broadens the presentation  of
discontinued operations to include a component of an entity rather  than  a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after  December  15, 2001, and interim periods within those  fiscal  years,
with  early application encouraged. The Company will adopt SFAS No. 144  in
the  first quarter of fiscal 2003 and does not expect the adoption of  this
statement  to  have  a  material impact on its  results  of  operations  or
financial position.

      In  June  2002, the FASB issued SFAS No. 146, "Accounting  for  Costs
Associated  with  Exit  or Disposal Activities." SFAS  No.  146  supersedes
Emerging  Issues  Task Force ("EITF") No. 94-3, "Liability Recognition  for
Certain  Employee Termination Benefits and Other Costs to Exit an  Activity
(Including  Certain  Costs  Incurred in a  Restructuring)."  SFAS  No.  146
eliminates the provisions of EITF No. 94-3 that required a liability to  be
recognized  for certain exit or disposal activities at the date  an  entity
committed  to  an  exit plan. SFAS No. 146 requires a liability  for  costs
associated  with  an  exit or disposal activity to be recognized  when  the
liability  is  incurred. SFAS No. 146 is effective  for  exit  or  disposal
activities that are initiated after December 31, 2002. The Company does not
expect  the  adoption of this statement to have a material  impact  on  its
results of operations or financial position.

MANAGEMENT OUTLOOK

      During  fiscal  2002, the Company delivered another  year  of  strong
financial  performance in a difficult economic environment.  These  results
were  achieved  by disciplined capacity growth, opportunistic acquisitions,
and  diligent  fiscal responsibility. Our passionate culinary culture  that
keeps  the  Company's menu offerings on the leading edge and our unwavering
focus on guest satisfaction are key contributors to our continued success.

      During fiscal 2003, the Company will continue to leverage many of the
initiatives  that  drove  fiscal  2002  performance.  Positive   lifestyle,
demographic,  and  demand trends for food away from home  help  balance  an
uncertain  economic environment. Revenue growth will be  driven  by  higher
capacity as a result of the Company's recent acquisitions, continued  brand
development and an effective real estate strategy. The Company believes the
ongoing  efforts to enhance our guests' experience provide the best  avenue
to deliver long-term shareholder value.

FORWARD-LOOKING STATEMENTS

      The  Company  wishes to caution readers that the following  important
factors,  among  others, could cause the actual results of the  Company  to
differ  materially from those indicated by forward-looking statements  made
in  this  report  and  from time to time in news releases,  reports,  proxy
statements,  registration statements and other written  communications,  as
well  as  oral  forward-looking  statements  made  from  time  to  time  by
representatives  of  the Company. Such forward- looking statements  involve
risks  and  uncertainties that may cause the Company's  or  the  restaurant
industry's  actual results, performance or achievements  to  be  materially
different from any future results, performance or achievements expressed or
implied  by  these  forward-looking statements. Factors  that  might  cause
actual events or results to differ materially from those indicated by these
forward-looking  statements may include matters  such  as  future  economic
performance,  restaurant openings, operating margins, the  availability  of
acceptable  real estate locations for new restaurants, the  sufficiency  of
the Company's cash balances and cash generated from operating and financing
activities  for the Company's future liquidity and capital resource  needs,
and  other  matters,  and  are  generally  accompanied  by  words  such  as
"believes,"  "anticipates," "estimates," "predicts," "expects" and  similar
expressions  that convey the uncertainty of future events or  outcomes.  An
expanded discussion of various risk factors follows.

Competition  may adversely affect the Company's operations and  financial
results.

      The  restaurant business is highly competitive with respect to price,
service,  restaurant location and food quality, and is  often  affected  by
changes  in  consumer tastes, economic conditions, population  and  traffic
patterns.  The  Company  competes  within each  market  with  locally-owned
restaurants  as  well as national and regional restaurant chains,  some  of
which  operate  more restaurants and have greater financial  resources  and
longer  operating  histories than the Company. There is active  competition
for  management personnel and for attractive commercial real  estate  sites
suitable for restaurants. In addition, factors such as inflation, increased
food,  labor  and  benefits  costs,  and difficulty  in  attracting  hourly
employees may adversely affect the restaurant industry in general  and  the
Company's restaurants in particular.

The Company's sales volumes generally decrease in winter months.

      The  Company's sales volumes fluctuate seasonally, and are  generally
higher in the summer months and lower in the winter months, which may cause
seasonal fluctuations in the Company's operating results.

Changes  in  governmental regulation may adversely affect  the  Company's
ability  to  open  new  restaurants and the Company's existing  and  future
operations.

      Each  of  the  Company's  restaurants is  subject  to  licensing  and
regulation  by alcoholic beverage control, health, sanitation,  safety  and
fire  agencies  in  the  state, county and/or  municipality  in  which  the
restaurant is located. The Company has not encountered any difficulties  or
failures  in obtaining the required licenses or approvals that could  delay
or  prevent  the opening of a new restaurant and although the Company  does
not, at this time, anticipate any occurring in the future, there can be  no
assurance  that  the Company will not experience material  difficulties  or
failures that could delay the opening of restaurants in the future.

     The Company is subject to federal and state environmental regulations,
and although these have not had a material negative effect on the Company's
operations,  there can be no assurance that there will not  be  a  material
negative  effect  in the future. More stringent and varied requirements  of
local  and state governmental bodies with respect to zoning, land  use  and
environmental factors could delay or prevent development of new restaurants
in particular locations. The Company is subject to the Fair Labor Standards
Act,  which  governs  such  matters as minimum wages,  overtime  and  other
working conditions, along with the Americans With Disabilities Act,  family
leave  mandates  and  a variety of other laws enacted by  the  states  that
govern these and other employment law matters. Although the Company expects
increases  in  payroll expenses as a result of federal and  state  mandated
increases in the minimum wage, and although such increases are not expected
to  be  material, there can be no assurance that there will not be material
increases in the future. However, the Company's vendors may be affected  by
higher  minimum wage standards, which may result in increases in the  price
of goods and services supplied to the Company.

Inflation may increase the Company's operating expenses.

      The  Company  has not experienced a significant overall  impact  from
inflation.  As  operating expenses increase, the  Company,  to  the  extent
permitted  by  competition, recovers increased  costs  by  increasing  menu
prices, by reviewing, then implementing, alternative products or processes,
or  by  implementing  other  cost-reduction procedures.  There  can  be  no
assurance,  however, that the Company will be able to continue  to  recover
increases in operating expenses due to inflation in this manner.

Increased energy costs may adversely affect the Company's profitability.

      The  Company's  success  depends in part on  its  ability  to  absorb
increases in utility costs. Various regions of the United States  in  which
the   Company   operates  multiple  restaurants,  particularly  California,
experienced significant increases in utility prices during the 2001  fiscal
year. If these increases should recur, they will have an adverse effect  on
the Company's profitability.

If  the  Company  is  unable  to  meet its  growth  plan,  the  Company's
profitability in the future may be adversely affected.

     The Company's ability to meet its growth plan is dependent upon, among
other  things, its ability to identify available, suitable and economically
viable  locations  for  new restaurants, obtain all  required  governmental
permits (including zoning approvals and liquor licenses) on a timely basis,
hire  all  necessary contractors and subcontractors, and meet  construction
schedules. The costs related to restaurant and concept development  include
purchases  and  leases of land, buildings and equipment  and  facility  and
equipment  maintenance,  repair and replacement. The  labor  and  materials
costs  involved  vary  geographically and  are  subject  to  general  price
increases.  As  a  result, future capital expenditure costs  of  restaurant
development may increase, reducing profitability. There can be no assurance
that the Company will be able to expand its capacity in accordance with its
growth  objectives  or  that the new restaurants  and  concepts  opened  or
acquired will be profitable.

Unfavorable publicity relating to one or more of the Company's restaurants
in a particular brand may taint public perception of the brand.

       Multi-unit  restaurant  businesses  can  be  adversely  affected  by
publicity  resulting  from  poor  food quality,  illness  or  other  health
concerns  or  operating issues stemming from one or  a  limited  number  of
restaurants.  In  particular,  since the Company  depends  heavily  on  the
"Chili's"  brand  for  a  majority of its revenues,  unfavorable  publicity
relating  to one or more Chili's restaurants could have a material  adverse
effect  on  the  Company's  business, results of operations  and  financial
condition.

Other   risk  factors  may  adversely  affect  the  Company's  financial
performance.

      Other  risk factors that could cause the Company's actual results  to
differ  materially  from those indicated in the forward-looking  statements
include,  without  limitation,  changes in  economic  conditions,  consumer
perceptions  of  food  safety,  changes in  consumer  tastes,  governmental
monetary   policies,  changes  in  demographic  trends,   availability   of
employees, terrorist acts, and weather and other acts of God.



BRINKER   INTERNATIONAL,  INC.  CONSOLIDATED  STATEMENTS  OF   INCOME   (In
thousands, except per share amounts)

<TABLE>
                                                            Fiscal Years
                                                    2002         2001        2000
<S>                                             <C>           <C>          <C>
Revenues                                        $2,887,111    $2,406,874   $2,100,496

Operating Costs and Expenses:
   Cost of sales                                   796,714       663,357      575,570
   Restaurant expenses                           1,591,367     1,303,349    1,138,487
   Depreciation and amortization                   130,102       100,064       90,647
   General and administrative                      121,420       109,110      100,123

     Total operating costs and expenses          2,639,603     2,175,880    1,904,827

Operating income                                   247,508       230,994      195,669
Interest expense                                    13,327         8,608       10,746
Other, net                                           2,332           459        3,381

Income before provision for income taxes           231,849       221,927      181,542
Provision for income taxes                          79,136        76,779       63,702

     Net income                                    $152,713     $145,148     $117,840


Basic net income per share                            $1.56        $1.46        $1.20

Diluted net income per share                          $1.52        $1.42        $1.17

Basic weighted average shares outstanding            97,862       99,101       98,445

Diluted weighted average shares outstanding         100,565      102,098      101,114

</TABLE>


See accompanying notes to consolidated financial statements.



BRINKER  INTERNATIONAL,  INC. CONSOLIDATED BALANCE  SHEETS  (In  thousands,
except share and per share amounts)

<TABLE>
                                                             2002          2001
<S>                                                         <C>           <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                $   10,091    $  13,312
   Accounts receivable                                          22,613       31,438
   Inventories                                                  25,190       27,351
   Prepaid expenses and other                                   66,727       57,809
   Income taxes receivable                                      15,673        3,019
   Deferred income taxes                                         1,660        7,295

     Total current assets                                      141,954      140,224

Property and Equipment, at Cost:
   Land                                                        254,000      201,013
   Buildings and leasehold improvements                      1,091,434      898,133
   Furniture and equipment                                     635,403      478,847
   Construction-in-progress                                     57,015       70,051

                                                             2,037,852    1,648,044
   Less accumulated depreciation and amortization             (682,435)    (563,320)

     Net property and equipment                              1,355,417    1,084,724


Other Assets:
   Goodwill                                                    193,899      138,127
   Other                                                        92,066       82,245

     Total other assets                                        285,965      220,372

     Total assets                                           $1,783,336   $1,445,320



LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Current installments of long-term debt                     $17,292       $17,635
   Accounts payable                                           118,418        98,175
   Accrued liabilities                                        166,510       134,420

     Total current liabilities                                302,220       250,230

Long-term debt, less current installments                     426,679       236,060
Deferred income taxes                                          17,295         6,782
Other liabilities                                              60,046        51,961
Commitments and Contingencies (Notes 8 and 14)
Shareholders' Equity:
   Common stock-250,000,000 authorized shares; $.10 par        11,750        11,750
value; 117,500,054 shares issued and 97,440,391 shares
outstanding at June 26, 2002, and 117,501,080 shares
issued and 99,509,455 shares outstanding at June 27,
2001
   Additional paid-in capital                                 330,191       314,867
   Retained earnings                                          954,701       801,988

                                                            1,296,642     1,128,605
Less:
Treasury stock, at cost (20,059,663 shares at June 26,       (317,674)     (225,334)
2002 and 17,991,625 shares at June 27, 2001)
Accumulated other comprehensive loss                                -          (895)
Unearned compensation                                          (1,872)       (2,089)

   Total shareholders' equity                                 977,096       900,287

   Total liabilities and shareholders' equity              $1,783,336    $1,445,320
</TABLE>




See accompanying notes to consolidated financial statements.



BRINKER INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
                 Common Stock
                                                                                      Accumulated
                                          Additional                                        Other
                                             Paid-In      Retained     Treasury     Comprehensive        Unearned
                    Shares      Amount       Capital      Earnings        Stock              Loss    Compensation   Total
<S>                 <C>        <C>          <C>           <C>          <C>                   <C>            <C>     <C>
Balances at June    98,847     $11,722      $285,448      $539,011     $(174,742)              $-              $-   $661,439
30, 1999
Net income               -           -             -       117,840             -                -               -    117,840
Purchases of        (3,668)          -             -             -       (60,707)               -               -    (60,707)
treasury stock
Issuances of         3,291           -        (3,187)            -        33,832                -               -     30,645
common stock
Tax benefit from         -           -        10,837             -             -                -               -     10,837
stock options
exercised
Amortization of          -           -             -             -             -                -           2,124      2,124
unearned
compensation
Issuance of            328          32         5,074           (11)           86                -          (5,151)        30
restricted
stock, net of
forfeitures

Balances at June    98,798      11,754       298,172       656,840       (201,531)              -          (3,027)    762,208
28, 2000
Net income               -           -             -       145,148              -               -               -     145,148

Change in fair           -           -             -             -              -            (895)              -        (895)
value of
derivatives, net
of tax

   Comprehensive                                                                                                      144,253
     income

Purchases of       (2,841)           -             -             -        (65,578)              -               -     (65,578)
treasury stock
Issuances of        3,541            -        (2,529)            -         41,194               -               -      38,665
common stock
Tax benefit from        -            -        19,430             -              -               -               -      19,430
stock options
exercised
Amortization of         -            -              -            -              -               -           1,307       1,307
unearned
compensation
Issuance of            11           (4)          (206)           -            581               -            (369)          2
restricted
stock, net of
forfeitures

Balances at June   99,509       11,750        314,867      801,988        (225,334)          (895)         (2,089)    900,287
27, 2001
Net income              -            -              -      152,713               -              -               -     152,713

Reclassification        -            -              -            -               -            895               -         895
adjustment to
earnings, net of
tax

   Comprehensive                                                                                                      153,608
    income

Purchases of       (5,058)           -              -           -          (136,069)            -               -    (136,069)
treasury stock
Issuances of        2,890            -         (4,602)          -            42,394             -               -      37,792
common stock
Tax benefit from        -            -         18,826           -                 -             -               -      18,826
stock options
exercised
Amortization of         -            -              -           -                 -             -           1,594       1,594
unearned
compensation
Issuance of            99            -          1,100           -             1,335             -          (1,377)      1,058
restricted
stock, net of
forfeitures

Balances at June   97,440      $11,750       $330,191     $954,701        $(317,674)           $-         $(1,872)   $977,096
26, 2002
</TABLE>


See accompanying notes to consolidated financial statements.



BRINKER  INTERNATIONAL,  INC. CONSOLIDATED STATEMENTS  OF  CASH  FLOWS  (In
thousands)
<TABLE>
                                                           Fiscal Years
                                                    2002        2001        2000
<S>                                               <C>         <C>         <C>
Cash Flows from Operating Activities:
Net income                                        $152,713    $145,148    $117,840
Adjustments to reconcile net income to net cash
provided by operating activities:
   Depreciation and amortization                   130,102     100,064      90,647
   Amortization of deferred costs                    8,252       1,307       2,124
   Deferred income taxes                            24,166       3,213       1,985
   Impairment of notes receivable                    8,723           -           -
   Loss on sale of affiliate                             -         387           -
   Changes in assets and liabilities, excluding
   effects of acquisitions and disposition:
     Receivables                                      6,138     (7,439)      1,109
     Inventories                                      2,863     (9,732)     (1,398)
     Prepaid expenses and other                      (3,467)    (2,112)       (371)
     Other assets                                     2,965     (5,156)     (4,032)
     Current income taxes                           (12,654)   (15,154)     14,234
     Accounts payable                                38,808     16,863      26,964
     Accrued liabilities                             29,006     18,812      10,520
     Other liabilities                                2,418        610       9,372

     Net cash provided by operating activities      390,033    246,811     268,994

Cash Flows from Investing Activities:
Payments for property and equipment                (371,052)  (205,160)   (165,397)
Payments for purchases of restaurants               (60,491)   (92,267)          -
Proceeds from sale of affiliate                       4,000      1,000           -
Investments in equity method investees              (12,322)    (3,443)       (954)
Net repayments from affiliates                          708        975           -

     Net cash used in investing activities         (439,157)  (298,895)   (166,351)


Cash Flows from Financing Activities:
Net (payments) borrowings on credit facilities      (83,200)    94,900     (58,200)
Payments of long-term debt                          (16,908)   (14,934)    (14,635)
Net proceeds from issuance of long-term debt        244,288          -           -
Proceeds from issuances of treasury stock            37,792     38,665      30,645
Purchases of treasury stock                        (136,069)   (65,578)    (60,707)

     Net cash provided by (used in) financing        45,903     53,053    (102,897)
activities

Net change in cash and cash equivalents              (3,221)       969        (254)
Cash and cash equivalents at beginning of year       13,312     12,343      12,597

Cash and cash equivalents at end of year            $10,091    $13,312     $12,343
</TABLE>


See accompanying notes to consolidated financial statements.




                       BRINKER INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Basis of Presentation

      The consolidated financial statements include the accounts of Brinker
International, Inc. and its wholly-owned subsidiaries (the "Company").  All
intercompany   accounts   and  transactions   have   been   eliminated   in
consolidation.  The  Company  owns  and operates,  or  franchises,  various
restaurant  concepts principally located in the United States.  Investments
in  unconsolidated  affiliates in which the Company  exercises  significant
influence,  but  does not control, are accounted for by the equity  method,
and  the  Company's  share of the net income or loss  of  the  investee  is
included in other, net in the consolidated statements of income.

      The Company has a 52/53 week fiscal year ending on the last Wednesday
in  June.  Fiscal years 2002, 2001 and 2000, which ended on June 26,  2002,
June 27, 2001 and June 28, 2000, respectively, each contained 52 weeks.

      Certain prior year amounts in the accompanying consolidated financial
statements have been reclassified to conform with fiscal 2002 presentation.
These  reclassifications  have no effect on the  Company's  net  income  or
financial position as previously reported.

(b)  Revenue Recognition

      The  Company  records  revenue from the sale of  food,  beverage  and
alcohol  as  products are sold. Initial fees received from a franchisee  to
establish  a  new franchise are recognized as income when the  Company  has
performed  all  of  its obligations required to assist  the  franchisee  in
opening a new franchise restaurant, which is generally upon opening of such
restaurant.  Continuing royalties, which are a percentage of net  sales  of
franchised  restaurants, are accrued as income when earned.  Proceeds  from
the  sale of gift cards are recorded as deferred revenue and recognized  as
income when redeemed by the holder.

      The Company adopted EITF 01-9, "Accounting for Consideration Given by
a  Vendor  to  a Customer (Including a Reseller of the Vendor's Products),"
effective March 28, 2002. EITF 01-9 concluded that sales incentives offered
to customers to buy a product should be classified as a reduction of sales.
The  Company  previously included sales incentives in restaurant  expenses.
Sales  incentives reclassified from restaurant expenses to revenues totaled
$79.5  million, $66.8 million, and $59.3 million in fiscal 2002, 2001,  and
2000, respectively. These reclassifications have no effect on net income.

(c)  Financial Instruments

      The  Company's  policy  is  to invest cash  in  excess  of  operating
requirements in income-producing investments. Income-producing  investments
with  maturities  of  three months or less at the time  of  investment  are
reflected as cash equivalents.

     The Company's financial instruments at June 26, 2002 and June 27, 2001
consist  of  cash  equivalents, accounts receivable, notes receivable,  and
long-term  debt. The fair value of these financial instruments approximates
the  carrying  amounts  reported in the consolidated  balance  sheets.  The
following methods were used in estimating the fair value of each  class  of
financial  instrument: cash equivalents and accounts receivable approximate
their  carrying  amounts due to the short duration of  those  items;  notes
receivable  are  based on the present value of expected future  cash  flows
discounted  at  the  interest rate currently offered by the  Company  which
approximates  rates  currently being offered by local lending  institutions
for  loans  of similar terms to companies with comparable credit risk;  and
long-term debt is based on the amount of future cash flows discounted using
the  Company's  expected  borrowing rate for debt of  comparable  risk  and
maturity.

      The  Company does not use derivative instruments for trading purposes
and  the Company has procedures in place to monitor and control their  use.
The  Company's  use  of  derivative instruments  is  currently  limited  to
interest  rate  swaps, which are entered into with the  intent  of  hedging
exposures  to  changes in interest rates on the Company's  debt  and  lease
obligations.  The  Company  records  all  derivative  instruments  in   the
consolidated balance sheet at fair value. The accounting for  the  gain  or
loss  due to changes in fair value of the derivative instrument depends  on
whether  the derivative instrument qualifies as a hedge. If the  derivative
instrument does not qualify as a hedge, the gains or losses are reported in
earnings  when they occur. However, if the derivative instrument  qualifies
as  a  hedge, the accounting varies based on the type of risk being hedged.
Amounts receivable or payable under interest rate swaps related to the debt
and  lease obligations are recorded as adjustments to interest expense  and
restaurant   expenses,  respectively.  Cash  flows  related  to  derivative
transactions are included in operating activities. See Notes 6  and  7  for
additional  discussion of debt-related agreements and derivative  financial
instruments and hedging activities.

(d)  Inventories

      Inventories,  which  consist of food, beverages,  and  supplies,  are
stated at the lower of cost (weighted average cost method) or market.

(e)  Property and Equipment

     Buildings and leasehold improvements are amortized using the straight-
line  method  over  the lesser of the life of the lease, including  renewal
options, or the estimated useful lives of the assets, which range from 5 to
20  years.  Furniture and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets, which range from 3 to
8 years.

      The  Company evaluates property and equipment held and  used  in  the
business  for  impairment  whenever  events  or  changes  in  circumstances
indicate  that  the  carrying amount of a restaurant's assets  may  not  be
recoverable.   An   impairment  is  determined   by   comparing   estimated
undiscounted  future operating cash flows for a restaurant to the  carrying
amount of its assets. If an impairment exists, the amount of impairment  is
measured as the excess of the carrying amount over the estimated discounted
future  operating  cash flows of the asset and the expected  proceeds  upon
sale  of  the  asset. Assets held for sale are reported  at  the  lower  of
carrying amount or fair value less costs to sell.

(f)  Capitalized Interest

       Interest  costs  capitalized  during  the  construction  period   of
restaurants were approximately $4.5 million, $2.8 million, and $3.2 million
during fiscal 2002, 2001, and 2000, respectively.

(g)  Advertising

      Advertising  costs are expensed as incurred. Advertising  costs  were
$116.6 million, $95.4 million, and $80.7 million in fiscal 2002, 2001,  and
2000,  respectively,  and  are  included  in  restaurant  expenses  in  the
consolidated statements of income.

(h)  Goodwill and Other Intangible Assets

      Intangible  assets include both goodwill and identifiable intangibles
arising  from  the  allocation of the purchase prices of  assets  acquired.
Goodwill  represents the residual purchase price after  allocation  to  all
other identifiable net assets acquired. Other intangibles consist mainly of
reacquired development rights and intellectual property.

      The  Company  adopted  SFAS No. 142, "Goodwill and  Other  Intangible
Assets,"  effective June 28, 2001. SFAS No. 142 eliminates the amortization
for  goodwill and other intangible assets with indefinite lives. Intangible
assets  with  lives restricted by contractual, legal, or other  means  will
continue  to  be  amortized  over their useful lives.  Goodwill  and  other
intangible  assets  not subject to amortization are tested  for  impairment
annually  or more frequently if events or changes in circumstances indicate
that  the asset might be impaired. SFAS No. 142 requires a two-step process
for  testing  impairment. First, the fair value of each reporting  unit  is
compared  to  its  carrying  value to determine whether  an  indication  of
impairment  exists. If an impairment is indicated, then the fair  value  of
the  reporting unit's goodwill is determined by allocating the unit's  fair
value  to its assets and liabilities (including any unrecognized intangible
assets)  as  if  the  reporting  unit  had  been  acquired  in  a  business
combination.  The  amount of impairment for goodwill and  other  intangible
assets is measured as the excess of its carrying value over its fair value.
No  such  impairment  losses were recorded upon  the  initial  adoption  of
SFAS  142.  Prior  to  the  adoption of SFAS No. 142,  goodwill  was  being
amortized on a straight-line basis over 30 to 40 years.

      Intangible assets subject to amortization under SFAS No. 142  consist
primarily   of  intellectual  property  rights.  Amortization  expense   is
calculated using the straight-line method over their estimated useful lives
of  15  to 25 years. Intangible assets not subject to amortization  consist
primarily  of  reacquired development rights. See  Note  3  for  additional
disclosures related to goodwill and other intangibles.

(i)  Self-Insurance Program

      The  Company  utilizes a paid loss self-insurance  plan  for  general
liability  and  workers' compensation coverage. Predetermined  loss  limits
have  been  arranged with insurance companies to limit  the  Company's  per
occurrence cash outlay. Additionally, in fiscal 2002 and 2001, the  Company
entered  into  guaranteed  cost agreements with  an  insurance  company  to
eliminate  all future general liability losses for those respective  fiscal
years.  Accrued  expenses  and  other  liabilities  include  the  estimated
incurred but unreported costs to settle unpaid claims and estimated  future
claims.

(j)  Income Taxes

      Deferred tax assets and liabilities are recognized for the future tax
consequences  attributable to differences between the  financial  statement
carrying  amounts  of existing assets and liabilities and their  respective
tax  bases. Deferred tax assets and liabilities are measured using  enacted
tax  rates expected to apply to taxable income in the years in which  those
temporary  differences are expected to be recovered or settled. The  effect
on  deferred  tax  assets  and liabilities of a  change  in  tax  rates  is
recognized in income in the period that includes the enactment date.

(k)  Stock-Based Compensation

      The  Company  uses the intrinsic value method for measuring  employee
stock-based  compensation  cost. Under this method,  compensation  cost  is
measured as the excess, if any, of the quoted market price of the Company's
common  stock at the grant date over the amount the employee must  pay  for
the  stock.  The Company's policy is to grant stock options at  the  market
value  of  the  underlying stock at the date of grant.  Proceeds  from  the
exercise  of  common stock options issued to officers, directors,  and  key
employees  under  the Company's stock option plans are credited  to  common
stock to the extent of par value and to additional paid-in capital for  the
excess.  Required pro forma disclosures of compensation expense  determined
under  the  fair  value method prescribed by SFAS No. 123, "Accounting  for
Stock-Based Compensation," are presented in Note 9.

(l)  Comprehensive Income

      Comprehensive income is defined as the change in equity of a business
enterprise  during  a  period  from  transactions  and  other  events   and
circumstances from non-owner sources. Comprehensive income consists of  net
income and the effective unrealized portion of changes in the fair value of
the Company's cash flow hedges.

(m)  Net Income Per Share

      Basic earnings per share is computed by dividing income available  to
common  shareholders  by  the  weighted average  number  of  common  shares
outstanding  for the reporting period. Diluted earnings per share  reflects
the potential dilution that could occur if securities or other contracts to
issue  common stock were exercised or converted into common stock. For  the
calculation  of  diluted net income per share, the basic  weighted  average
number  of  shares  is increased by the dilutive effect  of  stock  options
determined  using  the  treasury stock method. For all  periods  presented,
there  were  no other securities excluded from the calculation  of  diluted
earnings  per  share  because their effect on  the  periods  presented  was
antidilutive.  The Company's contingently convertible debt  securities  are
not  considered  for  purposes of diluted earnings  per  share  unless  the
required  conversion criteria have been met as of the end of the  reporting
period.

(n)  Segment Reporting

      Operating  segments  are  components of  an  enterprise  about  which
separate financial information is available that is evaluated regularly  by
the  chief  operating decision maker in deciding how to allocate  resources
and  in  assessing  performance. The Company identifies operating  segments
based  on management responsibility and believes it meets the criteria  for
aggregating its operating segments into a single reporting segment.

(o)  Use of Estimates

     The preparation of the consolidated financial statements in conformity
with  generally  accepted accounting principles in  the  United  States  of
America  requires management to make estimates and assumptions that  affect
the  reported  amounts  of assets and liabilities  and  the  disclosure  of
contingent assets and liabilities at the date of the consolidated financial
statements  and  the  reported amounts of revenues and costs  and  expenses
during  the  reporting  period.  Actual results  could  differ  from  those
estimates.

2.    BUSINESS COMBINATIONS AND INVESTMENT IN UNCONSOLIDATED ENTITIES

      In  November  2001, the Company acquired from its franchise  partner,
Sydran  Group,  LLC  and  Sydran  Food Services  III,  L.P.  (collectively,
"Sydran"), thirty-nine Chili's restaurants for approximately $53.9 million.
As  part  of the acquisition, the Company assumed $35.5 million in  capital
lease  obligations ($19.9 million principal plus $15.6 million representing
a debt premium) and recorded goodwill totaling approximately $52.5 million.
The   operations  of  the  restaurants  are  included  in   the   Company's
consolidated results of operations from the date of the acquisition.

      In  July  2001,  the Company formed a partnership  with  Rockfish,  a
privately  held  Dallas-based  restaurant  company  with  twelve  locations
currently   in  operation.  The  Company  made  a  $12.3  million   capital
contribution  to  Rockfish  in exchange for an  approximate  40%  ownership
interest  in  the  legal  entities owning  and  developing  the  restaurant
concept.

      In  June  2001, the Company acquired from its franchise partner,  Hal
Smith  Restaurant Group, three On The Border restaurants for  approximately
$6.6  million.  Goodwill  of approximately $2.9  million  was  recorded  in
connection  with  the  acquisition. The operations of the  restaurants  are
included in the Company's consolidated results of operations from the  date
of the acquisition.

      In  April  2001, the Company acquired from its franchise partner,  NE
Restaurant  Company,  Inc. ("NERCO"), forty Chili's,  three  Chili's  sites
under  construction, and seven On The Border locations. Total consideration
was  approximately  $93.5  million, of which  approximately  $40.9  million
represented  the assumption of mortgage loan obligations and  approximately
$9.0  million  was  for  certain other liabilities and  transaction  costs.
Goodwill of approximately $20.5 million was recorded in connection with the
acquisition.  The  operations  of  the  restaurants  are  included  in  the
Company's  consolidated  results  of  operations  from  the  date  of   the
acquisition.

      In February 2001, the Company acquired the remaining 50% interest  in
the  Big  Bowl  restaurant  concept from  its  joint  venture  partner  for
approximately $38.0 million. The Company originally invested $20.8  million
in  the joint venture prior to February 1, 2001 and accounted for the joint
venture  under  the equity method. Goodwill of approximately $48.9  million
was  recorded  in  connection with the acquisition. The operations  of  the
restaurants  are  included  in  the  Company's  consolidated   results   of
operations from the date of the acquisition.

      In  February  2001,  the Company sold its interest  in  the  Wildfire
restaurant concept for $5.0 million, of which $4.0 million was included  in
accounts receivable in the Company's consolidated balance sheet at June 27,
2001.  During  fiscal  2002,  the remaining balance  of  $4.0  million  was
collected.

       The  pro-forma  effects  of  these  acquisitions  on  the  Company's
historical results of operations are not material.

3.    GOODWILL AND OTHER INTANGIBLES

      The gross carrying amount of intellectual property rights subject  to
amortization  totaled  $6.4 million at June 26, 2002  and  June  27,  2001.
Accumulated  amortization  related  to  these  intangible  assets   totaled
approximately $1.2 million and $960,000 at June 26, 2002 and June 27, 2001,
respectively.  The  carrying amount of reacquired  development  rights  not
subject to amortization totaled $4.4 million at June 26, 2002 and June  27,
2001.

      The  changes in the carrying amount of goodwill for the  fiscal  year
ended June 26, 2002 are as follows (in thousands):


Balance, June 27, 2001                                 $138,127
     Goodwill arising from acquisitions                  55,473
     Other adjustments                                      299

Balance, June 26, 2002                                 $193,899



     The pro forma effects of the adoption of SFAS No. 142 on net income is
as follows (in thousands, net of taxes):


                                          2002     2001      2000

Net income, as reported                 $152,713  $145,148  $117,840
     Intangible amortization                   -     2,349     1,843

Net income, pro forma                   $152,713  $147,497  $119,683



      The  pro  forma effects of the adoption of SFAS No. 142 on basic  and
diluted earnings per share is as follows:


                                              2002    2001   2000

Basic net income per share, as reported       $1.56   $1.46  $1.20
Basic net income per share, pro forma          1.56    1.49   1.22
Diluted net income per share, as reported      1.52    1.42   1.17
Diluted net income per share, pro forma        1.52    1.44   1.18


4.    ACCRUED AND OTHER LIABILITIES

     Accrued liabilities consist of the following (in thousands):


                                                 2002    2001

Payroll                                        $70,121  $61,713
Gift cards                                      27,141   17,425
Sales tax                                       16,841   14,180
Property tax                                    13,624   12,149
Other                                           38,783   28,953

                                              $166,510 $134,420

Other liabilities consist of the following (in thousands):


Retirement plan (see Note 11)                  $29,869  $27,371
Other                                           30,177   24,590

                                               $60,046  $51,961



5.    INCOME TAXES

      The  provision  for  income  taxes  consists  of  the  following  (in
thousands):


                                           2002     2001     2000

Current income tax expense:
   Federal                                $47,228  $62,609   $52,958
   State                                    6,819   10,269     8,166
   Foreign                                    923      688       593

     Total current income tax expense      54,970   73,566    61,717

Deferred income tax expense:
   Federal                                 22,088    2,989     1,835
   State                                    2,078      224       150

     Total deferred income tax expense     24,164    3,213     1,985

                                          $79,136  $76,779   $63,702



      A  reconciliation between the reported provision for income taxes and
the  amount computed by applying the statutory Federal income tax  rate  of
35%  to  income  before  provision  for income  taxes  is  as  follows  (in
thousands):


                                           2002     2001     2000

Income tax expense at statutory rate      $81,147  $77,674  $63,540
FICA tax credit                            (9,002)  (7,029)  (5,993)
State income taxes, net of Federal          5,783    6,822    5,405
benefit
Other                                       1,208     (688)     750

                                          $79,136  $76,779  $63,702



      The  income  tax effects of temporary differences that give  rise  to
significant  portions of deferred income tax assets and liabilities  as  of
June 26, 2002 and June 27, 2001 are as follows (in thousands):


                                                  2002       2001

Deferred income tax assets:
   Insurance reserves                            $7,099     $6,665
   Employee benefit plans                        12,243     10,443
   Leasing transactions                           8,564      8,479
   Other, net                                    13,077     15,921

     Total deferred income tax assets            40,983     41,508

Deferred income tax liabilities:
   Depreciation and capitalized interest on      34,326     28,847
property and equipment
   Prepaid expenses                               7,928      4,792
   Goodwill and other amortization                5,371      2,926
   Other, net                                     8,993      4,430

     Total deferred income tax liabilities       56,618     40,995

     Net deferred income tax liability (asset)  $15,635     $(513)



6.    DEBT

     Long-term debt consists of the following (in thousands):


                                                 2002       2001

Convertible debt                               $254,948         $-
Senior notes                                     45,953     59,966
Credit facilities                                63,500    146,700
Capital lease obligations (see Note 8)           36,047      1,398
Mortgage loan obligations                        43,523     45,631

                                                443,971    253,695
Less current installments                       (17,292)   (17,635)

                                               $426,679   $236,060



      In  October  2001, the Company issued $431.7 million of  zero  coupon
convertible  senior debentures (the "Debentures"), maturing on October  10,
2021, and received proceeds totaling approximately $250.0 million prior  to
debt  issuance costs. The Debentures require no interest payments and  were
issued  at a discount representing a yield to maturity of 2.75% per  annum.
The  Debentures are redeemable at the Company's option on October 10, 2004,
and  the  holders of the Debentures may require the Company to  redeem  the
Debentures  on  October 10, 2003, 2005, 2011 or 2016, and in certain  other
circumstances. In addition, each $1,000 Debenture is convertible into 18.08
shares  of  the Company's common stock if the stock's market price  exceeds
120%  of  the  accreted conversion price at specified  dates,  the  Company
exercises  its  option to redeem the Debentures, the credit rating  of  the
Debentures  is reduced below both Baa3 and BBB-, or upon the occurrence  of
certain specified corporate transactions. The accreted conversion price  is
equal  to  the  issue  price of the Debenture plus accrued  original  issue
discount divided by 18.08 shares.

     The $46.0 million of unsecured senior notes bear interest at an annual
rate   of  7.8%.  Interest  is  payable  semi-annually  and  principal   of
$14.3 million is due annually through fiscal 2004 with the remaining unpaid
balance due in fiscal 2005.

      The  Company  has  credit facilities aggregating  $375.0  million  at
June 26, 2002. A revolving credit facility of $275.0 million bears interest
at  LIBOR  (1.855%  at June 26, 2002) plus a maximum of  1.375%  (0.50%  at
June  26, 2002) and expires in fiscal 2006. At June 26, 2002, $60.0 million
was  outstanding under this facility. The remaining credit facilities  bear
interest  based  upon the lower of the banks' "Base" rate,  certificate  of
deposit  rate,  negotiated rate, or LIBOR rate plus 0.375%, and  expire  at
various  times beginning in fiscal 2003. Unused credit facilities available
to  the  Company  were  approximately $311.5  million  at  June  26,  2002.
Obligations under the Company's credit facilities, which require short-term
repayments,  have  been  classified  as  long-term  debt,  reflecting   the
Company's  intent  and  ability to refinance these borrowings  through  the
existing credit facilities.

     Pursuant to the acquisition of NERCO (see Note 2), the Company assumed
$43.5 million in mortgage loan obligations. The obligations require monthly
principal   and   interest  payments,  mature   on   various   dates   from
September 2002 through March 2020, and bear interest at rates ranging  from
8.44%  to  10.75%  per  year.  The obligations are  collateralized  by  the
acquired restaurant properties.

      Excluding capital lease obligations (see Note 8), the Company's long-
term  debt  maturities for the five years following June 26,  2002  are  as
follows (in thousands):


Fiscal Year

2003                                                   $16,456
2004                                                    18,145
2005                                                    18,073
2006                                                    65,890
2007                                                     2,261
Thereafter                                             287,099

                                                      $407,924



7.    DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

      The Company enters into interest rate swaps to manage fluctuations in
interest  expense  and  to  maintain the value of fixed-rate  debt  (senior
notes).  The  fixed-rate  debt  is exposed to  changes  in  fair  value  as
market-based  interest  rates  fluctuate.  The  Company  entered  into  two
interest  rate  swaps  in  April  2000  with  a  total  notional  value  of
$42.8  million at June 26, 2002. This fair value hedge changes  the  fixed-
rate  interest  on  the  entire balance of the Company's  senior  notes  to
variable-rate  interest.  Under the terms of the hedges  (which  expire  in
fiscal 2005), the Company pays semi-annually a variable interest rate based
on  90-Day LIBOR (1.86% at June 26, 2002) plus 0.530% for one of the  swaps
and  180-Day LIBOR (1.91% at June 26, 2002) plus 0.395% for the other swap,
in arrears, compounded at three-month intervals. The Company receives semi-
annually the fixed interest rate of 7.8% on the senior notes. The estimated
fair  value  of  these  agreements  at  June  26,  2002  was  approximately
$3.2   million,  which  is  included  in  other  assets  in  the  Company's
consolidated  balance sheet at June 26, 2002. The Company's  interest  rate
swap  hedges  meet  the  criteria  for the "short-cut  method"  under  SFAS
No.  133,  "Accounting for Derivative Instruments and Hedging  Activities."
Accordingly, the changes in fair value of the swaps are offset  by  a  like
adjustment  to  the carrying value of the debt and no hedge ineffectiveness
is assumed.

      The  Company entered into three interest rate swaps in December  2001
with  a total notional value of $117.8 million at June 26, 2002. These fair
value hedges change the fixed-rate interest component of an operating lease
commitment for certain real estate properties entered into in November 1997
to  variable-rate interest. Under the terms of the hedges (which expire  in
fiscal  2018),  the Company pays monthly a variable rate  based  on  30-Day
LIBOR (1.84% at June 26, 2002) plus 1.26%. The Company receives monthly the
fixed  interest rate of 7.156% on the lease. The estimated  fair  value  of
these   agreements  at  June  26,  2002  was  an  asset  of   approximately
$5.7  million. The fair value hedges were fully effective during the fiscal
year  ended  June 26, 2002. Accordingly, the change in fair  value  of  the
swaps was recorded in other liabilities.

8.    LEASES

(a)  Capital Leases

      The  Company leases certain buildings under capital leases. The asset
values of $26.4 million at June 26, 2002 and $6.5 million at June 27, 2001,
respectively, and the related accumulated amortization of $6.8 million  and
$6.1 million at June 26, 2002 and June 27, 2001, respectively, are included
in  property and equipment. Amortization of assets under capital  lease  is
included  in depreciation and amortization expense. As part of  the  Sydran
acquisition in November 2001, the Company recorded $19.9 million in capital
lease assets.

(b)  Operating Leases

      The  Company leases restaurant facilities, office space, and  certain
equipment  under  operating leases having terms expiring at  various  dates
through  fiscal 2095. The restaurant leases have renewal clauses  of  1  to
35  years  at the option of the Company and have provisions for  contingent
rent based upon a percentage of gross sales, as defined in the leases. Rent
expense  for fiscal 2002, 2001, and 2000 was $100.4 million, $89.2 million,
and  $81.8 million, respectively. Contingent rent included in rent  expense
for  fiscal  2002,  2001,  and  2000 was $9.7 million,  $8.9  million,  and
$7.2 million, respectively.

      In  fiscal 1998 and 2000, the Company entered into equipment  leasing
facilities  totaling  $55.0  million and $25.0 million,  respectively.  The
leasing  facilities  were  accounted  for  as  operating  leases  and   had
expiration  dates of 2004 and 2006, respectively. The Company guaranteed  a
residual  value of approximately 87% of the total amount funded  under  the
leases.  The Company had the option to purchase all of the leased equipment
for  an  amount  equal to the unamortized lease balance,  which  could  not
exceed 75% of the total amount funded through the leases. In February 2002,
the  Company  acquired  the  remaining assets leased  under  the  equipment
leasing facilities for $36.2 million and terminated the lease arrangements.

      In  fiscal 2000, the Company entered into a $50.0 million real estate
leasing facility. During fiscal 2001, the Company increased the facility to
$75.0  million. The real estate facility was accounted for as an  operating
lease  and was to expire in fiscal 2007. The Company guaranteed a  residual
value of approximately 87% of the total amount funded under the lease.  The
Company  had  the option to purchase all of the leased real estate  for  an
amount  equal  to  the  unamortized lease balance. In  February  2002,  the
Company  acquired the remaining assets leased under the real estate leasing
facility for $56.8 million and terminated the lease arrangement.

(c)  Commitments

      At  June  26,  2002,  future minimum lease payments  on  capital  and
operating leases were as follows (in thousands):


Fiscal                                        Capital    Operating
Year                                          Leases        Leases

2003                                           $3,506      $85,656
2004                                            3,469       83,512
2005                                            3,200       81,453
2006                                            3,165       77,618
2007                                            3,243       72,605
Thereafter                                     48,436      427,822

   Total minimum lease payments                65,019     $828,666


   Imputed interest (average rate of 8%)      (28,972)
   Present value of minimum lease payments     36,047
   Less current installments                     (836)
   Capital lease obligations-noncurrent       $35,211




      At June 26, 2002, the Company had entered into other lease agreements
for  restaurant  facilities  currently under  construction  or  yet  to  be
constructed. Classification of these leases as capital or operating has not
been  determined  as  construction of the leased properties  has  not  been
completed.

9.    STOCK OPTION PLANS

      The  Company  has  adopted  the disclosure-only  provisions  of  SFAS
No. 123. Had the Company adopted the fair value based accounting method for
stock  compensation  expense  prescribed by SFAS  No.  123,  the  Company's
diluted  net income per common and equivalent share would have been reduced
to  the  pro forma amounts indicated below (in thousands, except per  share
data):


                                          2002     2001      2000

Net income-as reported                  $152,713  $145,148  $117,840
Net income-pro forma                     137,803   132,963   108,503
Diluted net income per share-as             1.52      1.42      1.17
reported
Diluted net income per share-pro forma      1.37      1.30      1.07


      The  weighted average fair value of option grants was $10.66, $10.90,
and  $7.25 during fiscal 2002, 2001 and 2000, respectively. The fair  value
is   estimated  using  the  Black-Scholes  option-pricing  model  with  the
following weighted average assumptions:


                                           2002    2001      2000

Expected volatility                       35.5%    34.1%      40.8%
Risk-free interest rate                    4.1%     5.9%       5.9%
Expected lives                          5 years  5 years    5 years
Dividend yield                             0.0%     0.0%       0.0%


     The pro forma disclosures provided are not likely to be representative
of  the  effects  on  reported net income for future years  due  to  future
grants.

(a)  1983, 1992, and 1998 Employee Incentive Stock Option Plans

      In  accordance  with  the  Incentive Stock Option  Plans  adopted  in
October  1983,  November  1992,  and  October  1998,  options  to  purchase
approximately 40.2 million shares of Company common stock may be granted to
officers,  directors,  and  eligible employees,  as  defined.  Options  are
granted  at the market value of the underlying common stock on the date  of
grant,  are exercisable beginning one to two years from the date of  grant,
with various vesting periods, and expire 10 years from the date of grant.

      In  October  1993, the 1983 Incentive Stock Option  Plan  (the  "1983
Plan")  expired. Consequently, no options were granted under the 1983  Plan
subsequent to fiscal 1993. Options granted prior to the expiration  of  the
1983 Plan remain exercisable through April 2003.

      In  October 1998, the 1998 Stock Option and Incentive Plan (the "1998
Plan")  was adopted and no additional options were granted under  the  1992
Incentive  Stock Option Plan (the "1992 Plan"). Options granted  under  the
1992 Plan prior to the adoption of the 1998 Plan remain exercisable through
March 2008.

      Transactions during fiscal 2002, 2001, and 2000 were as  follows  (in
thousands, except option prices):
<TABLE>
                                         Number of             Weighted Average Share
                                         Company Options               Exercise Price
                                       2002   2001       2000    2002    2001    2000
<s>                                  <c>      <c>       <c>     <c>     <c>     <c>
Options outstanding at beginning of   10,759  11,997    13,342  $16.91  $13.03  $11.58
year
Granted                                2,512   2,808     2,508   27.90   26.96   16.13
Exercised                             (2,892) (3,373)   (3,229)  13.09   11.01    9.28
Forfeited                               (435)   (673)     (624)  23.38   19.18   13.79

Options outstanding at end of year     9,944  10,759    11,997  $20.50  $16.91  $13.03


Options exercisable at end of year     4,091   4,788     5,502  $13.38  $11.64  $10.53
</TABLE>

<TABLE>

                                          Options Outstanding             Options Exercisable
Range of exercise prices         Number            Weighted
                                     of             average    Weighted                 Weighted
                                options           remaining     average                  average
                                                contractual    exercise    Number of    exercise
                                                life (years)      price      options       price
<s>                               <c>                  <c>        <c>          <c>        <c>
$7.42-$11.58                      1,733                4.09       $8.71        1,719       $8.69
$12.89-$18.67                     3,363                6.41       16.59        2,372       16.78
$25.50-$33.02                     4,848                8.88       27.43            -           -

                                  9,944                7.21      $20.50        4,091      $13.38
</TABLE>




(b)  1991 and 1999 Non-Employee Stock Option Plans

      In  accordance with the Stock Option Plan for Non-Employee  Directors
and Consultants adopted in May 1991, options to purchase 881,250 shares  of
Company  common stock were authorized for grant. In fiscal 2000,  the  1991
Stock  Option Plan for Non-Employee Directors and Consultants was  replaced
by  the 1999 Stock Option and Incentive Plan for Non-Employee Directors and
Consultants  which  authorized the issuance of  up  to  450,000  shares  of
Company  common stock. The authority to issue the remaining  stock  options
under the 1991 Stock Option Plan for Non-Employee Directors and Consultants
has  been  terminated.  Options are granted at  the  market  value  of  the
underlying  common  stock on the date of grant, vest  one-third  each  year
beginning  two years from the date of grant, and expire 10 years  from  the
date of grant.

      Transactions during fiscal 2002, 2001, and 2000 were as  follows  (in
thousands, except option prices):
<TABLE>
                                           Number of       Weighted Average Share
                                        Company Options         Exercise Price
                                           2002   2001  2000   2002    2001    2000
<s>                                      <c>     <c>    <c>   <c>     <c>     <c>
Options outstanding at beginning of year   351    468    521  $13.96  $11.65  $11.42
Granted                                     82     38      9   30.06   23.96   15.67
Exercised                                  (70)  (155)   (62)  11.24    9.44   10.32
Forfeited                                  (10)     -      -   30.06       -       -

Options outstanding at end of year         353    351    468  $17.79  $13.96  $11.65


Options exercisable at end of year         199    208    278  $12.61  $11.71  $10.23
</TABLE>

     At June 26, 2002, the range of exercise prices for options outstanding
was  $8.33 to $30.06 with a weighted average remaining contractual life  of
6.63 years.

(c)  On The Border 1989 Stock Option Plan

      In accordance with the Stock Option Plan for On The Border employees,
options to purchase 550,000 shares of On The Border's preacquisition common
stock  were  authorized  for grant. Effective May  18,  1994,  the  376,000
unexercised  On The Border stock options became exercisable immediately  in
accordance with the provisions of the Stock Option Plan, and were converted
to approximately 186,000 Company stock options and expire 10 years from the
date  of original grant. At June 26, 2002, there were approximately  37,000
options exercisable and outstanding at an exercise price of $13.18  with  a
weighted average remaining contractual life of 1.21 years.

10.   SHAREHOLDERS' EQUITY

(a)  Stockholder Protection Rights Plan

      The  Company  maintains  a Stockholder Protection  Rights  Plan  (the
"Plan").  Upon implementation of the Plan, the Company declared a  dividend
of  one  right  on each outstanding share of common stock. The  rights  are
evidenced  by the common stock certificates, automatically trade  with  the
common  stock, and are not exercisable until it is announced that a  person
or  group  has  become  an  Acquiring  Person,  as  defined  in  the  Plan.
Thereafter, separate rights certificates will be distributed and each right
(other  than  rights  beneficially owned  by  any  Acquiring  Person)  will
entitle, among other things, its holder to purchase, for an exercise  price
of $40, a number of shares of Company common stock having a market value of
twice  the  exercise  price. The rights may be redeemed  by  the  Board  of
Directors for $0.01 per right prior to the date of the announcement that  a
person or group has become an Acquiring Person.

(b)  Preferred Stock

      The  Company's  Board of Directors is authorized to provide  for  the
issuance of 1,000,000 preferred shares with a par value of $1.00 per share,
in  one  or  more  series,  and  to  fix  the  voting  rights,  liquidation
preferences,  dividend  rates, conversion rights,  redemption  rights,  and
terms,  including  sinking fund provisions, and certain  other  rights  and
preferences. As of June 26, 2002, no preferred shares were issued.

(c)  Treasury Stock

      In  August  2001  and  April 2002, the Board of Directors  authorized
increases  in  the  stock repurchase plan of an additional  $100.0  million
each,   bringing   the   Company's  total  share  repurchase   program   to
$410.0  million.  Pursuant  to the Company's  stock  repurchase  plan,  the
Company  repurchased approximately 5.1 million shares of its  common  stock
for $136.1 million during fiscal 2002, resulting in a cumulative repurchase
total  of  approximately  16.0  million shares  of  its  common  stock  for
$327.6  million. The Company's stock repurchase plan is used by the Company
to   offset  the  dilutive  effect  of  stock  option  exercises,   satisfy
obligations under its savings plans, and for other corporate purposes.  The
repurchased  common  stock  is reflected as a  reduction  of  shareholders'
equity.

(d)  Restricted Stock

      Pursuant  to  shareholder  approval in  November  1999,  the  Company
implemented  the  Executive  Long-Term  Incentive  Plan  for  certain   key
employees, one component of which is the award of restricted common  stock.
During fiscal 2002 and 2001, respectively, approximately 100,000 and 57,000
shares of restricted common stock were awarded, the majority of which vests
over  a three-year period. Unearned compensation was recorded as a separate
component  of  shareholders' equity at the date of the award based  on  the
market  value of the shares and is being amortized to compensation  expense
over the vesting period.

(e)  Stock Split

      On  December 8, 2000, the Board of Directors declared a three-for-two
stock  split, effected in the form of a 50% stock dividend, to shareholders
of  record on January 3, 2001, payable on January 16, 2001. As a result  of
the  split, 39.2 million shares of common stock were issued on January  16,
2001.  All  references to number of shares and per share amounts of  common
stock  have been restated to reflect the stock split. Shareholders'  equity
accounts  have been restated to reflect the reclassification of  an  amount
equal  to  the par value of the increase in issued common shares  from  the
retained earnings account to the common stock account.

11.   SAVINGS PLANS

      The Company sponsors a qualified defined contribution retirement plan
("Plan  I")  covering salaried and hourly employees who have completed  one
year  of  service and have attained the age of twenty-one.  Plan  I  allows
eligible employees to defer receipt of up to 20% of their compensation  and
100% of their eligible bonuses, as defined in the plan, and contribute such
amounts to various investment funds. The Company matches in Company  common
stock 25% of the first 5% a salaried employee contributes. Hourly employees
do   not  receive  matching  contributions.  Employee  contributions   vest
immediately while Company contributions vest 25% annually beginning on  the
participant's second anniversary of employment. In fiscal 2002,  2001,  and
2000,  the  Company  contributed  approximately  $828,000,  $788,000,   and
$731,000, respectively.

      The  Company sponsors a non-qualified defined contribution retirement
plan  ("Plan II") covering highly compensated employees, as defined in  the
plan.  Plan II allows eligible employees to defer receipt of up to  50%  of
their  base compensation and 100% of their eligible bonuses, as defined  in
the  plan. The Company matches in Company common stock 25% of the first  5%
of  non-officer contributions while officers' contributions are matched  at
the  same  rate  with cash. Employee contributions vest  immediately  while
Company  contributions  vest 25% annually beginning  on  the  participant's
second  anniversary  of employment. In fiscal 2002,  2001,  and  2000,  the
Company   contributed  approximately  $657,000,  $655,000,  and   $543,000,
respectively. At the inception of Plan II, the Company established a  Rabbi
Trust to fund Plan II obligations. The market value of the trust assets  is
included  in  other  assets and the liability to Plan  II  participants  is
included in other liabilities.

12.   SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest and income taxes is as follows (in thousands):


                                           2002    2001    2000

Interest, net of amounts capitalized      $8,229  $8,904  $10,192
Income taxes, net of refunds              48,801  68,597   36,646


      Non-cash  investing  and  financing activities  are  as  follows  (in
thousands):


                                           2002   2001   2000

Restricted common stock issued, net of    $2,435   $371  $5,181
forfeitures
Increase in fair value of interest rate      286  2,867       -
swaps and debt
Decrease in fair value of forward rate         -    895       -
agreements included in other
comprehensive income
Increase in fair value of interest rate    5,667      -       -
swaps on real estate leasing facility


      During 2002, the Company purchased certain assets and assumed certain
liabilities  in  connection with the acquisition of restaurants.  The  fair
values  of  the  acquired assets and liabilities recorded at  the  date  of
acquisition are as follows (in thousands):


Property and equipment acquired                       $36,312
Goodwill                                               55,473
Other assets acquired                                   8,585
Capital lease obligations assumed                     (35,480)
Other liabilities assumed                              (4,399)

Net cash paid                                         $60,491





13.   RELATED PARTY TRANSACTION

      The  Company  has  secured notes receivable from Eatzi's  Corporation
("Eatzi's")  with  a  carrying  value of approximately  $11.0  million  and
$20.6   million   at  June  26,  2002  and  June  27,  2001,  respectively.
Approximately  $6.0  million of the notes receivable  is  convertible  into
nonvoting Series A Preferred Stock of Eatzi's at the option of the  Company
and matures on December 28, 2006. The remaining note receivable matures  on
September 28, 2005.

      Interest  on the convertible note receivable is 10.5% per  year  with
payments  due  on  a quarterly basis until the principal  balance  and  all
accrued  and  unpaid  interest have been paid  in  full.  Interest  on  the
remaining  notes receivable balance is prime rate plus 1.5% per  year  with
payments  due  on  a quarterly basis until the principal  balance  and  all
accrued  and  unpaid interest have been paid in full. The notes  receivable
are  included  in  other  assets in the accompanying  consolidated  balance
sheets.

      During fiscal 2002 and 2001, certain scheduled payments were not made
as the Company continued negotiations with Eatzi's to restructure the notes
receivable. A letter of intent was signed on August 6, 2002 to  divest  the
Company  of  its  interest in the concept. Under the terms of  the  letter,
Eatzi's  has agreed to pay the Company $11.0 million in cash and to execute
a  $4.0  million promissory note in consideration for its interest  in  the
concept.  The promissory note will be unsecured and payable only  upon  the
closing of an initial public offering by Eatzi's. Due to the uncertainty of
collecting  the $4.0 million promissory note, the Company will establish  a
reserve for the entire principal balance. As a result of the divesture,  in
fiscal  2002 an approximate $8.7 million impairment charge was recorded  in
restaurant expenses to reduce the notes to their net realizable value.

14.   CONTINGENCIES

      During fiscal 2002, the Company recorded an approximate $11.0 million
charge  to restaurant expenses stemming from an agreement reached with  the
California  Department of Labor Standards Enforcement ("DLSE"). The  DLSE's
primary allegation involved the Company's documentation policies related to
breaks  provided  to  employees.  The  Company  believes  it  has  been  in
substantial  compliance with the California labor laws related to  employee
breaks  and other employee related matters, but was unable to document  all
issues to the DLSE's satisfaction. The Company agreed to the settlement  to
avoid a potentially costly and protracted litigation.

      The  Company is engaged in various legal proceedings and has  certain
unresolved  claims  pending.  The  ultimate  liability,  if  any,  for  the
aggregate  amounts  claimed cannot be determined  at  this  time.  However,
management  of the Company, based upon consultation with legal counsel,  is
of  the  opinion that there are no matters pending or threatened which  are
expected  to  have  a  material  adverse effect,  individually  or  in  the
aggregate, on the Company's consolidated financial condition or results  of
operations.

15.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

      The  following table summarizes the unaudited consolidated  quarterly
results  of  operations for fiscal 2002 and 2001 (in thousands, except  per
share amounts):

                                         Fiscal Year 2002
                                          Quarters Ended
                                 Sept.    Dec.      March      June
                                   26      26         27        26

Revenues                        $672,655  $685,752  $745,786  $782,918
Income before provision for       60,695    52,960    51,617    66,577
income taxes
Net income                        39,634    34,636    34,170    44,273
Basic net income per share          0.40      0.35      0.35      0.45
Diluted net income per share        0.39      0.35      0.34      0.44
Basic weighted average shares     98,963    97,718    97,694    97,675
outstanding
Diluted weighted average shares  101,572   100,131   100,652   100,491
outstanding


                                         Fiscal Year 2001
                                          Quarters Ended
                                 Sept.       Dec.     March       June
                                   27         27        28         27

Revenues                        $573,925    $567,546  $608,192   $657,211
Income before provision for       54,311      49,714    53,801     64,101
income taxes
Net income                        35,194      32,215    34,863     42,876
Basic net income per share          0.36        0.33      0.35       0.43
Diluted net income per share        0.35        0.32      0.34       0.42
Basic weighted average shares     98,753      98,497    99,450     99,800
outstanding
Diluted weighted average shares  101,570     101,718   102,498    102,577
outstanding


                       INDEPENDENT AUDITORS' REPORT

The Board of Directors
Brinker International, Inc.:

      We  have  audited  the accompanying consolidated  balance  sheets  of
Brinker  International,  Inc. and subsidiaries as  of  June  26,  2002  and
June   27,  2001,  and  the  related  consolidated  statements  of  income,
shareholders' equity and cash flows for each of the years in the three-year
period ended June 26, 2002. These consolidated financial statements are the
responsibility  of  the  Company's management.  Our  responsibility  is  to
express an opinion on these consolidated financial statements based on  our
audits.

      We  conducted  our  audits  in  accordance  with  auditing  standards
generally accepted in the United States of America. Those standards require
that  we  plan  and perform the audit to obtain reasonable assurance  about
whether  the  financial  statements are free of material  misstatement.  An
audit  includes examining, on a test basis, evidence supporting the amounts
and  disclosures  in  the  financial statements.  An  audit  also  includes
assessing the accounting principles used and significant estimates made  by
management,   as  well  as  evaluating  the  overall  financial   statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

      In  our  opinion, the consolidated financial statements  referred  to
above  present fairly, in all material respects, the financial position  of
Brinker  International,  Inc. and subsidiaries as  of  June  26,  2002  and
June 27, 2001, and the results of their operations and their cash flows for
each  of  the  years  in  the three-year period  ended  June  26,  2002  in
conformity  with  accounting principles generally accepted  in  the  United
States of America.

                                                       KPMG LLP

Dallas, Texas
July 31, 2002, except for Note 13,
    as to which the date is August 6, 2002

    MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS

To Our Shareholders:

      Management  is  responsible for the reliability of  the  consolidated
financial  statements  and  related notes,  which  have  been  prepared  in
conformity  with  accounting principles generally accepted  in  the  United
States  of  America  and  include  amounts  based  upon  our  estimate  and
judgments,  as  required. The consolidated financial statements  have  been
audited  and  reported on by our independent auditors, KPMG LLP,  who  were
given  free  access  to all financial records and related  data,  including
minutes  of  the meetings of the Board of Directors and Committees  of  the
Board. We believe that the representations made to the independent auditors
were valid and appropriate.

      The  Company  maintains a system of internal controls over  financial
reporting  designed to provide reasonable assurance of the  reliability  of
the   consolidated  financial  statements.  The  Company's  internal  audit
function  monitors and reports on the adequacy of the compliance  with  the
internal  control  system  and appropriate actions  are  taken  to  address
significant control deficiencies and other opportunities for improving  the
system  as  they  are  identified. The Audit  Committee  of  the  Board  of
Directors,  which  is  comprised  solely  of  outside  directors,  provides
oversight to the financial reporting process through periodic meetings with
our  independent  auditors, internal auditors,  and  management.  Both  our
independent  auditors and internal auditors have free access to  the  Audit
Committee. Although no cost-effective internal control system will preclude
all  errors and irregularities, we believe our controls as of and  for  the
year ended June 26, 2002 provide reasonable assurance that the consolidated
financial statements are reliable.


RONALD A. MCDOUGALL
Chairman of the Board and Chief Executive Officer


CHARLES M. SONSTEBY
Executive Vice President and Chief Financial Officer


