<SUBMISSION>
<ACCESSION-NUMBER>0000703351-04-000063
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>9
<PERIOD>20040630
<FILING-DATE>20040913
<DATE-OF-FILING-DATE-CHANGE>20040913
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BRINKER INTERNATIONAL INC
<CIK>0000703351
<ASSIGNED-SIC>5812
<IRS-NUMBER>751914582
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-10275
<FILM-NUMBER>041027397
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6820 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
<PHONE>9729809917
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>6820 LBJ FREEWAY
<CITY>DALLAS
<STATE>TX
<ZIP>75240
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CHILIS INC
<DATE-CHANGED>19910528
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form10k04_f1.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<html>

<head>

<title>FORM 10-K</title>

</head>

<body link=blue vlink=purple>

<p align="center">UNITED
STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
Washington, D.C.&nbsp;
20549</p>

<p align=center>FORM 10-K</p>

<p align=center>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF<br>
THE SECURITIES EXCHANGE ACT OF 1934</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p align=center>For the fiscal year ended June 30, 2004</p>
  </td>
  <td width=319 valign=top>
  <p align=center>Commission File No. 1-10275</p>
  </td>
 </tr>
</table>



<p align=center>BRINKER INTERNATIONAL, INC.</p>

<p align=center>(Exact name of registrant as specified in its charter)</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p align=center>Delaware</p>
  </td>
  <td width=319 valign=top>
  <p align=center>75-1914582</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p align=center>(State or other jurisdiction of</p>
  </td>
  <td width=319 valign=top>
  <p align=center>(I.R.S. employer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p align=center>incorporation or organization)</p>
  </td>
  <td width=319 valign=top>
  <p align=center>identification no.)</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=319 valign=top>
  <p align=center>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p align=center>6820 LBJ Freeway, Dallas, Texas</p>
  </td>
  <td width=319 valign=top>
  <p align=center>75240</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p align=center>(Address of principal executive offices)</p>
  </td>
  <td width=319 valign=top>
  <p align=center>(Zip Code)</p>
  </td>
 </tr>
</table>



<p align=center>Registrant's telephone number,<br>
including area code (972) 980-9917</p>

<p>Securities registered
pursuant to Section 12(b) of the Act:</p>



<p align=center><u>Title of Each Class<br>
</u>Common Stock, $0.10 par value<br>
Stock Purchase Rights</p>

<p>Securities registered pursuant
to Section 12(g) of the Act:&nbsp; None</p>





<p>Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.&nbsp; Yes <u>&nbsp;&nbsp;X&nbsp;&nbsp;</u>&nbsp; No ___</p>



<p>Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.&nbsp; ____</p>



<p>Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2).&nbsp; Yes <u>&nbsp;&nbsp;X&nbsp;&nbsp;</u>&nbsp; No ___</p>



<p>State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed second
fiscal quarter. $2,920,282,280.00.</p>



<p>Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date.</p>



<table border=1 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Class</p>
  </td>
  <td width=319 valign=top>
  <p>Outstanding
  at August 24, 2004</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Common
  Stock, $0.10 par value</p>
  </td>
  <td width=319 valign=top>
  <p>89,834,485
  shares</p>
  </td>
 </tr>
</table><hr><P STYLE="page-break-after: always"></P>
<p align="center"><br clear=all>




DOCUMENTS INCORPORATED BY REFERENCE</p>

<p>Portions of the registrant's Annual Report to Shareholders
for the fiscal year ended June 30, 2004, are incorporated by reference into
Part II hereof, to the extent indicated herein.&nbsp; Portions of the registrant's Proxy Statement for its annual
meeting of shareholders on November 4, 2004, to be dated on or about September
13, 2004, are incorporated by reference into Part III hereof, to the extent
indicated herein.</p>



<p align=center><b>PART I</b></p>

<p>Item 1.&nbsp; BUSINESS.</p>



<blockquote>



<p><b><u>General</u></b></p>



<p align="justify">Brinker International, Inc. (the &quot;Company&quot;) is
principally engaged in the ownership, operation, development and franchising of
the Chili's Grill &amp; Bar (&quot;Chili's&quot;), Romano's Macaroni Grill (&quot;Macaroni
Grill&quot;), Maggiano's Little Italy (&quot;Maggiano's&quot;), On The Border Mexican Grill
&amp; Cantina (&quot;On The Border&quot;), Corner Bakery Cafe (&quot;Corner Bakery&quot;), and Big
Bowl Asian Kitchen (&quot;Big Bowl&quot;) restaurant concepts.&nbsp; Additionally, in July 2001, the Company acquired a 40% interest
in the legal entities owning and developing Rockfish Seafood Grill (&quot;Rockfish&quot;).&nbsp; In October 2002, the Company made an
additional capital contribution to Rockfish increasing its ownership interest
to approximately 43%.&nbsp; The Company was
organized under the laws of the State of Delaware in September 1983 to succeed
to the business operated by Chili's, Inc., a Texas corporation, organized in
August 1977.&nbsp; The Company completed the
acquisitions of Macaroni Grill, On The Border, Maggiano's, Corner Bakery and
Big Bowl in November 1989, May 1994, August 1995, August 1995, and February 2001,
respectively.</p>



<p align="justify"><b><u>Primary Restaurant Concepts</u></b></p>



<p align="justify"><u>Chili's Grill &amp; Bar</u></p>



<p align="justify">Chili's is a full-service restaurant, featuring a
casual atmosphere and a varied menu of chicken, beef and seafood entrees,
steaks, fajitas, sandwiches, salads, appetizers, desserts, and its legendary
Big Mouth Burgers and Baby Back Ribs, all prepared fresh daily according to
special Chili's recipes.&nbsp; The
full-service Margarita Bar is available at each Chili's restaurant, with a
variety of specialty margaritas, including the Presidente Margarita, offered as
the concept's signature drink.&nbsp; Emphasis
is placed on serving substantial portions of fresh, flavorful, and high quality
food at modest prices.&nbsp; </p>



<p align="justify">Chili's restaurants feature quick, efficient and
friendly table service designed to minimize customer waiting time and
facilitate table turnover, with an average turnover time per table of
approximately 45 minutes.&nbsp; Service
personnel are dressed casually in jeans, knit shirts, t-shirts, and aprons to
reinforce the casual, informal environment.&nbsp;
The decor of a Chili's restaurant consists of booth seating, tile-top
tables, hanging plants and wood and brick walls covered with interesting
memorabilia.</p>



<p align="justify">Entree selections range in menu price from $5.89 to
$14.99, with the average revenue per meal, including alcoholic beverages,
approximating $11.68 per person.&nbsp; During
the year ended June 30, 2004, food and non-alcoholic beverage sales constituted
approximately 86.6% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 13.4%.</p>



<p align="justify"><u>Romano's Macaroni Grill</u></p>



<p align="justify">Macaroni Grill is a quality, casual, fun Italian
restaurant full of the sights, sounds and aromas of Italy today.&nbsp; Guests enjoy Italian culinary masterpieces
from regions all over Italy as well as a few American Italian favorites.&nbsp; These selections include signature pastas,
grilled features, seafood, salads and pizza from Rome, Sicily, Portofino,
Milan, Bologna and Naples - all prepared by talented chefs in open
kitchens.&nbsp; Macaroni Grill features wood
burning ovens, festive string lights, fresh flowers, a broad selection of wine,
and display cooking.&nbsp; Guests are met
with a sincere welcome at the door and enjoy warm, knowledgeable service.&nbsp; Additionally, guests enjoy the convenience
of Macaroni Grill's Curbside To Go service.&nbsp;
Delicious, chef-prepared meals are delivered right to their cars for
them to share at home with friends and family.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">Entree selections range in menu price from $5.99 to
$17.99 with monthly chef features priced separately.&nbsp; The average revenue per meal, including alcoholic beverages, is
approximately $14.26 per person.&nbsp; During
the year ended June 30, 2004, food and non-alcoholic beverage sales constituted
approximately 87.2% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 12.8%.</p>



<p align="justify"><u>Maggiano's Little Italy</u></p>



<p align="justify">Maggiano's restaurants are classic re-creations of
dinner houses found in New York's Little Italy in the 1940s.&nbsp; Each of the Maggiano's restaurants is a
casual, full-service Italian restaurant with a family-style menu as well as a
full lunch and dinner menu offering Southern Italian appetizers, homemade
bread, bountiful portions of pasta, chicken, seafood, veal and prime steaks, as
well as a full range of alcoholic beverages. Most Maggiano's restaurants also
feature extensive banquet facilities.&nbsp; </p>



<p align="justify">Entree selections range in menu price from $7.95 to
$37.95, with the average revenue per meal, including alcoholic beverages,
approximating $26.31 per person.&nbsp; During
the year ended June 30, 2004, food and non-alcoholic beverage sales constituted
approximately 79.4% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 20.6%.</p>



<p align="justify"><u>On The Border Mexican Grill &amp; Cantina</u></p>



<p align="justify">On The Border is a full-service, national,
casual-dining Mexican restaurant chain.&nbsp;
On The Border's menu offers a wide variety of Mexican favorites and is
best known for its fajitas and margaritas.&nbsp;
On The Border also offers a variety of innovative menu items that allow
guests to &quot;Explore the Best of Mexico&quot;, from Guacamole Live! to Shaken
Margarita Shrimp Cocktail to a Red Chili Ribeye.&nbsp; As a full service restaurant, On The Border offers full bar
service, in-restaurant dining and patio dining in all locations.&nbsp; On The Border also offers the convenience of
a To-Go menu and To-Go entrance to expedite take-out service in all
locations.&nbsp; In addition to To Go, On The
Border offers catering service from simple drop-off delivery to full-service
event planning.</p>



<p align="justify">Entree selections range in menu price from $5.99 to
$13.99, with the average revenue per meal, including alcoholic beverages,
approximating $12.75 per person.&nbsp; During
the year ended June 30, 2004, food and non-alcoholic beverage sales constituted
approximately 80.5% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 19.5%.</p>



<p align="justify"><u>Corner Bakery Cafe</u></p>



<p align="justify">Evolving over the years from one true bakery to a
collection of destinations for people in their communities, Corner Bakery Cafe
has grown into one of America's premiere quick-casual bakery cafes.&nbsp; Beneath recognizable black and white
awnings, Corner Bakery Cafe serves breakfast, lunch, dinner and everything in
between.&nbsp; Breakfast choices include egg
scramblers, breakfast pastries and mixed-berry parfaits.&nbsp; Lunch and dinner feature hearty soups, fresh
salads, delicious sandwiches, hot panini and decadent desserts.&nbsp; Corner Bakery Cafe's atmosphere allows
guests to sit and relax or get their food to go quickly.&nbsp; Most cafes have both indoor seating and
inviting outdoor patios.&nbsp; Corner Bakery
Cafe's catering offers a wide variety of breakfast treats, fresh salads and
unique sandwich choices for any size meeting or social event.</p>



<p align="justify">Prices for menu items range from $1.00 to $6.99 with
the average revenue per meal approximating $7.44 per person.&nbsp; During the fiscal year ended June 30, 2004,
food and non-alcoholic beverage sales constituted over 99% of the concept's
total restaurant revenues.&nbsp; Catering
sales constituted approximately 20.3% of sales.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify"><u>Big Bowl Asian Kitchen</u></p>



<p align="justify">Big Bowl Asian Kitchen is a full-service, casual
dining concept with a menu featuring appetizers and entrees inspired and
influenced by the varied cuisines and flavor profiles of Asia, ranging from the
classic and familiar Chinese and Japanese, to the bold and innovative Thai and
Vietnamese.&nbsp; Staying true to these
varied culinary origins, all of Big Bowl's food is crafted with attention to
detail, using fresh ingredients, an assortment of authentic sauces and
condiments, all served with a variety of noodles and jasmine rice.&nbsp; The stir fry bar allows guests to make
choices from a tremendous assortment of fresh vegetables, sauces with vibrant
flavor profiles, and wok-seared meats.&nbsp;
Complementing the menu, Big Bowl offers an assortment of non-alcoholic
beverages, like its signature ginger soda, as well as cocktails and Asian
beers.&nbsp; Big Bowl's atmosphere is casual
and evocative, with decor elements built on the color palette and icons of the
Far East.&nbsp; The staff-members are
well-trained to escort diners through the menu and the experience, delivering
friendly, knowledgeable service.</p>



<p align="justify">Entree selections range in menu price from $6.95 to
$12.95, and appetizer prices range from $3.95 to $7.25.&nbsp; The average revenue per meal, including
alcoholic beverages is approximately $13.15 per person.&nbsp; During the year ended June 30, 2004, food
and non-alcoholic beverage sales constituted approximately 90.2% of the
concept's total restaurant revenues, with alcoholic beverage sales accounting
for the remaining 9.8%.</p>



<p align="justify"><b><u>Jointly-Developed Concept</u></b></p>



<p align="justify"><u>Rockfish Seafood Grill</u></p>



<p align="justify">Rockfish offers fresh, flavorful seafood dishes served
in a lively environment.&nbsp; Reminiscent of
a fly-fishing camp, the Rockfish decor features piney wood tables, river rock
fireplaces and an open kitchen with chefs preparing the catch of the day.&nbsp; The restaurant serves a wide variety of
reasonably priced seafood ranging from salmon and trout to catfish, shrimp and
crab.&nbsp; Daily chalkboard specials
featuring various items, including, when in-season, Copper River Salmon, are
also very popular with diners.&nbsp;
Friendly, attentive servers clad in Rockfish t-shirts and jeans add to
the casual backdrop.&nbsp; All locations
feature full-service bars and most have patio seating availability.</p>



<p align="justify">Entree selections range in menu price from $5.63 to
$16.75 with chalkboard specials priced on a daily basis.&nbsp; The average revenue per meal, including
alcoholic beverages, is approximately $14.37 per person.&nbsp; During the year ended June 30, 2004, food
and non-alcoholic beverage sales constituted approximately 86.7% of the
concept's total revenues, with alcoholic beverage sales accounting for the
remaining 13.3%.</p>



<p align="justify"><b><u>Business Development</u></b></p>



<p align="justify">The Company's long-term objective is to continue most
of its expansion of its restaurant concepts by opening Company-operated units
in strategically desirable markets.&nbsp; The
Company intends to concentrate on the development of certain identified markets
to achieve penetration levels deemed desirable in order to improve the
Company's competitive position, marketing potential and profitability.&nbsp; Expansion efforts will be focused not only
on major metropolitan areas in the United States but also on smaller market
areas and non-traditional locations (such as airports, kiosks and food courts)
which can adequately support any of the Company's restaurant concepts.</p>



<p align="justify">The Company considers the restaurant site selection
process critical to its long-term success and devotes significant effort to the
investigation of new locations utilizing a variety of sophisticated analytical
techniques.&nbsp; The site selection process
evaluates a variety of factors, including: trade area demographics, such as
target population density and household income levels; physical site
characteristics such as visibility, accessibility and traffic volume; relative
proximity to activity centers such as shopping centers, hotel and entertainment
complexes and office buildings; and supply and demand trends, such as proposed
infrastructure improvements, new developments, and potential competition.&nbsp; Members of management inspect, review and approve
each restaurant site prior to its acquisition.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">The Company periodically reevaluates restaurant
sites to ensure that site selection attributes have not deteriorated below
minimum standards.&nbsp; In the event site
deterioration were to occur, the Company makes a concerted effort to improve
the restaurant's performance by providing physical, operating and marketing
enhancements unique to each restaurant's situation.&nbsp; If efforts to restore the restaurant's performance to acceptable
minimum standards are unsuccessful, the Company considers relocation to a
proximate, more desirable site, or evaluates closing the restaurant if the
Company's measurement criteria, such as return on investment and area
demographic trends, do not support relocation.&nbsp;
Since inception, the Company has closed eighty-seven restaurants,
including thirty-five in fiscal 2004, which were performing below the Company's
standards primarily due to declining or shifting trade area demographics.&nbsp; The Company operates pursuant to a strategic
plan targeted to support the Company's long-term growth objectives, with a
focus on continued development of those restaurant concepts that have the
greatest return potential for the Company and its shareholders.</p>



<p align="justify">The following table illustrates the system-wide
restaurants opened in fiscal 2004 and the planned openings in fiscal 2005:</p>



</blockquote>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=159 valign=top>

  </td>
  <td width=167 valign=top>
  <p align=right>Fiscal 2004 Openings</p>
  </td>
  <td width=198 valign=top>
  <p align=right>Fiscal 2005 Projected Openings</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Chili's:<br>
  &nbsp; Company-Operated<br>
  &nbsp; Franchise</p>
  </td>
  <td width=167 valign=top>
  <p align=right><br>
  71<br>
  24</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  75-80<br>
  25-30</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Macaroni
  Grill:<br>
  &nbsp; Company-Operated<br>
  &nbsp; Franchise</p>
  </td>
  <td width=167 valign=top>
  <p align=right><br>
  18<br>
  2</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  18-20<br>
  3-6</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Maggiano's</p>
  </td>
  <td width=167 valign=top>
  <p align=right>3</p>
  </td>
  <td width=198 valign=top>
  <p align=right>4-5</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>On
  The Border:<br>
  &nbsp; Company-Operated<br>
  &nbsp; Franchise</p>
  </td>
  <td width=167 valign=top>
  <p align=right><br>
  3<br>
  0</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  10-13<br>
  0-1</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Corner
  Bakery:<br>
  &nbsp; Company-Operated<br>
  &nbsp; Franchise</p>
  </td>
  <td width=167 valign=top>
  <p align=right><br>
  5<br>
  0</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  8-10<br>
  0-1</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Big
  Bowl</p>
  </td>
  <td width=167 valign=top>
  <p align=right>3</p>
  </td>
  <td width=198 valign=top>
  <p align=right>1-2</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Rockfish</p>
  </td>
  <td width=167 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 5</u></p>
  </td>
  <td width=198 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 0-1</u></p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total</p>
  </td>
  <td width=167 valign=top>
  <p align=right>134</p>
  </td>
  <td width=198 valign=top>
  <p align=right>144-169</p>
  </td>
 </tr>
</table>

</div>



<blockquote>



<p align="justify">The Company anticipates that some of the fiscal 2005
projected restaurant openings may be constructed pursuant to &quot;build-to-suit&quot;
agreements, in which the lessor contributes some or substantially all, of the
building construction costs.&nbsp; In other
cases, the Company may either lease or own the land (paying for any owned land
from its own funds) and either lease or own the building, furniture, fixtures
and equipment (paying for any owned items from its own funds).</p>



<p align="justify">The following table illustrates the approximate
average capital investment for a typical unit in the Company's primary
restaurant concepts:</p>





<table border=1 cellspacing=0 cellpadding=0 style="border-width: 0">
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>&nbsp;</p>
  </td>
  <td width=82 valign=top style="border-style: none; border-width: medium">
  <p align=center>Chili&#39;s</p>
  </td>
  <td width=82 valign=top style="border-style: none; border-width: medium">
  <p align=center>Macaroni<br>
  Grill</p>
  </td>
  <td width=78 valign=top style="border-style: none; border-width: medium">
  <p align=center>Maggiano&#39;s</p>
  </td>
  <td width=82 valign=top style="border-style: none; border-width: medium">
  <p align=center>On The<br>
  Border</p>
  </td>
  <td width=82 valign=top style="border-style: none; border-width: medium">
  <p align=center>Big Bowl</p>
  </td>
  <td width=82 valign=top style="border-style: none; border-width: medium">
  <p align=center>Corner<br>
  Bakery</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>Land</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$&nbsp;&nbsp; 700,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$&nbsp;&nbsp; 950,000</p>
  </td>
  <td width=78 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$2,500,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$&nbsp;&nbsp; 800,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$850,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$&nbsp;&nbsp; 600,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>Building</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>1,100,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>1,300,000</p>
  </td>
  <td width=78 valign=top align="right" style="border-style: none; border-width: medium">
  <p>3,150,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>1,300,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>1,100,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>615,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>Furniture &amp;<br>
  Equipment</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  450,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  520,000</p>
  </td>
  <td width=78 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  1,200,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  520,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  450,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p><br>
  325,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>Other</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>70,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>80,000</p>
  </td>
  <td width=78 valign=top align="right" style="border-style: none; border-width: medium">
  <p>150,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>80,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>50,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>25,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top style="border-style: none; border-width: medium">
  <p align=center>Total</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$2,320,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$2,850,000</p>
  </td>
  <td width=78 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$7,000,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$2,700,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$2,450,000</p>
  </td>
  <td width=82 valign=top align="right" style="border-style: none; border-width: medium">
  <p>$1,565,000</p>
  </td>
 </tr>
</table>





</blockquote>





<blockquote>



<p align="justify">The specific rate at which the Company is able to
open new restaurants is determined by its success in locating satisfactory
sites, negotiating acceptable lease or purchase terms, securing appropriate
local governmental permits and approvals, and by its capacity to supervise construction
and recruit and train management personnel.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify"><b><u>Franchise Operations</u></b></p>



<p align="justify">The Company intends to continue its expansion through
franchise development, both domestically and internationally.&nbsp; At June 30, 2004, forty-two total joint
venture or franchise development agreements existed.&nbsp; During the year ended June 30, 2004, twenty Chili's franchised
restaurants were opened, four company-owned Chili's were sold to a franchisee,
and two Macaroni Grill franchised restaurants were opened.</p>



<p align="justify">In fiscal 2004, the first franchised Chili's opened on
an international United States Air Force base at Kadena Air Force Base in
Okinawa, Japan.&nbsp; Another opening is
planned for Ramstein Air Force Base in Germany during early fiscal 2005.&nbsp; United States Air Force Services is the
Company's franchisee for these locations.&nbsp;
Additionally, in fiscal 2004 the Company sold four company-owned Chili's
restaurants in Northeast Ohio to Strang Management Corporation and received a
commitment from Strang Management Corporation to build sixteen more Chili's
restaurants over a six year period. The Company also entered into a franchise
development agreement limited exclusively to small town Chili's development with
Bonnaroo Restaurant Group for selected small towns in South Carolina and Georgia.</p>



<p align="justify">The Company intends to selectively pursue domestic and
international expansion and is currently contemplating development in other
countries.&nbsp; A typical franchise
development agreement provides for payment of area development and initial
franchise fees in addition to subsequent royalty and advertising fees based on
the gross sales of each restaurant.&nbsp;
Future franchise development agreements are expected to remain limited
to enterprises having significant experience as restaurant operators and proven
financial ability to develop multi-unit operations.</p>



<p align="justify"><b><u>Jointly-Developed Operations</u></b></p>



<p align="justify">From time to time, the Company enters into agreements
for research and development activities related to the testing of new
restaurant concepts, typically acquiring a significant equity interest in such
ventures.&nbsp; The Company's ownership
interest in the legal entities owning the Rockfish restaurants is approximately
43%.&nbsp; At June 30, 2004, twenty-five
Rockfish restaurants were operating, located in the states of Arizona, New Mexico,
North Carolina, and Texas.</p>



<p align="justify"><b><u>Restaurant Management</u></b></p>



<p align="justify">The Company's philosophy to maintain and operate each
concept as a distinct and separate entity ensures that the culture, recruitment
and training programs and unique operating environments are preserved.&nbsp; These factors are critical to the viability
of each concept.&nbsp; Each concept is
directed by a president and one or more concept vice presidents overseeing
specifically identified areas.</p>



<p align="justify">The Company's restaurant management structure varies
by concept. &nbsp;The individual restaurants
themselves are led by a management team including a general manager and between
two to five additional managers.&nbsp; The
level of restaurant supervision depends upon the operating complexity and sales
volume of each concept.&nbsp; An area
director/supervisor is responsible for the supervision of, on average, three to
seven restaurants.&nbsp; For those concepts
with a significant number of units within a geographical region, additional
levels of management may be provided.</p>



<p align="justify">The Company believes that there is a high correlation
between the quality of restaurant management and the long-term success of a
concept.&nbsp; In that regard, the Company
encourages increased tenure at all management positions through various short
and long-term incentive programs, including equity ownership.&nbsp; These programs, coupled with a general
management philosophy emphasizing quality of life, have enabled the Company to
attract and retain management employees at levels above the industry norm.</p>



<p align="justify">The Company ensures consistent quality standards in
all concepts through the issuance of operations manuals covering all elements
of operations and food and beverage manuals, which provide guidance for
preparation of Company-formulated recipes.&nbsp;
Routine visitation to the restaurants by all levels of supervision
enforces strict adherence to Company standards and operating procedures.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">The director of training for each concept is
responsible for maintaining each concept's operational training program.&nbsp; The training program includes a three to
four month training period for restaurant management trainees, a continuing
management training process for managers and supervisors, and training teams
consisting of groups of employees experienced in all facets of restaurant
operations that train employees to open new restaurants.&nbsp; The training teams typically begin on-site
training at a new restaurant seven to ten days prior to opening and remain on
location one to two weeks following the opening to ensure the smooth transition
to operating personnel.</p>



<p align="justify"><b><u>Purchasing</u></b></p>



<p align="justify">The Company's ability to maintain consistent quality
of products throughout each of its restaurant concepts depends upon acquiring
food and beverage products and related items from reliable sources.&nbsp; Suppliers are pre-approved by the Company
and are required, along with the restaurants, to adhere to strict product
specifications established through the Company's quality assurance program to
ensure that high quality, wholesome food and beverage products are served in
the restaurants.&nbsp; The Company negotiates
directly with the major suppliers to obtain competitive prices and uses
purchase commitment contracts to stabilize the potentially volatile pricing
associated with certain commodity items.&nbsp;
All essential food and beverage products are available, or upon short
notice can be made available, from alternative qualified suppliers to be
delivered to the Company's restaurants.&nbsp;
Because of the relatively rapid turnover of perishable food products,
inventories in the restaurants, consisting primarily of food, beverages and
supplies, have a modest aggregate dollar value in relation to revenues.</p>



<p align="justify"><b><u>Advertising and Marketing</u></b></p>



<p align="justify">The Company's concepts generally focus on the eighteen
to fifty-four year old age group, which constitutes approximately half of the
United States population.&nbsp; Members of
this population segment grew up on fast food, but the Company believes that,
with increasing maturity, they prefer a more adult, upscale dining experience.&nbsp; To attract this target group, the Company
relies primarily on television, radio, direct mail advertising and information
communicated by customers.</p>



<p align="justify">The Company's franchise agreements require advertising
contributions to the Company to be used exclusively for the purpose of
maintaining, directly administering and preparing standardized advertising and
promotional activities.&nbsp; Franchisees
spend additional amounts on local advertising when approved by the Company.</p>



<p align="justify"><b><u>Employees</u></b></p>



<p align="justify">At June 30, 2004, the Company employed approximately
96,600 persons, of whom approximately 1,100 were corporate personnel, 5,900
were restaurant area directors, managers or trainees and 89,600 were employed
in non-management restaurant positions.&nbsp;
The executive officers of the Company have an average of over 20 years
of experience in the restaurant industry.</p>



<p align="justify">The Company considers its employee relations to be
good and believes that its employee turnover rate compares favorably with the
industry average.&nbsp; Most employees, other
than restaurant management and corporate personnel, are paid on an hourly
basis.&nbsp; The Company believes that it
provides working conditions and wages that compare favorably with those of its
competition.&nbsp; The Company's employees
are not covered by any collective bargaining agreements.</p>



<p align="justify"><b><u>Trademarks</u></b></p>



<p align="justify">The Company has registered and/or has pending, among
other marks, &quot;Big Bowl&quot;, &quot;Big Bowl Asian Kitchen&quot;, &quot;Brinker International&quot;,
&quot;Chili's&quot;, &quot;Chili's Bar &amp; Bites&quot;, &quot;Chili's Grill &amp; Bar&quot;, &quot;Chili's
Margarita Bar&quot;, &quot;Chili's Southwest Grill &amp; Bar&quot;, &quot;Chili's Too&quot;, &quot;Corner
Bakery&quot;, &quot;Corner Bakery Cafe&quot;, &quot;Romano's Macaroni Grill&quot;, &quot;Macaroni Grill&quot;,
&quot;Maggiano's&quot;, &quot;Maggiano's Little Italy&quot;, &quot;On The Border&quot;, &quot;On The Border
Mexican Cafe&quot;, and &quot;On The Border Mexican Grill &amp; Cantina&quot;, as trademarks
with the United States Patent and Trademark Office.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify"><b><u>Risk Factors/Forward-Looking Statements</u></b></p>



<p align="justify">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 verbal forward-looking statements made from time to time by
representatives of the Company.&nbsp; 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.&nbsp; 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 &quot;believes,&quot; &quot;anticipates,&quot; &quot;estimates,&quot;
&quot;predicts,&quot; &quot;expects&quot; and similar expressions that convey the uncertainty of
future events or outcomes.&nbsp; An expanded
discussion of some of these risk factors follows.</p>



<p align="justify"><u>Competition may adversely affect the Company's
operations and financial results</u>.</p>



<p align="justify">The restaurant business is highly competitive with
respect to price, service, restaurant location, nutritional and dietary trends
and food quality, and is often affected by changes in consumer tastes, economic
conditions, population and traffic patterns.&nbsp;
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.&nbsp; There is active
competition for management personnel and for attractive commercial real estate
sites suitable for restaurants.&nbsp; 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.</p>



<p align="justify"><u>The Company's sales volumes generally decrease in
winter months</u>.</p>



<p align="justify">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.</p>



<p align="justify"><u>Changes in governmental regulation may adversely
affect the Company's ability to open new restaurants and the Company's existing
and future operations</u>.</p>



<p align="justify">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.&nbsp; The Company
generally has not encountered any material 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.</p>



<p align="justify">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, the Company cannot ensure that there will
not be a material negative effect in the future.&nbsp; 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.&nbsp; </p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">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, various family
leave mandates and a variety of other laws enacted, or rules and regulations
promulgated, by federal, state and local governmental authorities that govern
these and other employment matters.&nbsp; The
Company expects increases in payroll expenses as a result of federal, state and
local mandated increases in the minimum wage, and although such increases are
not expected to be material, the Company cannot assure that there will not be
material increases in the future.&nbsp; In
addition, the Company's vendors may be affected by higher minimum wage
standards, which may increase the price of goods and services supplied to the
Company.</p>



<p align="justify"><u>Inflation may increase the Company's operating
expenses</u>.</p>



<p align="justify">The Company has not experienced a significant
overall impact from inflation.&nbsp; 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.&nbsp; 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.</p>



<p align="justify"><u>Increased energy costs may adversely affect the
Company's profitability</u>.</p>



<p align="justify">The Company's success depends in part on its ability
to absorb increases in utility costs.&nbsp;
Various regions of the United States in which the Company operates
multiple restaurants, particularly California, have experienced significant and
temporary increases in utility prices.&nbsp;
If these increases should recur, they will have an adverse effect on the
Company's profitability.</p>



<p align="justify"><u>Successful mergers, acquisitions, divestitures
and other strategic transactions are important to the future growth and profitability
of the Company</u></p>



<p align="justify">The Company intends to evaluate potential mergers,
acquisitions, joint venture investments, and divestitures as part of its
strategic planning initiative.&nbsp; These
transactions involve various inherent risks, including accurately assessing the
value, future growth potential, strengths, weaknesses, contingent and other
liabilities and potential profitability of acquisition candidates; the Company's
ability to achieve projected economic and operating synergies; unanticipated
changes in business and economic conditions affecting an acquired business; and
the ability of the Company to complete divestitures on acceptable terms and at
or near the prices estimated as attainable by the Company.</p>



<p align="justify"><u>If the Company is unable to meet its growth plan,
the Company's profitability in the future may be adversely affected</u>.</p>



<p align="justify">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.&nbsp; 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.&nbsp; The labor and materials
costs involved vary geographically and are subject to general price
increases.&nbsp; As a result, future capital
expenditure costs of restaurant development may increase, reducing
profitability.&nbsp; 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.</p>



<p align="justify"><u>Unfavorable publicity relating to one or more of
the Company's restaurants in a particular brand may taint public perception of
the brand</u>.</p>



<p align="justify">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.&nbsp; In particular, since the
Company depends heavily on the &quot;Chili's&quot; 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 Chili's brand, and consequently on the Company's
business, financial condition and results of operations.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify"><u>Other risk factors may adversely affect the
Company's financial performance</u>.</p>



<p align="justify">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 attacks, and weather and other acts of God.</p>



<p align="justify"><b><u>Available Information</u></b></p>



<p align="justify">The Company maintains an internet website with the
address of http://www.brinker.com.&nbsp;
Copies of the Company's reports filed with, or furnished to, the
Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K and any
amendments to such reports are available for viewing and copying at such
internet website, free of charge, as soon as reasonably practicable after
filing such material with, or furnishing it to, the Securities and Exchange
Commission.&nbsp; In addition, copies of the
Company's corporate governance materials, including, Corporate Governance
Guidelines, Governance and Nominating Committee Charter, Audit Committee
Charter, Compensation Committee Charter, Executive Committee Charter, Code of
Conduct and Ethical Business Policy, and Problem Resolution Procedure/Whistle
Blower Policy, are available for viewing and copying at the website, free of
charge.</p>





</blockquote>





<p>Item 2.&nbsp;&nbsp;&nbsp; PROPERTIES.</p>



<blockquote>



<p align="justify"><b><u>Restaurant Locations</u></b></p>



<p align="justify">At June 30, 2004, the Company's system of
company-operated, jointly-developed and franchised units included 1,476
restaurants located in forty-nine states, Washington, D.C., Australia, Bahrain,
Canada, Egypt, Great Britain, Guatemala, Indonesia, Japan, Kuwait, Lebanon,
Malaysia, Mexico, Oman, Peru, Philippines, Puerto Rico, Qatar, Saudi Arabia,
South Korea, Taiwan, United Arab Emirates, and Venezuela.&nbsp; The Company's portfolio of restaurants is
illustrated below:</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=297 valign=top>
  <p>Chili's:<br>
  &nbsp;&nbsp; Company-Operated<br>
  &nbsp;&nbsp; Franchise</p>
  </td>
  <td width=76 valign=top>
  <p align=right><br>
  752<br>
  227</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Macaroni Grill:<br>
  &nbsp;&nbsp; Company-Operated<br>
  &nbsp;&nbsp; Franchise</p>
  </td>
  <td width=76 valign=top>
  <p align=right><br>
  206<br>
  9</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Maggiano's</p>
  </td>
  <td width=76 valign=top>
  <p align=right>28</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>On The Border:<br>
  &nbsp;&nbsp; Company-Operated<br>
  &nbsp;&nbsp; Franchise</p>
  </td>
  <td width=76 valign=top>
  <p align=right><br>
  111<br>
  18</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Corner Bakery:<br>
  &nbsp;&nbsp; Company-Operated<br>
  &nbsp;&nbsp; Franchise</p>
  </td>
  <td width=76 valign=top>
  <p align=right><br>
  83<br>
  3</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Big Bowl</p>
  </td>
  <td width=76 valign=top>
  <p align=right>14</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Rockfish</p>
  </td>
  <td width=76 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 25</u></p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; Total</p>
  </td>
  <td width=76 valign=top>
  <p align=right>1,476</p>
  </td>
 </tr>
</table>



<p align="justify">The 979 Chili's restaurants include domestic
locations in 49 states and foreign locations in 22 countries.&nbsp; The 215 Macaroni Grill restaurants include
domestic locations in 40 states and foreign locations in Canada, Great Britain,
Mexico and Puerto Rico.&nbsp; The Maggiano's,
On The Border, Corner Bakery, and Big Bowl restaurants are located exclusively
within the United States in 13 (and the District of Columbia), 31,&nbsp; 8 (and the District of Columbia), and 6
states, respectively.</p>





<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>





<p align="justify"><b><u>Restaurant Property Information</u></b></p>



<p align="justify">The following table illustrates the approximate
average dining capacity for each current prototypical unit in the Company's
primary restaurant concepts:</p>



</blockquote>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=91 valign=top>

  </td>
  <td width=91 valign=top>
  <p align="center">Chili's</p>
  </td>
  <td width=95 valign=top>
  <p>Macaroni Grill</p>
  </td>
  <td width=112 valign=top>
  <p align="center">Maggiano's</p>
  </td>
  <td width=108 valign=top>
  <p>On The Border</p>
  </td>
  <td width=126 valign=top>
  <p align="center">Big Bowl</p>
  </td>
 </tr>
 <tr>
  <td width=91 valign=top>
  <p>Square Feet</p>
  </td>
  <td width=91 valign=top>
  <p>4,000 - 5,700</p>
  </td>
  <td width=95 valign=top>
  <p>6,300 - 7,000</p>
  </td>
  <td width=112 valign=top>
  <p>12,000 - 18,000</p>
  </td>
  <td width=108 valign=top>
  <p>5,200 - 6,200</p>
  </td>
  <td width=126 valign=top>
  <p align="center">5,500 - 5,700</p>
  </td>
 </tr>
 <tr>
  <td width=91 valign=top>
  <p>Dining Seats</p>
  </td>
  <td width=91 valign=top>
  <p>&nbsp;&nbsp; 150 - 220</p>
  </td>
  <td width=95 valign=top>
  <p>&nbsp;&nbsp; 235 - 280</p>
  </td>
  <td width=112 valign=top>
  <p>&nbsp;&nbsp;&nbsp; 500 - 725</p>
  </td>
  <td width=108 valign=top>
  <p>&nbsp;&nbsp; 195 - 265</p>
  </td>
  <td width=126 valign=top>
  <p align="center">&nbsp;&nbsp; 195 - 200</p>
  </td>
 </tr>
 <tr>
  <td width=91 valign=top>
  <p>Dining Tables</p>
  </td>
  <td width=91 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; 35 - 50</p>
  </td>
  <td width=95 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; 50 - 70</p>
  </td>
  <td width=112 valign=top>
  <p>&nbsp;&nbsp;&nbsp; 100 - 150</p>
  </td>
  <td width=108 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; 45 - 65</p>
  </td>
  <td width=126 valign=top>
  <p align="center">&nbsp;&nbsp;&nbsp; 45 - 50</p>
  </td>
 </tr>
</table>

</div>



<blockquote>



<p align="justify">Corner Bakery's size and dining capacity varies
based upon whether it is an in-line or kiosk location.&nbsp; For a Corner Bakery located in a kiosk, the
square footage ranges from 80 to 200 square feet, the number of dining seats
varies from 0 to 40, and the number of dining tables varies from 0 to 15.&nbsp; For in-line Corner Bakery locations, the
square footage ranges from 1,971 to 5,347, the number of dining seats ranges
from 60 to 150, and the number of dining tables ranges from 20 to 50.</p>



<p align="justify">Certain of the Company's restaurants are leased for
an initial term of 5 to 30 years, with renewal terms of 1 to 35 years.&nbsp; The leases typically provide for a fixed
rental plus percentage rentals based on sales volume.&nbsp; At June 30, 2004, the Company owned the land and/or building for 861
of the 1,194 Company-operated restaurants.&nbsp;
The Company considers that its properties are suitable, adequate,
well-maintained and sufficient for the operations contemplated.</p>



<p align="justify"><b><u>Other Properties</u></b></p>



<p align="justify">The Company leases warehouse space totaling
approximately 39,150 square feet in Carrollton, Texas, which it uses for
storage of equipment and supplies.&nbsp; The
Company owns an office building containing approximately 108,021 square feet
which it uses for part of its corporate headquarters and menu development
activities.&nbsp; The Company leases an
additional office complex containing approximately 198,000 square feet for the
remainder of its corporate headquarters, of which approximately 151,860 square
feet is currently utilized by the Company, and the remaining 46,140 square feet
is under lease, listed for lease to third party tenants, or reserved for future
expansion of the Company headquarters.&nbsp;
The Company also leases office space in Arizona, California, Colorado,
Florida, Illinois, Missouri, New Jersey, North Carolina, Rhode Island and Texas
for use as regional operation or real estate/construction offices.&nbsp; The size of these office leases range from
144 square feet to 4,049 square feet.&nbsp;
The Company owns or leases warehouse space in California, Georgia,
Illinois and Texas for use as commissaries for the preparation of bread and
other food products primarily for its Corner Bakery stores.&nbsp; The size of these commissaries range from
11,383 square feet to 20,000 square feet.</p>





</blockquote>





<p>Item 3.&nbsp;&nbsp;&nbsp; LEGAL PROCEEDINGS.</p>



<blockquote>



<p align="justify">In January 1996, the Company entered into a Tip
Reporting Alternative Commitment agreement (the &quot;Contract&quot;) with the Internal
Revenue Service (the &quot;IRS&quot;).&nbsp; The
Contract required the Company, among other things, to implement tip reporting
educational programs for its hourly restaurant employees and to establish tip
reporting procedures.&nbsp; The IRS has
alleged that the Company did not meet the requirements of the Contract and has
retroactively and unilaterally revoked it.&nbsp;
As a result of the revocation, the IRS commenced an examination during
fiscal 2004 of the Company's 2000 through 2002 calendar years, which involved
interviews of current and former employees for the purpose of assessing
employer-only Federal Insurance Contributions Act&nbsp; (&quot;FICA&quot;) taxes on estimated unreported cash tips.&nbsp;
In connection with this examination, the IRS has also alleged that some portion
of these unreported tips should have been treated as service charges subject to
employment taxes.&nbsp; On August 30, 2004, the IRS notified the Company that it
intends to issue a notice and demand, on or after September 29, 2004, for the
employer's share of FICA taxes on unreported tips.&nbsp; The Company believes it has complied and
continues to comply with all of the terms of the Contract and with the law
pertaining to the employment tax treatment of service charges.&nbsp; The Company intends to
vigorously contest the accuracy of any assessment that may be proposed with
respect to either unreported tips or service charges and, in the case of tips,
to assert that the Contract precludes the retroactive assessment of
employer-only FICA taxes.&nbsp; It is not possible at this time to
reasonably estimate the possible loss or range of loss, if any, with respect to
either issue.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">The Company is engaged in various other legal
proceedings and has certain unresolved claims pending.&nbsp; The ultimate liability, if any, for the
aggregate amounts claimed cannot be determined at this time.&nbsp; 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.</p>





</blockquote>





<p>Item 4.&nbsp;&nbsp;&nbsp; SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.</p>



<p>None.</p>





<p align=center><b>PART
II</b></p>

<p>Item 5.&nbsp;&nbsp;&nbsp; MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.</p>



<blockquote>



<p align="justify">The Company's common stock is traded on the New York
Stock Exchange (&quot;NYSE&quot;) under the symbol &quot;EAT&quot;.&nbsp; Bid prices quoted represent interdealer prices without adjustment
for retail markup, markdown and/or commissions, and may not necessarily
represent actual transactions.&nbsp; The
following table sets forth the quarterly high and low closing sales prices of
the common stock, as reported by the NYSE.</p>



<p align="justify">Fiscal year ended June 30, 2004:</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=197 valign=top>

  <p align="justify">

  </td>
  <td width=134 valign=top>
  <p align="justify">High</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">Low</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">First Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$36.96</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$30.31</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Second Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$34.30</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$29.60</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Third Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$39.54</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$32.47</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Fourth Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$39.52</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$34.12</p>
  </td>
 </tr>
</table>



<p align="justify">Fiscal year ended June 25, 2003:</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=197 valign=top>

  <p align="justify">

  </td>
  <td width=134 valign=top>
  <p align="justify">High</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">Low</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">First Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$32.60</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$25.12</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Second Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$32.25</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$25.64</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Third Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$32.95</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$26.40</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p align="justify">Fourth Quarter</p>
  </td>
  <td width=134 valign=top>
  <p align="justify">$36.68</p>
  </td>
  <td width=126 valign=top>
  <p align="justify">$30.30</p>
  </td>
 </tr>
</table>





<p align="justify">As of August 24, 2004, there were 1,176 holders of
record of the Company's common stock.</p>



<p align="justify">The Company has never paid cash dividends on its
common stock and does not currently intend to do so as profits are reinvested
into the Company to fund expansion of its restaurant business.&nbsp; Payment of dividends in the future will
depend upon the Company's growth, profitability, financial condition and other
factors, which the Board of Directors may deem relevant.</p>



<p align="justify">In October 2001, the Company issued $431.7 million
aggregate principal amount at maturity of Zero Coupon Convertible Senior
Debentures Due 2021 (the &quot;Debentures&quot;).&nbsp;
The Debentures and the common stock issuable upon conversion of the
Debentures were not registered under the Securities Act of 1933, as amended;
however, the Company subsequently filed a registration statement covering the
resale of these securities by the holders thereof.&nbsp; Banc of America Securities LLC and Salomon Smith Barney Inc.
served as the joint book-running managers for the offering.&nbsp; The Debentures were offered and sold only to
&quot;qualified institutional buyers&quot; (as defined in Rule 144A under the Securities
Act of 1933, as amended).&nbsp; The aggregate
offering price for the Debentures was approximately $250.0 million and the
aggregate underwriting discount of 2.125% was approximately $5.3 million.&nbsp; The Debentures are redeemable at the
Company's option beginning on October 10, 2004, and the holders of the
Debentures may require the Company to redeem the Debentures on October 10,
2005, 2011 or 2016, and in certain other circumstances.&nbsp; 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, a credit rating of
the Debentures is reduced below Baa3 and BBB-, or upon the occurrence of
certain specified corporate transactions.&nbsp;
The accreted conversion price is equal to the issue price of the
Debenture plus accrued original issue discount divided by 18.08 shares.&nbsp; The proceeds of the offering were used for
repayment of existing indebtedness, restaurant acquisitions, purchases of
outstanding common stock under the Company's stock repurchase plan, and for
general corporate purposes.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">In May 2004, the Company issued $300.0 million in
the aggregate principal amount at maturity of 5.75% Notes due 2014 (the
&quot;Unregistered Notes&quot;).&nbsp; The Unregistered
Notes were not registered under the Securities Act of 1933, as amended.&nbsp; Citigroup Global Markets Inc. and J.P.
Morgan Securities Inc. served as the joint book-running managers for the
offering.&nbsp; The Unregistered Notes were
offered and sold only to &quot;qualified institutional buyers&quot; (as defined in Rule
144A under the Securities Act of 1933, as amended), and, outside the United States,
to non-U.S. persons in reliance on Regulation S under the Securities Act.&nbsp; The Unregistered Notes are redeemable at the
Company's option at any time, in whole or in part.&nbsp; The proceeds of the offering were and will be used for general
corporate purposes, including the repurchase of the Company's common stock
pursuant to its share repurchase program.</p>



<p align="justify">In September 2004, the Company completed an exchange
offer (the &quot;Exchange Offer&quot;) in the aggregate principal amount of $300.0
million pursuant to which all of the holders of the Unregistered Notes exchanged
the Unregistered Notes for new 5.75% notes due 2014 (the &quot;Registered
Notes&quot;).&nbsp; The Registered Notes are on
substantially the same terms as the Unregistered Notes except that the
Registered Notes have been registered under the Securities Act and are freely
tradeable.&nbsp; The Company did not receive
any new proceeds from the issuance of the Registered Notes.</p>



<p align="justify">Except as described in the immediately preceding paragraphs,
during the three-year period ended on August 24, 2004, the Company issued no
securities which were not registered under the Securities Act of 1933, as
amended.</p>



<p align="justify">Shares repurchased during the fourth quarter of fiscal
2004 are as follows (in thousands, except share and per share amounts):</p>



<table border=0 cellspacing=0 cellpadding=0 width=624>
 <tr>
  <td width=246 valign=bottom>
  <p align=center>&nbsp;</p>
  </td>
  <td width=114 valign=bottom>
  <p align=center><b>Total Number of
  Shares <br>
  <u>Purchased (a)</u></b></p>
  </td>
  <td width=102 valign=bottom>
  <p align=center><b>Average Price
  Paid per <br>
  <u>Share</u></b></p>
  </td>
  <td width=162 valign=bottom>
  <p align=center><b>Maximum Dollar
  Value that May Yet be Purchased Under the<br>
  <u>Program</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=246 valign=bottom>
  <p>March 25, 2004
  through April 28, 2004</p>
  </td>
  <td width=114 nowrap valign=bottom>
  <p>&nbsp;&nbsp; 501,000</p>
  </td>
  <td width=102 nowrap valign=bottom>
  <p align=center>$38.06</p>
  </td>
  <td width=162 nowrap valign=bottom>
  <p align=center>$493,600,321.00</p>
  </td>
 </tr>
 <tr>
  <td width=246 valign=bottom>
  <p>April 29, 2004
  through May 26, 2004</p>
  </td>
  <td width=114 nowrap valign=bottom>
  <p>1,820,300</p>
  </td>
  <td width=102 nowrap valign=bottom>
  <p align=center>$36.76</p>
  </td>
  <td width=162 nowrap valign=bottom>
  <p align=center>$426,604,870.00</p>
  </td>
 </tr>
 <tr>
  <td width=246 valign=bottom>
  <p>May 27, 2004
  through June 30, 2004</p>
  </td>
  <td width=114 nowrap valign=bottom>
  <p><u>3,714,000</u></p>
  </td>
  <td width=102 nowrap valign=bottom>
  <p align=center>$35.31</p>
  </td>
  <td width=162 nowrap valign=bottom>
  <p align=center>$295,323,157.00</p>
  </td>
 </tr>
 <tr>
  <td width=246 valign=bottom>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total</p>
  </td>
  <td width=114 nowrap valign=bottom>
  <p><u>6,035,300</u></p>
  </td>
  <td width=102 nowrap valign=bottom>
  <p align=center>$35.98</p>
  </td>
  <td width=162 nowrap valign=bottom>
  <p align=center>&nbsp;</p>
  </td>
 </tr>
</table>



<p align="justify">(a)
All of the shares purchased during the fourth quarter of fiscal 2004 were
purchased as part of the publicly announced program described in &quot;Liquidity and
Capital Resources&quot; contained within &quot;Management's Discussion and Analysis of
Financial Condition and Results of Operations&quot; which is incorporated by
reference from the 2004 Annual Report to Shareholders and is presented on pages
F-5 through F-7 of Exhibit 13 to this report.</p>







<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>







</blockquote>







<p>Item 6.&nbsp;&nbsp;&nbsp; SELECTED FINANCIAL DATA.</p>



<blockquote>



<p align="justify">&quot;Selected Financial Data&quot; is incorporated herein by
reference from the 2004 Annual Report to Shareholders and is presented on page
F-1 of Exhibit 13 to this report.</p>





</blockquote>





<p>Item 7.&nbsp;&nbsp;&nbsp; MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL<br>
CONDITION AND RESULTS OF
OPERATIONS.</p>

<blockquote>



<p align="justify">&quot;Management's Discussion and Analysis of Financial
Condition and Results of Operations&quot; is incorporated herein by reference from
the 2004 Annual Report to Shareholders and is presented on pages F-2 through F&#8209;11
of Exhibit 13 to this report.</p>





</blockquote>





<p>Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.</p>



<blockquote>



<p align="justify">&quot;Quantitative and Qualitative Disclosures About
Market Risk&quot; contained within &quot;Management's Discussion and Analysis of
Financial Condition and Results of Operations&quot; is incorporated herein by
reference from the 2004 Annual Report to Shareholders and is presented on pages
F-7 through F-8 of Exhibit 13 to this report.</p>





</blockquote>





<p>Item 8.&nbsp;&nbsp;&nbsp; FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</p>



<blockquote>



<p align="justify">Reference is made to the Index to Financial
Statements attached hereto on page 20 for a listing of all financial statements
incorporated by reference from the 2004 Annual Report to Shareholders attached
as part of Exhibit 13 to this report.</p>





</blockquote>





<p>Item 9.&nbsp;&nbsp;&nbsp; CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON<br>
ACCOUNTING AND FINANCIAL
DISCLOSURE.</p>

<blockquote>



<p>None.</p>





</blockquote>





<p>Item 9A.&nbsp; CONTROLS AND PROCEDURES.</p>



<blockquote>



<p align="justify">An evaluation was carried out under the supervision
and with the participation of the Company's management, including its Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of its disclosure controls and procedures [as defined in
rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
&quot;Exchange Act&quot;)], as of the end of the period covered by this report.&nbsp; Based upon the evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective in timely
making known to them material information relating to the Company required to
be disclosed in the Company's reports filed or submitted under the Exchange
Act.</p>



<p align="justify">There were no significant changes in the Company's
internal control over financial reporting or in other factors that could
significantly affect this control during the quarter ended June 30, 2004, that
has materially affected or is reasonably likely to materially affect, the
Company's internal control over financial reporting.</p>





</blockquote>





<p>Item 9B.&nbsp; OTHER INFORMATION.</p>



<blockquote>



<p>None.</p>





<hr><P STYLE="page-break-after: always"></P>



<p>&nbsp;</p>





</blockquote>





<p align=center><b>PART
III</b></p>

<p>Item 10.&nbsp; DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.</p>



<blockquote>



<p align="justify">&quot;Election of Directors - Information About
Nominees&quot;, &quot;Governance Of The Company&quot;, &quot;Executive Officers&quot;, and &quot;Section
16(a) Beneficial Ownership Reporting Compliance&quot; in the Company's Proxy
Statement to be dated on or about September 13, 2004, for the annual meeting of
shareholders on November 4, 2004, are incorporated herein by reference.</p>



<p align="justify">The Company has adopted a code of ethics that
applies to all members of Board of Directors and employees of the Company,
including, the principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.&nbsp; The Company has posted a
copy of the code on the Company's internet website at the internet address:
http://www.brinker.com/corp_gov/ethical_business_policy_pf.asp.&nbsp; Copies of the code may be obtained free of
charge from the Company's website at the above internet address.</p>





</blockquote>





<p>Item 11.&nbsp; EXECUTIVE COMPENSATION.</p>



<blockquote>



<p align="justify">&quot;Executive Compensation&quot; and &quot;Report of the
Compensation Committee&quot; in the Company's Proxy Statement to be dated on or
about September 13, 2004, for the annual meeting of shareholders on November 4,
2004, are incorporated herein by reference.</p>





</blockquote>





<p>Item 12.&nbsp; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT<br>
AND RELATED STOCKHOLDER
MATTERS.</p>

<blockquote>



<p align="justify">&quot;Election of Directors - Stock Ownership of
Directors&quot;, &quot;Executive Compensation - Equity Compensation Plan Information&quot;,
and &quot;Stock Ownership of Certain Persons&quot; in the Company's Proxy Statement to be
dated on or about September 13, 2004, for the annual meeting of shareholders on
November 4, 2004, are incorporated herein by reference.</p>





<p>Item 13.&nbsp; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.</p>



<p align="justify">&quot;Compensation Committee Interlocks and Insider
Participation&quot; in the Company's Proxy Statement to be dated on or about
September 13, 2004, for the annual meeting of shareholders on November 4, 2004,
is incorporated herein by reference.</p>





</blockquote>





<p>Item 14.&nbsp; PRINCIPAL ACCOUNTANT FEES AND SERVICES.</p>



<blockquote>



<p align="justify">&nbsp;&quot;Report of
the Audit Committee&quot; in the Company's Proxy Statement to be dated on or about
September 13, 2004, for the annual meeting of shareholders on November 4, 2004,
is incorporated herein by reference.</p>







</blockquote>







<p align=center><b>PART IV</b></p>

<p>Item 15.&nbsp; EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.</p>



<blockquote>



<p align="justify">(a)&nbsp;&nbsp;&nbsp; (1)
Financial Statements.</p>



<p align="justify">Reference is made to the Index to Financial
Statements attached hereto on page 20 for a listing of all financial statements
attached as Exhibit 13 to this report.</p>



<hr><P STYLE="page-break-after: always"></P>



<p align="justify">&nbsp;</p>



<p align="justify">(a)&nbsp;&nbsp;&nbsp; (2)
Financial Statement Schedules.</p>



<p align="justify">None.</p>



<p align="justify">(a)&nbsp;&nbsp;&nbsp; (3)
Exhibits.</p>



<p align="justify">Reference is made to the Exhibit Index preceding the
exhibits attached hereto on page E-1 for a list of all exhibits filed as a part
of this report.</p>



</blockquote>



<p align=center>SIGNATURES</p>

<p align="justify">Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>BRINKER INTERNATIONAL,
  INC.,</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>a Delaware corporation</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>By:<u>&nbsp; /s/ Charles M. Sonsteby&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; Charles M. Sonsteby, Executive Vice</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; President and Chief Financial Officer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Dated: September 13, 2004</p>
  </td>
  <td width=319 valign=top>

  </td>
 </tr>
</table>



<br clear=all>




<P STYLE="page-break-after: always"></P><p>Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by
the following persons of the registrant and in the capacities indicated on
September 13, 2004.</p>





<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p align=center><u>Name</u></p>
  </td>
  <td width=319 valign=top>
  <p align=center><u>Title</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp;&nbsp; /s/ Douglas H. Brooks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Douglas H. Brooks</td>
  <td width=319 valign=top>

  <p>President, Chief Executive
  Officer and Director<br>
  (Principal Executive
  Officer)</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ Charles M. Sonsteby&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Charles M. Sonsteby</td>
  <td width=319 valign=top>

  <p>Executive Vice President
  and Chief Financial Officer<br>
  (Principal Financial and
  Accounting Officer)</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  ___________________________________<br>
  Ronald A. McDougall</td>
  <td width=319 valign=top>

  <p>Chairman of the Board</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  ___________________________________<br>
  Dan W. Cook, III</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  ___________________________________<br>
  Robert M. Gates</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ Marvin J. Girouard&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Marvin J. Girouard</td>
  <td width=319 valign=top>


  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ Ronald Kirk&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Ronald Kirk</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  ___________________________________<br>
  George R. Mrkonic</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ Erle Nye&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> <br>
  Erle Nye</td>
  <td width=319 valign=top>


  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ James E. Oesterreicher&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  James E. Oesterreicher</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s/ Cece Smith&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Cece Smith</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <u>&nbsp;&nbsp; /s&nbsp; Roger T. Staubach&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
  Roger T. Staubach</td>
  <td width=319 valign=top>

  <p>Director</p>
  </td>
 </tr>
</table>



<br clear=all>






<hr><P STYLE="page-break-after: always"></P>






<p align=center>INDEX
TO FINANCIAL STATEMENTS</p>

<p>The following is a listing
of the financial statements which are attached hereto as part of Exhibit 13.</p>





<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>
  <p align=right><u>Page</u></p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Selected Financial Data</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-1</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Management's Discussion
  and Analysis of <br>
  &nbsp;&nbsp;&nbsp; Financial Condition and Results of Operations</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-2</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Consolidated Statements of
  Income - Fiscal Years<br>
  &nbsp;&nbsp;&nbsp; Ended June 30, 2004, June 25, 2003, and June 26, 2002</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-12</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Consolidated Balance
  Sheets - June 30, 2004 and June 25, 2003</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-13</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Consolidated Statements of
  Shareholders' Equity - Fiscal<br>
  &nbsp;&nbsp;&nbsp; Years Ended June 30, 2004, June 25, 2003, and June 26, 2002</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-14</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Consolidated Statements of
  Cash Flows - Fiscal Years<br>
  &nbsp;&nbsp;&nbsp; Ended June 30, 2004, June 25, 2003, and June 26, 2002</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-15</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>

  <p align="right">

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Notes to Consolidated
  Financial Statements</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-16</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Report of Independent
  Registered Public Accounting Firm</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-30</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

  </td>
  <td width=121 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Management's
  Responsibility for Consolidated Financial Statements</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-31</p>
  </td>
 </tr>
</table>





<p>All schedules are omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.</p>



<br clear=all>



<hr><P STYLE="page-break-after: always"></P>



<p align=center>INDEX
TO EXHIBITS</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=67 valign=top>
  <p><u>Exhibit</u></p>
  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 3(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Certificate of Incorporation
  of the Registrant, as amended.&nbsp;&nbsp; (1)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 3(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Bylaws of the
  Registrant.&nbsp;&nbsp; (2)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 4(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Form of Zero Coupon
  Convertible Senior Debenture Due 2021.&nbsp;&nbsp;
  (3)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 4(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Indenture between the
  Registrant and SunTrust Bank, as Trustee.&nbsp;&nbsp;
  (3)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 4(c)</p>
  </td>
  <td width=571 valign=top>
  <p>Form of 5.75% Note due
  2014.&nbsp;&nbsp; (4)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 4(d)</p>
  </td>
  <td width=571 valign=top>
  <p>Indenture between the
  Registrant and Citibank, N.A., as Trustee. (2)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>&nbsp; 4(e)</p>
  </td>
  <td width=571 valign=top>
  <p>Registration Rights
  Agreement by and among the Registrant, Citigroup Global Marketing, Inc., and
  J.P. Morgan Securities, Inc., as representatives of the initial named
  purchasers of the Notes. (2)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's 1991 Stock
  Option Plan for Non-Employee Directors and Consultants.&nbsp;&nbsp; (5)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's 1992
  Incentive Stock Option Plan.&nbsp;&nbsp; (5)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(c)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's Stock Option
  and Incentive Plan.&nbsp;&nbsp; (6)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(d)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's 1999 Stock
  Option and Incentive Plan for Non-Employee Directors and Consultants.&nbsp;&nbsp; (7)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(e)</p>
  </td>
  <td width=571 valign=top>
  <p>Transition Agreement dated
  June 5, 2003, by and among Registrant, Brinker International Payroll Company,
  L.P. and Mr. Ronald A. McDougall.&nbsp;&nbsp;
  (6)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>10(f)</p>
  </td>
  <td width=571 valign=top>
  <p>Consulting Agreement dated
  August 26, 2004, by and between Registrant and Mr. Ronald A. McDougall.&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>13</p>
  </td>
  <td width=571 valign=top>
  <p>2004 Annual Report to
  Shareholders.&nbsp;&nbsp; (9)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>21</p>
  </td>
  <td width=571 valign=top>
  <p>Subsidiaries of the
  Registrant.&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>23</p>
  </td>
  <td width=571 valign=top>
  <p>Consent of Independent
  Registered Public Accounting Firm.&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>31(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Certification by Douglas
  H. Brooks, President and Chief Executive Officer of the Registrant, pursuant
  to 17 CFR 240.13a - 14(a) or 17 CFR 240.15d - 14(a).&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>31(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Certification by Charles
  M. Sonsteby, Executive Vice President and Chief Financial Officer of the
  Registrant, pursuant to 17 CFR 240.13a - 14(a) or 17 CFR 240.15d -
  14(a).&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>32(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Certification by Douglas
  H. Brooks, President and Chief Executive Officer of the Registrant, pursuant
  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>32(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Certification by Charles
  M. Sonsteby, Executive Vice President and Chief Financial Officer of the
  Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.&nbsp;&nbsp; (8)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  <hr><P STYLE="page-break-after: always"></P>
  <p>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>99(a)</p>
  </td>
  <td width=571 valign=top>
  <p>Proxy Statement of
  Registrant.&nbsp; (10)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>
  <p>_____________________________</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(1)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  annual report on Form 10-K for year ended June 28, 1995, and incorporated
  herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(2)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  registration statement on Form S-4 filed June 25, 2004, SEC File No.
  333-116879, and incorporated herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(3)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  registration statement on Form S-3 filed December 11, 2001, SEC File No.
  333-74902, and incorporated herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  &nbsp;</td>
  <td width=571 valign=top>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=67 valign=top>

  (4)</td>
  <td width=571 valign=top>

  Included in exhibit 4(d) to this annual report on Form 10-K for year ended
  June 30, 2004.</td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(5)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  annual report on Form 10-K for the year ended June 25, 1997, and incorporated
  herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(6)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  annual report on Form 10-K for the year ended June 25, 2003, and incorporated
  herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(7)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  annual report on Form 10-K for the year ended June 28, 2000, and incorporated
  herein by reference.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(8)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed herewith </p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(9)</p>
  </td>
  <td width=571 valign=top>
  <p>Portions filed herewith,
  to the extent indicated herein.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </td>
  <td width=571 valign=top>

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(10)</p>
  </td>
  <td width=571 valign=top>
  <p>To be filed on or about
  September 13, 2004.</p>
  </td>
 </tr>
</table>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>ex10f_10k041.htm
<DESCRIPTION>EXHIBIT 10(F)
<TEXT>
<html>

<head>

<title>EXHIBIT 10(f)</title>

</head>

<body>

<p align="center">EXHIBIT
10(F)</p>



<p>CONSULTING AGREEMENT</p>





<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This
Consulting Agreement (the &quot;Agreement&quot;) is entered into as of the 26th day of
August, 2004 by and between Brinker International, Inc., a Delaware corporation
(the &quot;Company&quot;), and Ronald A. McDougall (&quot;McDougall&quot;).</p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; McDougall
is currently serving as the Chairman of the Board of the Company.&nbsp; The Company and McDougall wish to make
arrangements for McDougall's continued service to the Company after November 4,
2004, at which time McDougall will cease to be a Director of the Company.</p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
consideration of the mutual undertakings of the parties contained herein, and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and McDougall hereby agree as follows:</p>



<p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Consulting Services to be Provided</u></b>.&nbsp; Beginning November 4, 2004 (Commencement
Date) McDougall shall provide such consulting services to the Company, as the
Board of Directors of the Company or the Chief Executive Officer shall
reasonably request.&nbsp; McDougall shall
devote such time to the performance of such services as shall be reasonably
necessary.&nbsp; The parties acknowledge that
the amount of time necessary will vary with the nature of the services
requested.&nbsp; If McDougall becomes less
than fully disabled (as determined pursuant to the procedure set forth in <u>Section
5(c)</u> hereof), McDougall agrees to use his best efforts to perform such
duties, as his partial disability will allow.</p>



<p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Term</u></b>.&nbsp;
The &quot;term&quot; shall commence on November 4, 2004 and, unless earlier
terminated pursuant to <u>Section 5.</u> hereof, shall terminate on November 3,
2006 (the &quot;Term&quot;).</p>

<p>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Compensation</u></b>.&nbsp;
McDougall's compensation shall be $150,000 per annum, payable in
quarterly installments commencing November 4, 2004.</p>

<p>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Expense Reimbursement</u></b>.&nbsp; After the Commencement Date, McDougall will be reimbursed by the
Company for all reasonable, properly documented out-of-pocket expenses actually
incurred or paid by McDougall during the Term in the performance of McDougall's
consulting services under this Agreement, including entertainment of employees
and franchisees, provided same is done in accordance with the guidelines of the
Company</p>

<p>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Termination of Consulting Services</u></b>.&nbsp; The provision of consulting services by
McDougall pursuant to this Agreement will terminate upon the occurrence of any
of the following events:</p>

<hr><P STYLE="page-break-after: always"></P>

<p>a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination
of Consulting Services Upon Death</u>.&nbsp;
The provision of consulting services hereunder by McDougall shall
terminate upon his death.&nbsp; Upon
termination due to death, McDougall's right to all compensation and benefits
hereunder shall terminate as of the date of death, except that McDougall's
estate shall be entitled to receive the compensation described in <u>Section 3</u>
hereof earned and accrued, and reimbursement for expenses incurred, prior to
the date of death.</p>

<p>b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination
of Consulting Services for Cause</u>.&nbsp;
The provision of consulting services hereunder by McDougall may be
terminated by the Company &quot;For Cause&quot; if McDougall (i) is convicted by a court
of law or jury, after all appeals, of a felony, any crime involving moral
turpitude under federal, state, or local laws, or any crime involving the
Company, (ii) upon the recommendation of the Compensation Committee of the
Board of Directors, is found by the Board of Directors of the Company (after
McDougall and his attorney are provided a full and complete opportunity to hear
the evidence against him and present his defense) (A) to have engaged in either
willful and repeated failure to perform his duties hereunder or gross neglect
as defined in the laws of the State of Texas or (B) to have repeated and
willfully engaged in acts which might, beyond a reasonable doubt, bring the
Company into disrepute, contempt, scandal and ridicule, (iii) is convicted,
after all appeals, of fraud, misappropriation or embezzlement in the
performance of his duties hereunder, or (iv) breaches any of the covenants
contained in <u>Section 6</u> or <u>Section 7</u> of this Agreement.&nbsp; In the case of <u>Section 5.(b)(ii)</u>
hereof, McDougall shall have an opportunity, prior to termination, to
participate in a full hearing before the Board of Directors of the Company, and
shall have the right to appeal any adverse decision by the Board of Directors
to a court of law.&nbsp; In the event of the
occurrence of any of the events described above, the effective date of the
termination of McDougall's consulting services with the Company (&quot;For Cause
Termination Date&quot;) shall be that date which is thirty (30) days after written
notice of the termination of consulting services pursuant to this <u>Section
5.(b)</u> is provided by the Company to McDougall.&nbsp; In the event of a termination of McDougall's employment For
Cause, McDougall's right to receive all compensation and benefits hereunder
shall terminate as of the For Cause Termination Date; provided, however, that
McDougall shall be entitled to receive the compensation described in <u>Section
3(a)</u> hereof and other benefits earned and accrued, and to receive
reimbursement for expenses incurred, on or prior to the For Cause Termination
Date.</p>

<p>c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination
of Consulting Services Upon Disability</u>.&nbsp;
If McDougall becomes permanently disabled as mutually agreed upon by the
Board of Directors of the Company and McDougall (or, if the Board of Directors
and McDougall cannot agree upon such permanent disability, a determination of
permanent disability is made by a medical doctor selected jointly by the
Company and McDougall), McDougall's consulting services with the Company shall
terminate on the date on which the determination of permanent disability is
reached (the &quot;Disability Termination Date&quot;).&nbsp;
If McDougall's consulting services are terminated due to a permanent
disability, McDougall shall continue to receive the compensation and benefits
described in <u>Section 3</u> hereof until November 3, 2006, unless earlier
terminated as provided in <u>Section 5(g)</u> hereof.</p>

<hr><P STYLE="page-break-after: always"></P>

<p>d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination
of Consulting Services Without Cause</u>.&nbsp;
If the Board of Directors, for reason other than death, permanent
disability, or For Cause, desires to terminate McDougall's consulting services,
such services shall terminate on that date which is ten (10) calendar days
after the occurrence of such events.&nbsp; If
McDougall's consulting services are so terminated, McDougall shall continue to
receive the compensation and benefits described in <u>Section 3</u> hereof
until November 3, 2006.</p>

<p>e.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Voluntary
Termination of Consulting Services</u>.&nbsp;
In the event that McDougall voluntarily terminates in writing his
consulting services hereunder, McDougall's right to all compensation and
benefits hereunder shall terminate as of the date of such termination (the
&quot;Voluntary Termination Date&quot;), except that McDougall shall be entitled to
receive the compensation described in <u>Section 3</u> hereof and other
benefits earned and accrued and reimbursement for expenses incurred, prior to
the Voluntary Termination Date.</p>

<p>f.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Liquidated Damages</u>. &nbsp;McDougall and the Company agree that upon the termination of
McDougall's consulting services as set forth in this <u>Section 5</u>. for any
reason whatsoever, any payments received or receivable by McDougall pursuant to
this Agreement shall constitute liquidated damages payable to McDougall.&nbsp; McDougall expressly waives any right that he
might have to additional damages relating to such termination of consulting
services whether actual, consequential, punitive or otherwise.</p>

<p>g.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Conflict</u>.&nbsp; In the event that after a termination of
McDougall's consulting services pursuant to <u>Section 5(c)</u> or <u>5(d)</u>
hereof, there is then an act or occurrence which would have allowed the Company
to terminate McDougall's consulting services pursuant to <u>Section 5(b)</u>
hereof had McDougall been serving as a consultant hereunder at the date of the
act or occurrence, then McDougall's right to receive all compensation and
benefits hereunder shall terminate as of that date which is thirty (30) days
after written notice of such termination is provided by the Company to
McDougall (the &quot;Subsequent Termination Date&quot;); provided, however, that
McDougall shall be entitled to receive the compensation and benefits described
in <u>Section 5(c)</u> or <u>5(d)</u> hereof and earned and accrued, and to
receive reimbursement for expenses incurred, on or prior to the Subsequent
Termination Date.</p>

<p>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Confidential Information</u></b><u>.</u></p>

<p>a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As further consideration for the
promises of the Company contained in this Agreement, McDougall agrees not to use
or cause to be used for McDougall's own benefit or for the benefit of any third
parties or to disclose to any third party in any manner, directly or indirectly,
any information of a confidential or proprietary nature, </p>

<hr><P STYLE="page-break-after: always"></P>

<p>trade secrets, or any other knowledge or information, except that which is
public knowledge, of or relating to the Company's business at any time during or
after the Term, unless the Company has consented in writing to such use or
disclosure.&nbsp; McDougall further acknowledges that compliance with these
restrictions is necessary to protect the Company's business and goodwill and
that a breach may irreparably damage the Company, for which money damages may
not be adequate.&nbsp; Consequently, if McDougall breaches or threatens to
breach any of these covenants, in addition to any other remedies which may be
available to the Company, the Company shall be entitled to seek appropriate
relief, and a court of law and/or jury shall determine what injunctive relief
and/or damages, if any, will apply after a hearing with prior notice of both
parties hereof.</p>

<p>b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
further consideration for the promises of the Company contained in this
Agreement, McDougall agrees that during the Term and thereafter, except as may
be required in the performance of McDougall's duties hereunder, McDougall will
not utilize for McDougall's own benefit or that of any third party, and will
not disclose to any third party, McDougall's knowledge of or any information
concerning the Company's internal organization, business structure, or the work
assignments or capabilities of any of the Company's officers or employees
without the Company's express prior written consent.</p>

<p>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Restriction on Other Employment</u></b>.</p>

<p>a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
further consideration for the promises of the Company contained in this
Agreement, McDougall agrees that during the Term, McDougall shall not directly
or indirectly perform any services for any business, profession, or other
endeavor, which is in the restaurant or foodservice business anywhere in the
World.&nbsp; Furthermore, for a period of
three (3) years after the expiration of the Term, McDougall shall not directly
or indirectly perform any services for any business, profession or other
endeavor which is in the restaurant or foodservice business anywhere in the
United States or any other country in which there is a restaurant owned and operated
by the Company or one of its franchisees or licensees, or for which a
development agreement has been signed providing for the development of a
restaurant by a franchisee or a licensee.&nbsp;
The restrictions contained in this <u>Section 7(a)</u> shall also prohibit
McDougall, without the prior written consent of the Company and during all
stated time periods, from hiring, soliciting, or in any manner attempting to
influence or induce any employee of the Company to leave the employment of the
Company.&nbsp; McDougall will not perform
such services either as an employee, agent, independent contractor, owner,
consultant or otherwise, except that McDougall may make passive,
non-controlling investments in an entity in the restaurant or foodservice
business in an amount not to exceed (i) five percent (5%) of the total equity
interests in any publicly-traded entity and (ii) two percent (2%) of the total
equity interests in any other such entity.&nbsp; If while McDougall is receiving
any compensation or other benefits pursuant to this Agreement, McDougall
directly or indirectly performs any services for any business, profession or
other endeavor which is in the restaurant of foodservice business anywhere in
the United States or any other country in which there is a restaurant owned and
operated by the Company or one of its franchisees or licensees, or for which a
development agreement has been signed providing for the development of a
restaurant </p>

<hr><P STYLE="page-break-after: always"></P>

<p>by a franchisee or licensee, McDougall's right to receive such compensation
and benefits hereunder shall terminate on that date which is thirty (30) days
after written notice of the termination is provided by the Company to McDougall
(the &quot;Competition Termination Date&quot;) and McDougall's right to receive all
compensation and benefits hereunder shall terminate as of the Competition
Termination Date; provided, however, that McDougall shall be entitled to
received the compensation and benefits earned and accrued and to receive
reimbursement for expenses incurred, on or prior to the Competition Termination
Date.</p>

<p>b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; McDougall
acknowledges that his right to compete has been limited only to the extent
necessary to protect the Company from unfair competition.&nbsp; The parties acknowledge, however, that
reasonable people may differ in making this determination.&nbsp; Therefore, if this restrictive covenant's
scope or enforceability is disputed, a court, jury or other trier of fact
(including an arbitrator, if the parties so agree in writing) may modify and
enforce the covenant to the extent that it believes to be reasonable under the
circumstances existing at that time and as may be necessary to render the
covenant enforceable under applicable law.</p>

<p>c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; McDougall
further acknowledges that compliance with these restrictions is necessary to
protect the Company's business and goodwill and that a breach may irreparably
damage the Company, for which money damages may not be adequate.&nbsp; Consequently, if McDougall breaches or
threatens to breach any of these covenants, in addition to any other remedies
which may be available to the Company, the Company shall be entitled to seek
appropriate relief, and a court of law and/or jury shall determine what
injunctive relief and/or damages, if any, will apply after a hearing with prior
notice to both parties hereto.</p>

<p>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>GOVERNING LAW</u>.&nbsp;
THIS AGREEMENT SHALL BE SUBJECT TO AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.</b></p>

<p>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Assignment</u></b>.&nbsp;
McDougall may not assign his rights and duties under this
Agreement.&nbsp; In the event of the sale by
the Company of all or substantially all of its assets, the Company agrees that
this Agreement and all of the obligations of Company hereunder shall be assumed
by the purchaser of such assets.</p>

<p>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Notices</u></b>.&nbsp;
Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, sent by certified, registered or express mail, postage
prepaid, or sent by overnight courier.&nbsp;
Any such notice shall be deemed given when (a) so delivered personally,
telegraphed, telexed or sent by facsimile transmission, (b) if mailed, five (5)
days after the date of deposit in the United States mail, or (c) one (1)
business day after such item is deposited with Federal Express or other
generally recognized overnight courier, shipping charges prepaid, addressed to
the appropriate party as follows:</p>

<hr><P STYLE="page-break-after: always"></P>

<p>&nbsp;</p>

<p align=center>If
to McDougall:</p>

<p align=center>Ron
McDougall<br>
40274
N. 105<sup>th</sup> Place<br>
Scottsdale,
Arizona 85262</p>

<p align=center>If
to the Company:</p>

<p align=center>Brinker
International, Inc.<br>
6820
LBJ Freeway<br>
Dallas,
Texas 75240<br>
Attn:&nbsp; General Counsel</p>



<p>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Entire Agreement</u></b>.&nbsp; This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.&nbsp;
This Agreement shall be binding upon the parties and their respective
successors, heirs and permitted assigns.</p>

<p>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Waivers and Amendments</u></b>.&nbsp; This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance.&nbsp; No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any such right, power or privilege, preclude any other or further
exercise thereof or the exercise of any other such right, power or privilege.</p>

<p>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Taxes</u></b>.&nbsp;
Each party shall be responsible to pay such taxes as are required to be
paid and/or withheld, as applicable, by each party pursuant to such laws.&nbsp; In addition, each party shall be responsible
to comply with all reporting, filing and other requirements in respect of such
payments which are applicable to such party and neither party shall have any
obligation or liability to the other party with respect to such other party's
obligations hereunder, each party hereby agreeing to hold harmless and
indemnify the other party from any claims made relating to the other party's
failure to comply with such requirements.</p>

<p>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Survival</u></b>.&nbsp;
The Company and McDougall agree that all terms and provisions of this
Agreement that are expressly intended to survive the Term of this Agreement
shall so survive and continue in full force and effect notwithstanding the
expiration of the Term.</p>

<hr><P STYLE="page-break-after: always"></P>

<p>15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Headings</u></b>.&nbsp;
The headings in this Agreement are for reference only and shall not
affect the interpretation of this Agreement.</p>

<p>16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b><u>Counterpart Execution</u></b>.&nbsp; This Agreement may be executed in several counterparts, each of
which shall be fully effective as an original and all of which together shall
constitute one and the same instrument.</p>

<p><b>IN WITNESS WHEREOF</b>, the parties have executed this
Agreement effective as of the date and year appearing in the first paragraph
hereof.</p>







<p><u>&nbsp;&nbsp; /s/ Ronald A. McDougall&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>Ronald A. McDougall</p>







<p>BRINKER
INTERNATIONAL, INC.,<br>
a
Delaware corporation</p>









<p>By:<u>&nbsp;&nbsp; /s/ Douglas H. Brooks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Douglas H. Brooks<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; President and Chief Executive
Officer</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>3
<FILENAME>ex13_form10k041.htm
<DESCRIPTION>EXHIBIT 13
<TEXT>
<html>

<head>

<title>EXHIBIT 13</title>

</head>

<body link=blue vlink=purple>

<p align=center><b><font size="2">EXHIBIT
13<br>
&nbsp;</font></b></p>



<table cellspacing=0 cellpadding=0 width=714>
 <tr>
  <td width=714 colspan=10 valign=top>

  <p align=center><b><font size="2">Brinker International, Inc.<br>
  Selected Financial Data<br>
  </font>
  </b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> <b><font size="2">(In thousands, except per share amounts and number of restaurants)</font></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fiscal
  Years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </b></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><b><u><font size="2">&nbsp;&nbsp; 2004(a)</font></u></b></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align="center"><b><u><font size="2">&nbsp;&nbsp; 2003</font></u></b></p>
  </td>
  <td width=93 valign=top>
  <p align="center"><b><u><font size="2">&nbsp;&nbsp; 2002</font></u></b></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align="center"><b><u><font size="2">&nbsp;&nbsp; 2001</font></u></b></p>
  </td>
  <td width=97 valign=top>
  <p align="center"><b><font size="2">&nbsp;</font><u><font size="2">&nbsp;&nbsp;
  2000</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><b><font size="2">Income Statement Data:</font></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Revenues</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$3,707,486</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$3,285,394</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$2,887,111 </font>
  </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$2,406,874</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">$2,100,496</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>

  <p><font size="2">Operating Costs and Expenses: </font> </p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Cost of sales</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,024,724</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">900,379</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">796,714</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">663,357</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">575,570</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Restaurant expenses</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,028,569</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">1,798,752</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">1,582,644</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">1,303,349</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">1,138,487</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Depreciation and amortization</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">175,449</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">158,153</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">130,102</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">100,064</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">90,647</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">General and administrative</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">153,231</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 131,763</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 121,420&nbsp; </font>
  </p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 109,110</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 100,123</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Restructure charges and other impairments</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 74,237</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 29,744</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,723</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>

  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">&nbsp;&nbsp; Total operating costs and expenses</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;3,456,210</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;3,018,791</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">&nbsp; </font> <u><font size="2">&nbsp;2,639,603&nbsp;
  </font>
  </u> </p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align="right"><u><font size="2">&nbsp;&nbsp;2,175,880</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align="right"><u><font size="2">&nbsp;&nbsp;1,904,827</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>

  <p><font size="2">Operating
  income</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">251,276</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">266,603</font></p>
  </td>
  <td width=93 valign=top>

  <p align=right><font size="2">247,508</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">230,994</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">195,669</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Interest
  expense</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">11,603</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">12,449</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">13,327</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">8,608</font></p>
  </td>
  <td width=97 valign=top>
  <p align=right><font size="2">10,746</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Other,
  net</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,742</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 567</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,332&nbsp;
  </font> </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 459</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 3,381</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Income
  before provision for income taxes </font> </p>
  </td>
  <td width=90 valign=top>

  <p align=right><font size="2"><br>
  237,931</font></p>
  </td>
  <td width=97 colspan=2 valign=top>

  <p align=right><font size="2"><br>
  253,587</font></p>
  </td>
  <td width=93 valign=top>

  <p align=right><font size="2"><br>
  231,849</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2"><br>
  221,927</font></p>
  </td>
  <td width=97 valign=top>

  <p align=right><font size="2"><br>
  181,542</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Provision for income taxes</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 83,970</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 84,951</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 79,136</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 76,779</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 63,702</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Net
  income</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp; 153,961&nbsp; </font> </u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp; 168,636</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp; 152,713&nbsp; </font> </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp; 145,148</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">$&nbsp; 117,840</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>

  </td>
  <td width=90 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=96 colspan=3 valign=top>

  </td>
  <td width=90 valign=top>

  </td>
  <td width=98 colspan=2 valign=top>

  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Basic
  net income per share </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.60</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.74</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.56</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.46 </font> </u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">$&nbsp; &nbsp;&nbsp;&nbsp;1.20 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Diluted
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.57</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.70</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.52</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.42</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.17</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Basic weighted average<br>
  &nbsp;shares
  outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp; 96,072</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 97,096&nbsp;&nbsp;&nbsp; </font> </u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;<br>
  &nbsp;&nbsp;&nbsp; 97,862&nbsp;&nbsp;&nbsp; </font> </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align="right"><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 99,101</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 98,445</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Diluted weighted average<br>
  &nbsp;shares outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp; 97,939</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp; 99,135&nbsp; </font>
  </u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp; 100,565&nbsp;&nbsp; </font>
  </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align="right"><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 102,098</font></u></p>
  </td>
  <td width=97 valign=top>
  <p align="right"><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 101,114</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><b><font size="2"><br>
  Balance Sheet Data (End of Period):</font></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Working capital (deficit)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 21,758</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">$
  (143,744)</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">$
  (160,266)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  (110,006)</font></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><font size="2">$
  (127,377)</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Total assets</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,211,791</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">1,944,690</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">1,783,336</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,445,320</font></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><font size="2">1,162,328</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Long-term obligations</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">806,556</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">492,829</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">504,020</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">294,803</font></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><font size="2">169,120</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Shareholders' equity</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,026,073</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">1,140,250</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">977,096</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 900,287</font></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 762,208</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><b><font size="2"><br>
  Number
  of Restaurants</font></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><b><font size="2">&nbsp;Open (End of Period):</font></b></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Company-operated</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,194</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">1,145</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">1,039 </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">899</font></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><font size="2">774</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Franchised/Joint venture</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 282</font></u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 257</font></u></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 229</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 244</font></u></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 264</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Total&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;
  </font>
  </p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,476</font></u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,402</font></u></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,268</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,143</font></u></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,038</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>

  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=712 colspan=9 valign=top>
  <p><font size="2">(a)
  Fiscal year 2004 consisted of 53 weeks while all other periods presented
  consisted of 52 weeks.</font></p>
  </td>
 </tr>
 <tr height=0>
  <td width=2></td>
  <td width=241></td>
  <td width=90></td>
  <td width=96></td>
  <td width=1></td>
  <td width=93></td>
  <td width=2></td>
  <td width=90></td>
  <td width=1></td>
  <td width=97></td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<font size="2">

<br clear=all>


</font>


<p align=center><b><font size="2">Management's
Discussion and Analysis of<br>
Financial Condition and Results of Operations</font></b></p>



<p><b><font size="2">GENERAL</font></b></p>



<p><font size="2">&nbsp;&nbsp; For an understanding of the significant
factors that influenced the performance of Brinker International, Inc. (the
&quot;Company&quot;) 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.</font></p>

<p><font size="2">&nbsp;&nbsp; The Company has a 52/53 week fiscal year
ending on the last Wednesday in June. Fiscal year 2004, which ended on June 30,
2004, contained 53 weeks while fiscal years 2003 and 2002, which ended on June
25, 2003 and June 26, 2002, respectively, each contained 52 weeks.</font></p>



<p><b><font size="2">RESULTS
OF OPERATIONS FOR FISCAL YEARS 2004, 2003, AND 2002</font></b></p>



<p><font size="2">&nbsp;&nbsp; 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:</font></p>





<p>&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p align="left"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Percentage of Total Revenues<br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Fiscal Years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>

  </td>
  <td width=72 valign=top>

  <p align="left"><u><b><font size="2">2004</font></b></u></td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>

  <p align="left"><u><b><font size="2">2003</font></b></u></td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>

  <p align="left"><u><b><font size="2">2002</font></b></u></td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Revenues</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">100.0%</font></u></p>
  </td>
  <td width=24 valign=top>
  <p></p>
  </td>
  <td width=66 valign=top>
  <p><u><font size="2">100.0%</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">100.0%</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p><font size="2">Operating Costs and Expenses:</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">&nbsp; Cost of sales</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;27.6%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;27.4%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;27.6%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">&nbsp; Restaurant
  expenses</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;54.7%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;54.8%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;54.8%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">&nbsp; Depreciation and
  amortization</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.7%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.8%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.5%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">&nbsp; General and
  administrative</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.2%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.0%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 4.2%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">&nbsp; Restructure
  charges and other impairments</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 2.0%</font></u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 0.9%</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 0.3%</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Total operating costs and expenses</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">&nbsp;93.2%</font></u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;91.9%</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;91.4%</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Operating income</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;&nbsp; 6.8%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 8.1%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 8.6%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Interest expense</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;&nbsp; 0.3%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 0.4%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 0.5%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Other, net</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 0.1%</font></u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; -</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 0.1%</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Income before provision for income taxes</font></p>
  </td>
  <td width=72 valign=top>
  <p><font size="2">&nbsp;&nbsp; 6.4%</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 7.7%</font></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><font size="2">&nbsp;&nbsp; 8.0%</font></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Provision for income taxes</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 2.3%</font></u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 2.6%</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 2.7%</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p><font size="2">Net income</font></p>
  </td>
  <td width=72 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 4.1%</font></u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 5.1%</font></u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p><u><font size="2">&nbsp;&nbsp; 5.3%</font></u></p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<u><font size="2"><br
clear=all>
</font>
</u>

<p><b><font size="2">OVERVIEW </font>
</b></p>



<p><font size="2">&nbsp;&nbsp; The Company is principally engaged in the
ownership, operation, development, and franchising of the Chili's Grill &amp;
Bar (&quot;Chili's&quot;), Romano's Macaroni Grill (&quot;Macaroni Grill&quot;), Maggiano's Little
Italy (&quot;Maggiano's&quot;), On The Border Mexican Grill &amp; Cantina (&quot;On The
Border&quot;), Corner Bakery Cafe (&quot;Corner Bakery&quot;), and Big Bowl Asian Kitchen
(&quot;Big Bowl&quot;) restaurant concepts.&nbsp; In
addition, the Company is involved in the ownership and development of Rockfish
Seafood Grill.&nbsp; At June 30, 2004, the
Company owned, operated, franchised, or was involved in the ownership of 1,476
restaurants.&nbsp; The Company's core
concepts accounted for 82.8% of the total units and included 979 Chili's, 215
Macaroni Grill, and 28 Maggiano's restaurants.</font></p>



<p><font size="2">The Company intends to continue the expansion
of its restaurant concepts by opening units in strategically desirable markets.
The Company considers the restaurant site selection process critical to its
long-term success and devotes significant effort to the investigation of new
locations utilizing a variety of sophisticated analytical techniques. The
Company intends to concentrate on the development of certain identified markets
to achieve penetration levels deemed desirable in order to improve competitive
position, marketing potential and profitability. Expansion efforts will be
focused not only on major metropolitan areas, but also on smaller market areas
and non-traditional locations (such as airports, kiosks and food courts) that
can adequately support any of the Company's restaurant concepts. The specific
rate at which the Company is able to open new restaurants is determined by its
success in locating satisfactory sites, negotiating acceptable lease or
purchase terms, securing appropriate local governmental permits and approvals,
and by its capacity to supervise construction and recruit and train management
personnel.</font></p>



<p><font size="2">The restaurant industry is a highly competitive business, which
is sensitive to changes in economic conditions, trends in lifestyles and
fluctuating costs.&nbsp; Operating margins for restaurants are susceptible to
fluctuations in prices of commodities, which include among other things, beef,
chicken, seafood, dairy, cheese, produce and other necessities to operate a
restaurant such as natural gas or other energy supplies.&nbsp; Additionally,
the restaurant industry is characterized by a high initial capital investment,
coupled with high labor costs.</font></p>



<p><font size="2">Revenues for the first quarter of fiscal 2005 are estimated to
increase by 5% to 7% compared to the same quarter in fiscal 2004, driven
primarily by capacity gains of 4% to 5%.&nbsp;
Cost of sales is estimated to be 0.3% to 0.4% higher than last year due
to the impact of higher beef, chicken and dairy costs.&nbsp; Restaurant expenses are estimated to be 0.4%
to 0.5% higher than last year as a result of increased utility costs.&nbsp; General and administrative expenses are
estimated to be 0.2% higherdue primarily to increased costs related to
consumer research.&nbsp; The effective tax
rate during the first quarter is estimated to be approximately 32.3%.</font></p>

<p><b><font size="2">REVENUES</font></b></p>



<p><font size="2">&nbsp;&nbsp; Revenues for fiscal 2004 increased to $3,707.5 million,
12.8% over the $3,285.4 million generated for fiscal 2003.&nbsp; Revenues for fiscal 2003 increased 13.8%
from fiscal 2002 revenues of $2,887.1 million.&nbsp;
The increases were primarily attributable to a net increase of 49 and
106 company-owned restaurants in fiscal 2004 and 2003, respectively, and an
increase in comparable store sales.&nbsp;
Revenues for fiscal 2004 increased due to a 10.5% increase in capacity
(as measured by average-weighted sales weeks), of which 2.1% was due to the
additional week in fiscal 2004, and a 2.3% increase in comparable store
sales.&nbsp; Revenues for fiscal 2003
increased due to a 12.3% increase in capacity and a 1.5% increase in comparable
store sales.&nbsp; Menu prices in the
aggregate increased 1.8% and 1.3% in fiscal 2004 and 2003, respectively.&nbsp;
</font> </p>



<hr><P STYLE="page-break-after: always"></P>



<p>&nbsp;</p>



<p><b><font size="2">COSTS
AND EXPENSES </font> </b></p>



<p><font size="2">&nbsp;&nbsp; Cost of sales, as a percent of revenues,
increased 0.2% in fiscal 2004 due to a 0.5% increase in commodity prices for
meat, seafood, dairy and cheese, and a 0.7% unfavorable product mix shift for
poultry and produce, partially offset by a 0.3% decrease in commodity prices
for poultry, a 0.2% favorable product mix shift for meat and seafood, and a
0.5% increase in menu prices.&nbsp; Cost of
sales, as a percent of revenues, decreased 0.2% in fiscal 2003 due primarily to
a 0.9% decrease in commodity prices for meat and cheese, a 0.4% favorable
product mix shift for beverages, and a 0.1% increase in menu prices, partially
offset by a 1.0% unfavorable product mix shift for meat and produce, and a 0.2%
increase in commodity prices for beverages.&nbsp; </font>
</p>



<p><font size="2">&nbsp;&nbsp; Restaurant expenses, as a percent of
revenues, decreased 0.1% in fiscal 2004.&nbsp;
The decrease was primarily due to increased sales leverage from the
additional week in fiscal 2004 and decreases in pre-opening costs due to a
lower number of store openings in fiscal 2004 as compared to fiscal 2003,
partially offset by higher labor and training costs related to new service
initiatives, higher payroll taxes resulting from increased tip reporting, and
increases in utility costs, property taxes, and health, workers compensation
and general liability insurance.&nbsp; Also
contributing to the decrease was a $2.4 million gain as a result of the sale of
four Chili's restaurants to a franchise partner and the sale of one real estate
property.&nbsp; Restaurant expenses, as a
percent of revenues, remained flat in fiscal 2003.&nbsp; Increases in wage rates, payroll taxes, and health and workers
compensation insurance were offset by an approximate $11.0 million expense
related to the settlement of certain California labor matters recorded in
fiscal 2002. </font> </p>



<p><font size="2">&nbsp;&nbsp; Depreciation and amortization increased $17.3
million and $28.1 million in fiscal 2004 and 2003, respectively.&nbsp; The increases were due primarily to new unit
construction and ongoing remodel costs, partially offset by a declining
depreciable asset base for older units.&nbsp;
The increase in fiscal 2003 was also due to the acquisition of
previously leased equipment and certain real estate assets, and restaurants
acquired during fiscal 2002.</font></p>



<p><font size="2">&nbsp;&nbsp; General and administrative expenses increased
$21.5 million and $10.3 million in fiscal 2004 and 2003, respectively.&nbsp; The increases were due primarily to an increase in payroll costs
resulting from an increase in headcount and wage rates.&nbsp; The increase in fiscal 2004 was also
attributable to increased costs related to consumer research.</font></p>



<p><font size="2">&nbsp;&nbsp; Restructure charges and other impairments
recorded during fiscal 2004 primarily relate to the Company's decision to close
thirty restaurants, including six Chili's, five Macaroni Grill, six On The
Border, six Corner Bakery, and seven Big Bowl restaurants.&nbsp; The decision to close the restaurants was
the result of a comprehensive analysis that examined restaurants not meeting
minimum return on investment thresholds and certain other operating performance
criteria, and resulted in a $39.5 million charge. As a result of the seven Big
Bowl closings and a review of the brand's competitive positioning and future
development plans, the earnings forecast was revised and the Company recorded a
goodwill impairment charge of $27.0 million.&nbsp;
In addition, the Company recorded a $7.7 million charge related to the
final disposition of the Cozymel's Coastal Grill (&quot;Cozymel's&quot;)
restaurants.&nbsp; Restructure charges and
other impairments recorded during fiscal 2003 include a $20.2 million charge
related to the Company's decision to discontinue growth and sell all sixteen of
its Cozymel's restaurants, $5.4 million in charges resulting from the decision
to close nine restaurants and to write down the assets of one under-performing
restaurant, and a $4.1 million impairment of intellectual property rights.</font></p>



<p><font size="2">&nbsp; </font></p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">&nbsp;Interest expense decreased $846,000 in fiscal 2004 due
primarily to debt issuance costs related to the convertible debt being fully
amortized in the second quarter of fiscal 2004, lower average outstanding
balances on the senior notes and revolving lines-of-credit, and a $2.4 million
gain related to an interest rate lock settled in May 2004.&nbsp; These decreases
were partially offset by interest expense related to the 5.75% notes issued in
May 2004 (the &quot;Notes&quot;) and a decrease in capitalized interest due to lower
interest rates.&nbsp; Interest expense decreased by $878,000 in fiscal 2003 due
primarily to decreased average borrowings and interest rates on the Company's
revolving lines-of-credit, a decrease in interest expense on the senior notes
due to a scheduled repayment, and an increase in interest capitalization related
to increased new restaurant construction activity.&nbsp; These decreases were
partially offset by the amortization of debt issuance costs and debt discounts
on the Company's convertible debt.</font></p>



<p><font size="2">&nbsp;&nbsp; Other, net increased $1.2 million in fiscal
2004 due primarily to gains from life insurance proceeds recorded in fiscal
2003 totaling $3.5 million, partially offset by a $1.0 million decrease in the
Company's share of losses in equity method investees and an increase in
interest income associated with the investment of proceeds received from the
issuance of the Notes.&nbsp; Other, net
decreased $1.8 million in fiscal 2003 due primarily to the previously mentioned
gains from life insurance proceeds, partially offset by a $1.1 million increase
in the Company's share of losses in equity method investees.&nbsp; </font> </p>



<p><b><font size="2">INCOME TAXES</font></b></p>



<p><font size="2">&nbsp;&nbsp; The Company's effective income tax rate was
35.3%, 33.5%, and 34.1% in fiscal 2004, 2003, and 2002, respectively. The
increase in fiscal 2004 was primarily due to the Big Bowl goodwill impairment
charge, which is not deductible for tax purposes, partially offset by an
increase in the FICA tax credit resulting from increased tip reporting.&nbsp; The decrease in fiscal 2003 is primarily due
to the increase in the FICA tax credit resulting from increased tip reporting
and the non-taxable gains from life insurance proceeds, partially offset by the
non-deductible loss resulting from the impairment of Cozymel's goodwill.&nbsp;
</font> </p>



<p><b><font size="2">IMPACT OF
INFLATION</font></b></p>



<p><font size="2">&nbsp;&nbsp; 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.</font></p>

<p><b><font size="2">LIQUIDITY AND
CAPITAL RESOURCES</font></b></p>



<p><font size="2">&nbsp;&nbsp; Working capital increased to $21.8 million at June 30, 2004 from a
deficit of $143.7 million at June 25, 2003, primarily due to $298.4 million in
cash received from the issuance of the 5.75% Notes in May 2004.&nbsp; Net cash provided by operating activities
increased to $481.2 million for fiscal 2004 from $448.9 million for fiscal 2003
due to increased profitability before restructuring charges and other
impairments, the additional week in fiscal 2004, and the timing of operational
receipts and payments. The Company believes that its various sources of
capital, including availability under existing credit facilities, ability to
raise additional financing, and cash flow from operating activities, are
adequate to finance operations as well as the repayment of current debt
obligations.</font></p>
<hr><P STYLE="page-break-after: always"></P>


<p><font size="2">&nbsp;&nbsp; Payments of the Company's contractual
obligations under outstanding indebtedness, purchase obligations as defined by
the Securities and Exchange Commission, and the expiration of credit facilities
as of June 30, 2004 are as follows:</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=432 colspan=5 valign=top>
  <p align=center><b><font size="2">Payments Due by Period<br>
  (in
  thousands)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=center><font size="2"><br>
  </font>
  <b><u><font size="2">Total</font></u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b><font size="2">Less than<br>
  </font>
  <u><font size="2">1 Year</font></u></b></p>
  </td>
  <td width=78 valign=top>
  <p align=center><b><font size="2">1-3<br>
  </font>
  <u><font size="2">Years</font></u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b><font size="2">3-5<br>
  </font>
  <u><font size="2">Years</font></u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b><font size="2">More than<br>
  </font>
  <u><font size="2">5 Years</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">5.75% notes</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">$298,449</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">$298,449</font></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Convertible
  debt(a)</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">269,233</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">269,233</font></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Senior notes</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">14,851</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">14,851</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Capital
  leases</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">60,952</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">3,390</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">6,808</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">7,157</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">43,597</font></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size="2">Mortgage
  loan obligations</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">38,931</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,344</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">4,733</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">4,349</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">27,505</font></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Operating leases </font> </p>
  </td>
  <td width=84>
  <p align=right><font size="2">881,928</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">104,356</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">199,034</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">174,026</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">404,512</font></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Purchase
  obligations(b)</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">107,905</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">22,169</font></p>
  </td>
  <td width=78>
  <p align=right><font size="2">51,104</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">34,632</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">-</font></p>
  </td>
 </tr>
</table>





<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=432 colspan=5 valign=top>
  <p align=center><b><font size="2"><br>
  Amount of Credit Facility
  Expiration by Period<br>
  (in
  thousands)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=center><b><font size="2">Total<br>
  Commitment</font></b></td>
  <td width=90 valign=top>
  <p align=center><b><font size="2">Less than<br>
  </font>
  <u><font size="2">1 year(d)</font></u></b></p>
  </td>
  <td width=79 valign=top>
  <p align=center><b><font size="2">1-3<br>
  </font>
  <u><font size="2">Years</font></u></b></p>
  </td>
  <td width=93 valign=top>
  <p align=center><b><font size="2">3-5<br>
  </font>
  <u><font size="2">Years</font></u></b></p>
  </td>
  <td width=86 valign=top>
  <p align=center><b><font size="2">More than </font> <u><font size="2"><br>
  5 Years</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p><font size="2">Credit
  facilities(c)</font></p>
  </td>
  <td width=84>
  <p align=right><font size="2">$325,000</font></p>
  </td>
  <td width=90>
  <p align=right><font size="2">$50,000</font></p>
  </td>
  <td width=79>
  <p align=right><font size="2">$275,000</font></p>
  </td>
  <td width=93>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 0</font></p>
  </td>
  <td width=86>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0</font></p>
  </td>
 </tr>
</table>



<p><font size="2">(a)&nbsp; The
convertible debt was issued at a discount representing a yield to maturity of
2.75% per annum.&nbsp; The $269.2 million
balance is the accreted carrying value of the debt at June 30, 2004.&nbsp; The convertible debt will continue to
accrete at 2.75% per annum and, if outstanding to maturity in October 2021, the
obligation will total $431.7 million.</font></p>



<p><font size="2">(b)&nbsp; A
&quot;purchase obligation&quot; is defined as an agreement to purchase goods or services
that is enforceable and legally binding on the Company and that specifies all
significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of the
transaction.&nbsp; The Company's purchase
obligations primarily consist of long-term obligations for the purchase of
telecommunication services and certain non-alcoholic beverages and exclude
agreements that are cancellable without significant penalty.</font></p>



<p><font size="2">(c)&nbsp; There
were no amounts outstanding under the credit facilities as of June 30, 2004.</font></p>



<p><font size="2">(d)&nbsp; The
portion of the credit facilities that expires in less than one year is an
uncommitted obligation giving the lenders the option not to extend the Company
funding.&nbsp; Should any or all of these
obligations not be extended, the Company has adequate capacity under the
committed facility, which does not expire until fiscal 2006.</font></p>



<p><font size="2">&nbsp;&nbsp; Capital expenditures consist of
purchases of land for future restaurant sites, new restaurants under
construction, purchases of new and replacement restaurant furniture and
equipment, and ongoing remodeling programs. Capital expenditures were $305.9
million in fiscal 2004 compared to $326.5 million in fiscal 2003.&nbsp; The Company estimates that its fiscal 2005
capital expenditures will approximate $396.0 million.&nbsp; These capital expenditures will be funded entirely from
operations and existing credit facilities. </font> </p>



<p><font size="2">&nbsp; In May 2004, the Company
issued $300.0 million of 5.75% Notes and received proceeds totaling
approximately $298.4 million prior to debt issuance costs.&nbsp; The Notes require semi-annual interest
payments and mature in June 2014.&nbsp; The
proceeds will primarily be used to repurchase common stock under the Company's
stock repurchase plan.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp; In fiscal 2004, the Company closed one Cozymel's restaurant and
sold the remaining fifteen restaurants.&nbsp;
In connection with the disposition, the Company received cash proceeds
totaling $16.0 million.</font></p>



<hr><P STYLE="page-break-after: always"></P>



<p>&nbsp;</p>



<p><font size="2">&nbsp;&nbsp; In fiscal 2004, the Company's note agreement with the legal
entities (collectively, the &quot;Rockfish Partnership&quot;) owning and developing
Rockfish Seafood Grill was amended and restated,
increasing the amount available under the note to $6.8 million, extending the
maturity date to December 2005, and increasing the interest rate to the prime
rate plus 1.5% (5.5% at June 30, 2004).&nbsp;
The note requires quarterly interest payments until maturity.&nbsp; At June 30, 2004, the Company's note receivable from
Rockfish Partnership totaled $6.8 million.</font></p>



<p><font size="2">&nbsp;&nbsp; In August 2004, the Company sold nine of its Chili's restaurants
to a franchise partner and received cash proceeds totaling $12.8 million.</font></p>



<p><font size="2">&nbsp;&nbsp; In connection with the closing of thirty
restaurants in fiscal 2004, the Company expects to generate cash of
approximately $13.0 million in fiscal 2005 primarily related to the sale of
real estate.</font></p>



<p><font size="2">&nbsp;&nbsp; In April 2004, the Board of Directors authorized an
increase in the stock repurchase plan of $500.0 million, bringing the total to
$1,010.0 million.&nbsp; Pursuant to the
Company's stock repurchase plan, the Company repurchased approximately 9.3
million shares of its common stock for $322.6 million during fiscal 2004.&nbsp; As of June 30, 2004, approximately 27.5
million shares had been repurchased for $714.7 million under the stock
repurchase plan.&nbsp; The Company's stock
repurchase plan will be used to minimize the dilutive impact of a potential
conversion of the convertible debt and stock option exercises.&nbsp; The repurchased common stock is reflected as
a reduction of shareholders' equity.</font></p>



<p><font size="2">&nbsp;&nbsp; In July 2004, the
Company began entering into forward purchase contracts to repurchase its common
stock.&nbsp; The contracts require the
Company to prepay the cost of the common stock at the inception of each
contract and require physical settlement of the common stock at any time prior
to June 29, 2005.&nbsp; The Company also has
the option to extend the maturity date of the contract for a nominal fee.&nbsp; The shares repurchased under the contracts
are intended to be used to offset the potential dilutive impact of the
convertible debt.&nbsp; The Company expects
to enter into forward purchase contracts of approximately $150.0 million during
fiscal 2005.</font></p>



<p><font size="2">&nbsp;&nbsp; The Company is not aware of any other event
or trend that 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 internal cash generating capabilities to
adequately manage the expansion of its business. </font> </p>

<p><b><font size="2">QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></b></p>



<p><font size="2">&nbsp;&nbsp; The Company is exposed to market risk from
changes in interest rates on debt and certain leasing facilities and from
changes in commodity prices.&nbsp; 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.</font></p>

<p><font size="2">&nbsp;&nbsp; The Company is exposed to interest rate risk
on short-term and long-term financial instruments carrying variable interest
rates.&nbsp; The Company's variable rate
financial instruments, consisting of the notional amounts of interest rate
swaps, totaled $129.4 million at June 30, 2004.&nbsp; 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 30, 2004 would be approximately $1.3
million.&nbsp; 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.</font></p>

<hr><P STYLE="page-break-after: always"></P>

<p>&nbsp;</p>

<p><font size="2">&nbsp;&nbsp; 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.&nbsp;
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.</font></p>



<p><font size="2">&nbsp;&nbsp; This market risk discussion contains
forward-looking statements.&nbsp; Actual results
may differ materially from this discussion based upon general market conditions
and changes in domestic and global financial markets.</font></p>

<p><b><font size="2">CRITICAL
ACCOUNTING POLICIES</font></b></p>



<p><font size="2">&nbsp;&nbsp; Our significant accounting policies are
disclosed in Note 1 to our consolidated financial statements.&nbsp; 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.</font></p>



<p><font size="2">&nbsp;&nbsp; <b>Property
and Equipment</b>&nbsp;</font></p>



<p><font size="2">&nbsp;&nbsp; Property and equipment are depreciated on a
straight-line basis over the estimated useful lives of the assets.&nbsp; 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.&nbsp; The Company
periodically reviews the assets for changes in circumstances, which may impact
their useful lives.</font></p>



<p><font size="2">&nbsp;&nbsp; <b>Impairment of Long-Lived Assets</b>&nbsp;
</font>
</p>



<p><font size="2">&nbsp;&nbsp; The Company reviews property and equipment for
impairment when events or circumstances indicate that the carrying amount of a
restaurant's assets may not be recoverable.&nbsp;
The Company tests for impairment using historical cash flows and other
relevant facts and circumstances as the primary basis for its estimates of
future cash flows.&nbsp; This process requires
the use of estimates and assumptions, which are subject to a high degree of
judgment.&nbsp; In addition, at least
annually the Company assesses the recoverability of goodwill and other
intangible assets related to its restaurant concepts.&nbsp; These impairment tests require the Company to estimate fair
values of its restaurant concepts by making assumptions regarding future
profits and cash flows, expected growth rates, terminal values, and other
factors.&nbsp; In the event that these
assumptions change in the future, the Company may be required to record
impairment charges for these assets.</font></p>



<p><font size="2">&nbsp;&nbsp; <b>Financial Instruments</b>&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp; The Company enters into
interest rate swaps to maintain the value of certain fixed-rate debt and lease
obligations.&nbsp; The fair value of these
swaps is estimated using widely accepted valuation methods.&nbsp; The valuation of derivatives involves
considerable judgment, including estimates of future interest rate curves.&nbsp; Changes in those estimates may materially
affect the amounts recognized in the balance sheet for the Company's
derivatives and interest costs in future periods.</font></p>



<p><font size="2">&nbsp;&nbsp; <b>Self-Insurance</b>&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp; The Company is self-insured for certain losses related to
health, general liability and workers' compensation.&nbsp; The Company maintains
stop loss coverage with third party insurers to limit its total exposure.&nbsp;
The self-insurance liability represents an estimate of the ultimate cost of
claims incurred and unpaid as of the balance sheet date.&nbsp; The estimated
liability is not discounted and is established based upon analysis of historical
data and actuarial estimates, and is reviewed by the Company </font> </p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">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. </font> </p>



<p><b><font size="2">FORWARD-LOOKING
STATEMENTS</font></b></p>



<p><font size="2">&nbsp;&nbsp; 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 verbal forward-looking statements made from time to time by
representatives of the Company.&nbsp; 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.&nbsp; 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 &quot;believes,&quot; &quot;anticipates,&quot; &quot;estimates,&quot;
&quot;predicts,&quot; &quot;expects&quot; and similar expressions that convey the uncertainty of
future events or outcomes.&nbsp; An expanded
discussion of some of these risk factors follows.</font></p>



<p><i><font size="2">Competition
may adversely affect the Company's operations and financial results.</font></i></p>



<p><font size="2">&nbsp;&nbsp; The restaurant business is highly competitive
with respect to price, service, restaurant location, nutritional and dietary
trends and food quality, and is often affected by changes in consumer tastes,
economic conditions, population and traffic patterns.&nbsp; 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.&nbsp;
There is active competition for management personnel and for attractive
commercial real estate sites suitable for restaurants.&nbsp; 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.</font></p>



<p><i><font size="2">The Company's sales volumes
generally decrease in winter months.</font></i></p>



<p><font size="2">&nbsp;&nbsp; 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.</font></p>



<p><i><font size="2">Changes in governmental regulation may adversely
affect the Company's ability to open new restaurants and the Company's existing
and future operations.</font></i></p>



<p><font size="2">&nbsp;&nbsp; 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.&nbsp; The Company
generally has not encountered any material 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.</font></p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">&nbsp;&nbsp;&nbsp;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, the Company cannot ensure that there will
not be a material negative effect in the future.&nbsp; 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.</font></p>



<p><font size="2">&nbsp;&nbsp; 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, various family
leave mandates and a variety of other laws enacted, or rules and regulations
promulgated, by federal, state and local governmental authorities that govern
these and other employment matters. The Company expects increases in payroll
expenses as a result of federal, state and local mandated increases in the
minimum wage, and although such increases are not expected to be material, the
Company cannot assure that there will not be material increases in the
future.&nbsp; In addition, the Company's
vendors may be affected by higher minimum wage standards, which may increase
the price of goods and services supplied to the Company.</font></p>



<p><i><font size="2">Inflation may increase the
Company's operating expenses.</font></i></p>



<p><font size="2">&nbsp;&nbsp; The Company has not experienced a significant
overall impact from inflation.&nbsp; 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.&nbsp; 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.</font></p>



<p><i><font size="2">Increased energy costs may
adversely affect the Company's profitability.</font></i></p>



<p><font size="2">&nbsp;&nbsp; The Company's success depends in part on its
ability to absorb increases in utility costs.&nbsp;
Various regions of the United States in which the Company operates
multiple restaurants, particularly California, have experienced significant and
temporary increases in utility prices.&nbsp;
If these increases should recur, they will have an adverse effect on the
Company's profitability.</font></p>



<p><font size="2">&nbsp;&nbsp; </font> <i><font size="2">Successful
mergers, acquisitions, divestitures and other strategic transactions are
important to the future growth and profitability of the Company.</font></i></p>



<p><font size="2">&nbsp;&nbsp; The Company intends to evaluate potential
mergers, acquisitions, joint venture investments, and divestitures as part of
its strategic planning initiative.&nbsp;
These transactions involve various inherent risks, including accurately
assessing the value, future growth potential, strengths, weaknesses, contingent
and other liabilities and potential profitability of acquisition candidates;
the Company's ability to achieve projected economic and operating synergies;
unanticipated changes in business and economic conditions affecting an acquired
business; and the ability of the Company to complete divestitures on acceptable
terms and at or near the prices estimated as attainable by the Company.</font></p>



<p><i><font size="2">If the Company is unable to meet its growth plan, the
Company's profitability in the future may be adversely affected.</font></i></p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">&nbsp;&nbsp; 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.&nbsp; 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.&nbsp; The labor and
materials costs involved vary geographically and are subject to general price
increases.&nbsp; As a result, future capital
expenditure costs of restaurant development may increase, reducing
profitability.&nbsp; 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.</font></p>



<p><i><font size="2">Unfavorable publicity relating to one or more of the
Company's restaurants in a particular brand may taint public perception of the
brand.</font></i></p>



<p><font size="2">&nbsp;&nbsp; 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.&nbsp; In particular, since
the Company depends heavily on the &quot;Chili's&quot; 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 Chili's brand, and consequently on
the Company's business, financial condition, and results of operations.</font></p>



<p><i><font size="2">Other risk factors may adversely
affect the Company's financial performance.</font></i></p>



<p><font size="2">&nbsp;&nbsp; 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.</font></p>


<hr><P STYLE="page-break-after: always"></P>



<p>&nbsp;</p>


<table border=0 cellspacing=0 cellpadding=0 width=715>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p align=center><b><font size="2">BRINKER
  INTERNATIONAL, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p align=center><b><font size="2">CONSOLIDATED
  STATEMENTS OF INCOME</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p align=center><b><font size="2">(In
  thousands, except per share amounts)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fiscal Years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>

  </td>
  <td width=106 valign=top>
  <p align="center"><b><font size="2">&nbsp;</font><u><font size="2">&nbsp;&nbsp;
  2004</font></u></b></p>
  </td>
  <td width=117 valign=top>
  <p align=center><b><u><font size="2">&nbsp;&nbsp; 2003</font></u></b></p>
  </td>
  <td width=150 valign=top>
  <p align=center><b><u><font size="2">&nbsp;&nbsp; 2002</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Revenues</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">$3,707,486</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">$3,285,394</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">$2,887,111</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><font size="2">Operating
  Costs and Expenses:</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; Cost of sales </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">1,024,724</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">900,379</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">796,714</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; Restaurant expenses </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">2,028,569</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">1,798,752</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">1,582,644</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; Depreciation and amortization </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">175,449</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">158,153</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">130,102</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; General and administrative </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">153,231</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">131,763</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">121,420</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; Restructure charges and other impairments</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 74,237</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 29,744</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 8,723</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp; Total operating costs and expenses </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;3,456,210</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;3,018,791</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">&nbsp; </font> <u><font size="2">&nbsp;2,639,603</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Operating
  income </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">251,276</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">266,603</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">247,508</font></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Interest
  expense</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">11,603</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">12,449</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">13,327</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Other,
  net</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,742</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 567</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 2,332&nbsp; </font>
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><font size="2">Income before provision for</font></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; income taxes</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><font size="2">237,931</font></p>
  </td>
  <td width=117 valign=top>
  <p align=right><font size="2">253,587</font></p>
  </td>
  <td width=150 valign=top>
  <p align=right><font size="2">231,849</font></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Provision
  for income taxes </font> </p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 83,970</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 84,951&nbsp;&nbsp;&nbsp;
  </font> </u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 79,136</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp; Net income</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">$&nbsp; 153,961</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">$&nbsp; 168,636</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">$&nbsp; 152,713</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Basic
  net income per share</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.60</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.74</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.56</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">Diluted
  net income per share</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.57</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.70</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.52</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><font size="2">Basic weighted average </font> </p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; shares outstanding</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 96,072</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 97,096</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 97,862</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><font size="2">Diluted weighted average </font> </p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p><font size="2">&nbsp; shares outstanding</font></p>
  </td>
  <td width=106 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 97,939</font></u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 99,135</font></u></p>
  </td>
  <td width=150 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 100,565</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=715 colspan=4 valign=top>
  <p><font size="2">See accompanying notes to
  consolidated financial statements.</font></p>
  </td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>


</font>


<table cellspacing=0 cellpadding=0 width=676 height="1174">
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p align=center><b><font size="2">BRINKER
  INTERNATIONAL, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="1">
  <p align=center><b><font size="2">CONSOLIDATED
  BALANCE SHEETS</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p align=center><b><font size="2">(In
  thousands, except share and per share amounts)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">

  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">

  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align="right"><b><u><font size="2">&nbsp;&nbsp; 2004&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font></u></b></p>
  </td>
  <td width=122 valign=top height="19">
  <p align="right"><b> <u><font size="2">&nbsp;&nbsp;&nbsp;2003&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><b><font size="2">ASSETS</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">Current
  Assets:</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Cash and cash equivalents</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">$&nbsp; 226,762</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">$&nbsp;&nbsp; 33,492</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Accounts receivable </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">37,934</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">36,019</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Inventories</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">38,113</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">24,403</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Prepaid expenses and other</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">74,764</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">73,686</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Deferred income taxes</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 23,347</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 267</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">

  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right>&nbsp;</p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total current assets </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 400,920</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 167,867</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2"><br>
  Property
  and Equipment, at Cost:</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Land</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">283,777</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">269,212</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Buildings and leasehold improvements </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">1,354,671</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">1,245,546</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Furniture and equipment</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">666,415</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">588,815</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Construction-in-progress</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 72,818</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 71,913</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; &nbsp;</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">2,377,681</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">2,175,486</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Less accumulated depreciation and
  amortization </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp; (810,835</font></u><font size="2">)</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp; (675,914</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Net property and equipment </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,566,846</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,499,572</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">

  <p><font size="2">Other
  Assets:</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Goodwill</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">158,068</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">185,068</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Other</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 85,957</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 92,183</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total other assets</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 244,025</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 277,251</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total assets </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">$2,211,791</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">$1,944,690</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">

  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><b><font size="2">LIABILITIES AND SHAREHOLDERS' EQUITY</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">Current
  Liabilities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Current installments of long-term debt </font> </p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">$&nbsp;&nbsp; 18,099</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">$&nbsp;&nbsp; 17,629</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Accounts payable</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">96,795</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">108,068</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Accrued liabilities</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">227,225</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">&nbsp;&nbsp; 177,983</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp; Income taxes payable</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 37,043</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 7,931</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total current liabilities</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 379,162</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp; 311,611</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">Long-term debt, less current
  installments</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">639,291</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">353,785</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">Deferred
  income taxes</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">81,902</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">55,096</font></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top height="19">
  <p><font size="2">Other
  liabilities</font></p>
  </td>
  <td width=102 colspan=2 valign=top height="19">
  <p align=right><font size="2">85,363</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">83,948</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">

  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">Commitments
  and Contingencies (Notes 9 and 15)</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">Shareholders'
  Equity:</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp; Common stock - 250,000,000 authorized
  shares; </font> </p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; $.10 par value; 117,499,541 shares issued
  </font> </p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; and 90,647,745 shares outstanding at</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; June 30, 2004, and 117,499,541 shares
  issued</font></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; and 97,854,952 shares outstanding at June
  25, 2003</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><font size="2">11,750</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">11,750</font></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp; Additional paid-in capital</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><font size="2">357,444</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">344,486</font></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">Accumulated other
  comprehensive income</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><font size="2">737</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 609</font></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp; Retained earnings</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,277,298</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,123,337</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">

  </td>
  <td width=96 valign=top height="19">
  <p align=right><font size="2">1,647,229</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">1,480,182</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp; Less:</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp; Treasury stock, at cost (26,851,796 shares
  at</font></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; June 30, 2004 and 19,644,589 shares at </font> </p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <font size="2">&nbsp;&nbsp; June 25, 2003)</font></td>
  <td width=96 valign=top height="19">
  <p align=right><font size="2">(619,806)</font></td>
  <td width=122 valign=top height="19">
  <p align=right><font size="2">(337,946)</font></td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp; Unearned compensation</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (1,350</font></u><font size="2">)</font></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (1,986</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total shareholders' equity </font> </p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,026,073</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">&nbsp;1,140,250</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top height="19">
  <p><font size="2">&nbsp;&nbsp; Total
  liabilities and shareholders' equity</font></p>
  </td>
  <td width=96 valign=top height="19">
  <p align=right><u><font size="2">$2,211,791</font></u></p>
  </td>
  <td width=122 valign=top height="19">
  <p align=right><u><font size="2">$1,944,690</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=676 colspan=4 valign=top height="19">


  <p><font size="2">See accompanying notes to
  consolidated financial statements.</font></p>
  </td>
 </tr>
 <tr height=0>
  <td width=451 height="19"></td>
  <td width=6 height="19"></td>
  <td width=96 height="19"></td>
  <td width=122 height="19"></td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>


</font>


<table cellspacing=0 cellpadding=0 width=721>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p align=center><b><font size="2">BRINKER INTERNATIONAL, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p align=center><b><font size="2">CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p align=center><b><font size="2">(In thousands)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p align=center>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=114 colspan=2 valign=top>
  <p align="center"><font size="2"><br>
  </font>
  <b><font size="2"><u><br>
  Common Stock<br>
  Shares</u>&nbsp;&nbsp;&nbsp;&nbsp; <u>Amount</u></font></b></p>
  </td>
  <td width=71 valign=top>
  <p align=center><b><font size="2"><br>
  Additional<br>
  Paid-In<br>
  <u>Capital</u></font></b></p>
  </td>
  <td width=75 valign=top>
  <p align=center><b><font size="2">&nbsp;<br>
  <br>
  Retained<br>
  <u>Earnings</u></font></b></p>
  </td>
  <td width=63 valign=top>
  <p align=center><b><font size="2"><br>
  <br>
  Treasury<br>
  <u>Stock</u></font></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b><font size="2">Accumulated<br>
  Other<br>
  Comprehensive<br>
  <u>Income</u></font></b></p>
  </td>
  <td width=82 valign=top>
  <p align=center><b><font size="2">&nbsp;<br>
  <br>
  Unearned<br>
  Compensation</font></b></p>
  </td>
  <td width=69 valign=top>
  <p align=center><u><font size="2"><b><br>
  <br>
  <br>
  Total</b></font></u></p>
  </td>
 </tr>
 <tr>
  <td width=480 colspan=6 valign=top>

  </td>
  <td width=90 valign=top>

  </td>
  <td width=82 valign=top>

  </td>
  <td
  width=69><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Balances
  at June 27, 2001</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">99,509</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">$11,750</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">$
  314,867</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">$
  801,988</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">$(225,334)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; (895)</font></p>
  </td>
  <td width=82 valign=top>
  <p align="right"><font size="2">$&nbsp;&nbsp; (2,089)</font></p>
  </td>
  <td width=69 valign=top>
  <p align="right"><font size="2">$
  900,287</font></p>
  </td>
 </tr>
 <tr>
  <td width=652 colspan=8 valign=top>

  </td>
  <td
  width=69><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Net
  income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">152,713</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">152,713</font></p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p><font size="2">Reclassification
  adjustment</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;to earnings, net of tax</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">895</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 895</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=652 colspan=8 valign=top>

  </td>
  <td
  width=69><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;Comprehensive income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 153,608 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">(5,058)</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">(136,069)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">(136,069)</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">2,890</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">(4,602)</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">42,394</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">37,792</font></p>
  </td>
 </tr>
 <tr>
  <td width=652 colspan=8 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
  <td
  width=69><p>&nbsp;</td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;options exercised</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">18,826</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">18,826</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,594</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">1,594</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 99</font></u></p>
  </td>
  <td width=48 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=71 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 1,100</font></u></p>
  </td>
  <td width=75 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=63 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 1,335</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (1,377</font></u><font size="2">)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,058 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Balances
  at June 26, 2002</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">97,440 </font> </p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">11,750</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">330,191 </font>
  </p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">954,701 </font>
  </p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">(317,674)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(1,872)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">977,096</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Net
  income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">168,636</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">168,636</font></p>
  </td>
 </tr>
 <tr>
  <td width=712 colspan=9 valign=top>
  <p><font size="2">Change
  in fair value</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;of investments, net of tax</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">609</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 609</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;Comprehensive income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 169,245</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">(2,208)</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">(64,477)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">(64,477)</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">2,492</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">(1,748)</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">42,048</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">40,300</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;options exercised</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">13,710</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">13,710</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">2,101</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">2,101</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 131</font></u></p>
  </td>
  <td width=48 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=71 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 2,333</font></u></p>
  </td>
  <td width=75 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=63 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 2,157</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (2,215</font></u><font size="2">)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 2,275</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Balances
  at June 25, 2003</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">97,855 </font> </p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;11,750</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">&nbsp; 344,486 </font> </p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">&nbsp;1,123,337 </font> </p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">&nbsp;(337,946)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 609</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp; (1,986)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">&nbsp;1,140,250</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Net
  income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">153,961</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">153,961</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Change
  in fair value</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;of investments, net of tax</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">128</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 128</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;Comprehensive income</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 154,089</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">(9,326)</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">(322,615)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">(322,615)</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">2,053</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">2,049</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">39,538</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">41,587</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
  <td width=66 valign=top>

  </td>
  <td width=48 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;options exercised</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp; 9,752</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp; 9,752</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=66 valign=top>

  </td>
  <td width=48 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=48 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=75 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,770</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">1,770</font></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 66</font></u></p>
  </td>
  <td width=48 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=71 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 1,157</font></u></p>
  </td>
  <td width=75 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=63 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 1,217</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (1,134</font></u><font size="2">)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,240</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>

  </td>
  <td width=66 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=48 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=71 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=75 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=157 valign=top>
  <p><font size="2">Balances
  at June 30, 2004</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">90,648 </font> </u></p>
  </td>
  <td width=48 valign=top>
  <p align=right><u><font size="2">$11,750</font></u></p>
  </td>
  <td width=71 valign=top>
  <p align=right><u><font size="2">$
  357,444 </font> </u></p>
  </td>
  <td width=75 valign=top>
  <p align=right><u><font size="2">$1,277,298 </font>
  </u></p>
  </td>
  <td width=63 valign=top>
  <p align=right><u><font size="2">$(619,806</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 737</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp; (1,350</font></u><font size="2">)</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">$1,026,073</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=652 colspan=8 valign=top>

  <p><font size="2">See accompanying notes to
  consolidated financial statements.&nbsp; </font> </p>
  </td>
  <td
  width=69><p>&nbsp;</td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<font size="2">

<br clear=all>


</font>


<table border=0 cellspacing=0 cellpadding=0 width=703>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b><font size="2">BRINKER INTERNATIONAL, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b><font size="2">CONSOLIDATED STATEMENTS OF CASH
  FLOWS</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b><font size="2">(In
  thousands)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fiscal Years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>

  </td>
  <td width=90 valign=top>
  <p align="center"><b><font size="2">&nbsp;</font><u><font size="2">&nbsp;&nbsp;
  2004&nbsp; </font> </u></b></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><b><font size="2">&nbsp;</font><u><font size="2">&nbsp;&nbsp;
  2003&nbsp; </font> </u></b></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><b><font size="2">&nbsp;</font><u><font size="2">&nbsp;&nbsp;
  2002&nbsp; </font> </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">Cash Flows from Operating Activities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net income</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$ 153,961</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$ 168,636</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$ 152,713</font></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">Adjustments
  to reconcile net income to net cash</font></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">&nbsp; provided by operating activities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp; Depreciation and amortization</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">175,449</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">158,153</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">130,102</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp; Restructure charges and other
  impairments</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">74,237</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">29,744</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">8,723</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp; Deferred
  income taxes</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">3,329</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">39,194</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">24,166</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp; Amortization of deferred
  costs</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">9,318</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">11,721</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">8,252</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Gain on sale of assets</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(2,452)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">&nbsp;&nbsp; Changes in
  assets and liabilities, excluding</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">effects of acquisitions and dispositions:</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Receivables</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(2,515)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(8,956)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">6,138</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(14,047)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(2,726)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,863</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid
  expenses and other</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,182</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">392</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(3,467)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other
  assets</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(3,146)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">2,474</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">3,640</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current
  income taxes</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">38,864</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">37,314</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">6,172</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts
  payable</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(11,273)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(10,350)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">19,982</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued
  liabilities</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">43,645</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">14,603</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">29,006&nbsp;&nbsp; </font> </p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other
  liabilities</font></p>
  </td>
  <td width=90 valign=top>
  <p align="right"><u><font size="2">&nbsp;&nbsp; 13,671</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 8,672</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 2,418</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
  cash provided by operating activities</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp; 481,223</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp; 448,871</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp; 390,708</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">Cash Flows from Investing Activities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Payments for property and
  equipment</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(305,863)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(326,525)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(371,052)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Proceeds from sale of assets</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">22,235</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Issuance of loan to affiliate</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(2,800)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(4,000)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(1,000)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net repayments of advances to
  affiliates </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 548</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 372</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 708</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Repayment of notes receivable
  from affiliate</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">11,000</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">325</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Investments in equity method
  investee</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(1,750)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(12,322)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Payments for purchases of
  restaurants</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp; (60,491)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Proceeds from sale of affiliate</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 4,000</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
  cash used in investing activities</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;(285,880</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;(320,903</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;(439,832</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p><font size="2">Cash Flows from Financing Activities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net proceeds from issuance of
  debt</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">296,075</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">244,288</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Payments of long-term debt </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(17,120)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(16,890)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(16,908)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Purchases of treasury stock</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;(322,615)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">&nbsp;(64,477)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(136,069)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Proceeds from issuances of
  treasury stock</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">41,587</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">40,300</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">37,792</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net payments on credit
  facilities </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp; (63,500</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp; (83,200</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net cash (used in) provided by
  financing</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; activities</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; (2,073</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;(104,567</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 45,903</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Net change in cash and cash
  equivalents</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">193,270</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">23,401</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">(3,221)</font></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Cash and cash equivalents at
  beginning of year</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 33,492</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 10,091</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 13,312</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p><font size="2">Cash and cash equivalents at end
  of year</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$ 226,762</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp; 33,492</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp; 10,091 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  <p><font size="2">See accompanying notes to
  consolidated financial statements.</font></p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<p>&nbsp;</p>

<b><font size="2"><br clear=all>
</font>
</b>

<p align=center><b><font size="2">BRINKER
INTERNATIONAL, INC.<br>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS</font></b></p>





<p><b><font size="2">1.&nbsp; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</font></b></p>



<p><b><font size="2">(a) Basis of Presentation</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The consolidated financial statements include the accounts
of Brinker International, Inc. and its wholly-owned subsidiaries (the
&quot;Company&quot;). All intercompany accounts and transactions have been eliminated in
consolidation. The Company owns and operates, franchises, and is involved in
the ownership of 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 investees is
included in other, net in the consolidated statements of income.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company has a 52/53 week fiscal year ending
on the last Wednesday in June. Fiscal year 2004, which ended on June 30, 2004,
contained 53 weeks while fiscal years 2003 and 2002, which ended on June 25,
2003 and June 26, 2002, respectively, each contained 52 weeks.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Certain prior year amounts in the
accompanying consolidated financial statements have been reclassified to
conform with fiscal 2004 presentation.&nbsp;
These reclassifications have no effect on the Company's net income or
financial position as previously reported.</font></p>



<p><b><font size="2">(b) Revenue Recognition</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company records revenue from the sale of
food, beverage and alcohol as products are sold.&nbsp; Initial fees received from a franchisee to establish a new
franchise are recognized as income when the Company has performed its
obligations required to assist the franchisee in opening a new franchise
restaurant, which is generally upon opening of such restaurant.&nbsp; Continuing royalties, which are a percentage
of net sales of franchised restaurants, are accrued as income when earned.&nbsp; Proceeds from the sale of gift cards are
recorded as deferred revenue and recognized as income when redeemed by the
holder.&nbsp; </font> </p>



<p><b><font size="2">(c) Financial Instruments</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company's policy is to invest cash in
excess of operating requirements in income&#8209;producing investments.
Income-producing investments with maturities of three months or less at the
time of investment are reflected as cash equivalents. </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company's financial instruments at June
30, 2004 and June 25, 2003 consist of cash equivalents, accounts receivable,
notes receivable, and long-term debt. The fair value of the Company's
convertible debt, based on quoted market prices, totaled approximately $287.0
million and $308.3 million at June 30, 2004 and June 25, 2003,
respectively.&nbsp; The fair value of all
other financial instruments approximates the carrying amounts reported in the
consolidated balance sheets. The following methods were used in estimating the
fair value of financial instruments other than the convertible debt: 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.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company's use of derivative instruments
is primarily related to interest rate swaps, which are entered into with the
intent of hedging exposures to changes in value of certain fixed-rate debt and
lease obligations.&nbsp; The Company records all derivative instruments in the
consolidated balance sheet at fair value.&nbsp; The accounting for the gain or
loss due to changes in fair value of </font> </p>

<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">the derivative instrument depends on whether the derivative
instrument qualifies as a hedge.&nbsp; 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.&nbsp; Amounts
receivable or payable under interest rate swaps related to the hedged 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 7 and 8 for additional discussion of
debt-related agreements and hedging activities.&nbsp; </font> </p>

<p><b><font size="2">&nbsp;(d) Inventories</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Inventories, which consist of food,
beverages, and supplies, are stated at the lower of cost (weighted average cost
method) or market.</font></p>

<p><b><font size="2">&nbsp;(e) Property and Equipment</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Buildings and leasehold improvements are
amortized using the straight&#8209;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 4 to 20 years. Furniture and equipment are depreciated
using the straight&#8209;line method over the estimated useful lives of the
assets, which range from 3 to 10 years.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; Assets held for sale are
reported at the lower of carrying amount or fair value less costs to sell.</font></p>

<p><b><font size="2">&nbsp;(f) Capitalized Interest</font></b></p>

<p><b><font size="2">&nbsp;</font></b><font size="2">&nbsp;&nbsp;&nbsp; Interest costs capitalized during the
construction period of restaurants were approximately $3.4 million, $5.6
million, and $4.5 million during fiscal 2004, 2003, and 2002, respectively.</font></p>



<p><b><font size="2">(g) Advertising</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Advertising costs are expensed as
incurred.&nbsp; Advertising costs were $151.3
million, $135.2 million, and $116.6 million in fiscal 2004, 2003, and 2002,
respectively, and are included in restaurant expenses in the consolidated
statements of income.</font></p>



<p><b><font size="2">(h) Goodwill and Other Intangible Assets</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Intangible assets include both goodwill and
identifiable intangibles arising from the allocation of the purchase prices of
assets acquired.&nbsp; 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.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Goodwill and other intangible assets with
indefinite lives are not subject to amortization but are tested for impairment
annually or more frequently if events or changes in circumstances indicate that
the asset might be impaired.&nbsp; Statement
of Financial Accounting Standards (&quot;SFAS&quot;) No. 142, &quot;Goodwill and Other
Intangible Assets,&quot; requires a two-step process for testing impairment.&nbsp;
First, the fair value of each reporting unit is compared to its carrying value
to determine whether an indication of impairment exists.&nbsp; 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.&nbsp; The amount of impairment for goodwill and other
intangible assets is
</font> </p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">measured as the excess of its carrying value over its fair
value.&nbsp; Intangible assets not subject to amortization consist primarily of
reacquired development rights.&nbsp; Intangible assets with lives restricted by
contractual, legal, or other means are amortized over their useful lives and
consist primarily of intellectual property.&nbsp; Amortization expense is
calculated using the straight-line method over their estimated useful lives of
15 to 20 years.&nbsp; See Note 4 for additional disclosures related to goodwill
and other intangibles.</font></p>



<p><b><font size="2">(i) Self-Insurance Program</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company utilizes a
paid loss self-insurance plan for health, general liability and workers'
compensation coverage.&nbsp; Predetermined
loss limits have been arranged with insurance companies to limit the Company's
per occurrence cash outlay.&nbsp;
Additionally, in fiscal 2002, the Company entered into a guaranteed cost
agreement with an insurance company to eliminate all future general liability
losses for that fiscal year.&nbsp; Accrued
expenses and other liabilities include the estimated incurred but unreported
costs to settle unpaid claims and estimated future claims. </font> </p>



<p><b><font size="2">(j) Income Taxes</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.</font></p>



<p><b><font size="2">(k)
Stock-Based Compensation</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company accounts for its stock based
compensation under the recognition and measurement principles of Accounting
Principles Board Opinion No. 25, &quot;Accounting for Stock Issued to Employees,&quot;
and related interpretations (&quot;APB 25&quot;), and has adopted the disclosure-only
provisions of SFAS No. 123, &quot;Accounting for Stock-Based Compensation.&quot;&nbsp; Under APB 25, no stock-based compensation
cost is reflected in net income for grants of stock options to employees
because the Company grants stock options with an exercise price equal to the
market value of the stock on the date of grant.&nbsp; Had the Company used the fair value based accounting method for
stock compensation expense prescribed by SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the pro-forma amounts
illustrated as follows (in thousands, except per share amounts):</font></p>

<p><font size="2">&nbsp;&nbsp; </font> </p>

<table border=0 cellspacing=0 cellpadding=0 width="655">
 <tr>
  <td width=377 valign=top>

  </td>
  <td width=109 valign=top>
  <p align="center"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align="center"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align="center"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>

  </td>
  <td width=109 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=95 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=74 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Net
  income - as reported </font> </p>
  </td>
  <td width=109 valign=top>
  <p align=right><font size="2">$153,961</font></p>
  </td>
  <td width=95 valign=top>
  <p align=right><font size="2">$168,636</font></p>
  </td>
  <td width=74 valign=top>
  <p align=right><font size="2">$152,713 </font> </p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Add:
  Reported stock-based compensation expense, net of taxes</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right><font size="2"><br>
  1,756</font></p>
  </td>
  <td width=95 valign=top>
  <p align=right><font size="2"><br>
  1,863</font></p>
  </td>
  <td width=74 valign=top>
  <p align=right><font size="2"><br>
  2,285</font></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Deduct: Fair value based
  compensation expense, net of taxes</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right>&nbsp;</p>
  <p align=right><u><font size="2">&nbsp;(18,663</font></u><font size="2">)</font></p>
  </td>
  <td width=95 valign=top>
  <p align=right>&nbsp;</p>
  <p align=right><u><font size="2">&nbsp;(17,697</font></u><font size="2">)</font></p>
  </td>
  <td width=74 valign=top>
  <p align=right>&nbsp;</p>
  <p align=right><u><font size="2">&nbsp;(17,195</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Net
  income - pro forma</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right><u><font size="2">$137,054</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align=right><u><font size="2">$152,802</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align=right><font size="2">&nbsp;</font><u><font size="2">$137,803 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>

  </td>
  <td width=109 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=95 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=74 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Earnings
  per share:</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=95 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=74 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Basic
  - as reported </font> </p>
  </td>
  <td width=109 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.60</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.74</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.56</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Basic
  - pro forma</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.43</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.57</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.41</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>

  </td>
  <td width=109 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=95 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=74 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Diluted
  - as reported</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.57</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.70</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.52 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=377 valign=top>
  <p><font size="2">Diluted
  - pro forma</font></p>
  </td>
  <td width=109 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.40</font></u></p>
  </td>
  <td width=95 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.54</font></u></p>
  </td>
  <td width=74 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 1.35 </font> </u></p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<font size="2">

<br
clear=all>


</font>


<p><font size="2">&nbsp;&nbsp;&nbsp; The weighted average fair
value of option grants was $11.38, $10.76, and $10.66 during fiscal 2004, 2003,
and 2002, respectively.&nbsp; The fair value
is estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions:</font></p>



<table border=0 cellspacing=0 cellpadding=0 width="616">
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=79 valign=top>
  <p align="center"><font size="2">&nbsp;</font><u><font size="2">&nbsp;2004</font></u></p>
  </td>
  <td width=87 valign=top>
  <p align="center"><font size="2">&nbsp;</font><u><font size="2">&nbsp;2003</font></u></p>
  </td>
  <td width=89 valign=top>
  <p align="center"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=79 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=87 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=89 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p><font size="2">Expected
  volatility</font></p>
  </td>
  <td width=79 valign=top>
  <p align=right><font size="2">33.0%</font></p>
  </td>
  <td width=87 valign=top>
  <p align=right><font size="2">34.0%</font></p>
  </td>
  <td width=89 valign=top>
  <p align=right><font size="2">35.5%</font></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p><font size="2">Risk-free
  interest rate</font></p>
  </td>
  <td width=79 valign=top>
  <p align=right><font size="2">3.4%</font></p>
  </td>
  <td width=87 valign=top>
  <p align=right><font size="2">3.0%</font></p>
  </td>
  <td width=89 valign=top>
  <p align=right><font size="2">4.1%</font></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p><font size="2">Expected
  lives</font></p>
  </td>
  <td width=79 valign=top>
  <p align=right><font size="2">5 years</font></p>
  </td>
  <td width=87 valign=top>
  <p align=right><font size="2">5 years</font></p>
  </td>
  <td width=89 valign=top>
  <p align=right><font size="2">5 years</font></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p><font size="2">Dividend
  yield</font></p>
  </td>
  <td width=79 valign=top>
  <p align=right><font size="2">0.0%</font></p>
  </td>
  <td width=87 valign=top>
  <p align=right><font size="2">0.0%</font></p>
  </td>
  <td width=89 valign=top>
  <p align=right><font size="2">0.0%</font></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.</font></p>



<p><b><font size="2">(l)
Comprehensive Income</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; Fiscal 2004 and 2003 comprehensive income consists of net income and the unrealized portion of changes in the fair value of the Company's investments in mutual funds.&nbsp; Fiscal 2002 comprehensive income consists of net income and the effective unrealized portion of changes in the fair value of the Company's cash flow hedges.</font></p>

<p><b><font size="2">(m)
Net Income Per Share</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; 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.&nbsp; 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.&nbsp; The Company had approximately 700,000, 1.4 million, and 1.9
million stock options outstanding at June 30, 2004, June 25, 2003, and June 26,
2002, respectively, that were not included in the dilutive earnings per share
calculation because the effect would have been antidilutive.&nbsp; 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.</font></p>



<p><b><font size="2">(n) Segment
Reporting</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; 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. </font> </p>

<p><b><font size="2">(o)
Use of Estimates</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.</font></p>



<hr><P STYLE="page-break-after: always"></P>

<p><b><font size="2">2.&nbsp; BUSINESS COMBINATION AND INVESTMENT IN EQUITY METHOD INVESTEE</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In November 2001, the Company acquired from
its franchise partner, Sydran Group, LLC and Sydran Food Services III, L.P.,
thirty-nine Chili's restaurants for approximately $53.9 million.&nbsp; 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.&nbsp; The
operations of the restaurants are included in the Company's consolidated
results of operations from the date of the acquisition. &nbsp;&nbsp;&nbsp; The pro-forma effect of this acquisition on the Company's
historical results of operations is not material.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In July 2001, the Company made a $12.3
million capital contribution to Rockfish Partnership in exchange for an
approximate 40% ownership interest.&nbsp; In
October 2002, the Company made an additional $1.8 million capital contribution
to Rockfish Partnership increasing its ownership interest to approximately 43%.</font></p>



<p><b><font size="2">3.&nbsp; RESTRUCTURE CHARGES AND OTHER IMPAIRMENTS </font> </b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal
2004, the Company recorded a $39.5 million charge resulting from the decision
to close thirty restaurants, including six Chili's, five Macaroni Grill, six On
The Border, six Corner Bakery, and seven Big Bowl restaurants.&nbsp; The decision to close the restaurants was
the result of a comprehensive analysis that examined restaurants not meeting
minimum return on investment thresholds and certain other operating performance
criteria.&nbsp; The charge consists of
long-lived asset impairments totaling $31.2 million, lease obligation charges
totaling $6.2 million, and the write-off of inventory and other supplies
totaling $2.1 million. The remaining carrying values of the long-lived assets
associated with the closed stores totaled approximately $13.0 million at June
30, 2004.&nbsp; In addition, the Company made
lease payments related to the closed stores totaling $800,000 during fiscal
2004, reducing the lease obligation included in accrued liabilities to $5.4
million at June 30, 2004.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; As a result
of the seven Big Bowl closings and a review of the brand's competitive
positioning and future development plans, the earnings forecast was revised and
the Company recorded a goodwill impairment charge of $27.0 million.&nbsp; The fair value of Big Bowl was estimated
using the present value of expected future cash flows.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal
2003, the Company evaluated the results of its efforts to reposition
Cozymel's.&nbsp; Based on the performance of
recent openings, the Company decided the brand no longer met the growth
characteristics needed to remain in the Company's portfolio.&nbsp; As a result, the Company entered into
negotiations during the fourth quarter of fiscal 2003 to sell all sixteen of
its Cozymel's restaurants.&nbsp; The decision
to discontinue growth and sell the brand required the Company to record asset
impairment charges totaling $20.2 million ($13.7 million for property and
equipment and $6.5 million for the remaining carrying value of goodwill).&nbsp; The carrying values of the assets to be sold
were approximately $23.8 million as of June 25, 2003 and consisted primarily of
property and equipment.&nbsp; In fiscal 2004,
the Company closed one Cozymel's restaurant and finalized the sale of the
remaining fifteen restaurants.&nbsp; In
connection with the disposition, the Company received cash proceeds totaling
$16.0 million and recorded an additional impairment charge totaling $7.7
million.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal
2003, the Company recorded a $5.4 million charge for long-lived asset
impairments and exit costs resulting from the decision to close nine
restaurants and to write down the assets of one under-performing
restaurant.&nbsp; Substantially all of the
assets were fully impaired.</font></p>





<hr><P STYLE="page-break-after: always"></P>


<p><font size="2">&nbsp;&nbsp; In fiscal
2003, the Company closed one of the two remaining PIZZAAHHH! restaurant
locations and cancelled all future development plans for the concept.&nbsp; As a result of this decision, a $4.1 million
impairment charge was recorded, representing the remaining net book value of
the intellectual property rights associated with the PIZZAAHHH! concept.&nbsp;
</font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal
2002, the Company recorded an approximate $8.7 million charge to reduce its
notes receivable from Eatzi's Corporation to their net realizable value (see
Note 14 for additional discussion).&nbsp;&nbsp; </font> </p>



<p><b><font size="2">4.&nbsp; GOODWILL AND OTHER INTANGIBLES</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The changes in the carrying amount of
goodwill for the fiscal years ended June 30, 2004 and June 25, 2003 are as
follows (in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=480 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><u><font size="2">&nbsp;
  2003</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=84 valign=top>

  </td>
  <td width=78 valign=top>

  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left><font size="2">Balance
  at beginning of year</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$185,068</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">$193,899</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left><font size="2">Impairment
  of goodwill (see Note 3)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">(27,000)</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">&nbsp; (6,501)</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left><font size="2">Purchase
  allocation adjustments</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp; (2,330</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left><font size="2">Balance
  at end of year</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$158,068</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$185,068</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; The gross carrying amount of
intellectual property subject to amortization totaled $1.2 million at June 30,
2004 and June 25, 2003.&nbsp; Accumulated
amortization related to these intangible assets totaled approximately $359,000
and $308,000 at June 30, 2004 and June 25, 2003, respectively.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The carrying amount of reacquired
development rights not subject to amortization totaled $4.4 million at June 30,
2004 and June 25, 2003.&nbsp; </font> </p>



<p><b><font size="2">5.&nbsp; ACCRUED AND OTHER LIABILITIES</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Accrued liabilities consist of the following
(in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Payroll</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$ 84,776</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">$ 73,916</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Gift
  cards</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">43,550</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">36,013</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Sales
  tax</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">28,254</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">20,606</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Property
  tax</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">21,404</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">14,901</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Other</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 49,241</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp; 32,547</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$227,225</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$177,983</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; Other liabilities consist of the following
(in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>

  </td>
  <td width=78 valign=top>

  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Retirement
  plan (see Note 12)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$ 38,473</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">$ 33,086</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">Other</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 46,890</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp; 50,862</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  85,363</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$
  83,948</font></u></p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>

<p><b><font size="2">6.&nbsp; INCOME TAXES</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The provision for income taxes consists of
the following (in thousands):</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=649 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=397 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=4 valign=top>
  <p><font size="2">Current income tax expense:</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp; Federal</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  65,977</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  36,761</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  47,228</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp; State</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">12,885</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">8,107</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">6,819</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">Foreign</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 1,098</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 889</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 923 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp;&nbsp; Total current income tax expense</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 79,960</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 45,757</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 54,970 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=649 colspan=4 valign=top>
  <p><font size="2">Deferred
  income tax expense:</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp; Federal</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">3,534</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">37,279</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">22,088</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp; State</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 476</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 1,915</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 2,078</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">&nbsp;&nbsp; Total deferred income tax expense </font> </p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 4,010</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 39,194</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 24,166</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  83,970</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  84,951</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$ 79,136</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=397 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=643 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">Income
  tax expense at statutory rate</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  83,275</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  88,755</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">$
  81,147</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">FICA
  tax credit</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">(17,506)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">(13,236)</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">(9,002)</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">State
  income taxes, net of Federal benefit</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">8,685</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">6,514</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">5,783 </font>
  </p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">Goodwill
  impairment</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">9,450</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">2,275</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>
  <p><font size="2">Other</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 66</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 643</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 1,208</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=397 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  83,970</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  84,951</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$
  79,136</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; The income tax effects of temporary
differences that give rise to significant portions of deferred income tax
assets and liabilities as of June 30, 2004 and June 25, 2003 are as follows (in
thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=481 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=643 colspan=3 valign=top>
  <p><font size="2">Deferred
  income tax assets:</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Restructuring charges and other impairments</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$
  17,399</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">$&nbsp; 5,149</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Employee benefit plans</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">13,863</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">13,387</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Leasing transactions</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">8,912</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">8,902</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Insurance reserves</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">&nbsp; 4,717</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">&nbsp; 3,966</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Other, net</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 22,513</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp; 14,716</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp;&nbsp; Total deferred income tax assets</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 67,404</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp; 46,120</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=643 colspan=3 valign=top>

  </td>
 </tr>
 <tr>
  <td width=643 colspan=3 valign=top>

  </td>
 </tr>
 <tr>
  <td width=643 colspan=3 valign=top>
  <p><font size="2">Deferred
  income tax liabilities:</font></p>
  </td>
 </tr>
 <tr>
  <td width=643 colspan=3 valign=top>
  <p><font size="2">&nbsp; Depreciation and capitalized interest</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp;&nbsp; on property and equipment</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">88,509</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">72,390</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp;Prepaid
  expenses</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">10,456</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">9,969</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Goodwill and other amortization</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">11,887</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">9,106</font></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp; Other, net</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 15,107</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 9,484</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp;&nbsp; Total deferred income tax liabilities</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;125,959</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;100,949</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=481 valign=top>
  <p><font size="2">&nbsp;&nbsp; Net deferred income tax liability</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$
  58,555</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$
  54,829</font></u></p>
  </td>
 </tr>
</table>





<hr><P STYLE="page-break-after: always"></P>

<p><b><font size="2">7.&nbsp; DEBT</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Long-term
debt consists of the following (in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>

  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">5.75%
  notes</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$298,449</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Convertible
  debt</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">269,233</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">262,086</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Senior
  notes</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">14,851</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">30,969</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Capital
  lease obligations (see Note 9)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">35,926</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">37,004</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Mortgage
  loan obligations</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;
  38,931</font></u></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">&nbsp;
  41,355</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">657,390</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">371,414</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Less
  current installments</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;(18,099</font></u><font size="2">)</font></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">&nbsp;(17,629</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$639,291</font></u></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">$353,785</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; In May 2004, the Company issued $300.0 million of
5.75% Notes and received proceeds totaling approximately $298.4 million prior
to debt issuance costs.&nbsp; The Notes require
semi-annual interest payments and mature in June 2014.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In October 2001, the Company issued $431.7 million
of zero coupon convertible senior debentures (the &quot;Debentures&quot;), maturing on
October 10, 2021, and received proceeds totaling approximately $250.0 million
prior to debt issuance costs.&nbsp; The
Debentures require no interest payments and were issued at a discount
representing a yield to maturity of 2.75% per annum.&nbsp; The Debentures are redeemable at the Company's option beginning
on October 10, 2004.&nbsp; If redeemed by the
Company, the holders of the Debentures may elect to receive payment in cash or
common stock.&nbsp; The holders may require
the Company to redeem the Debentures on October 10, 2005, 2011 or 2016, and in
certain other circumstances.&nbsp; If the holders
exercise their redemption rights, the Company may choose to pay in cash, common
stock, or a combination of the two.&nbsp; In
addition, each $1,000 Debenture is convertible into 18.08 shares (7.8 million
shares in total) of the Company's common stock if the stock's market price
exceeds 120% of the accreted conversion price for at least 20 trading days
during the first 30 trading days of each quarter, 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.&nbsp; The market price of the
Company's common stock has not exceeded 120% of the accreted conversion price
for any quarter, including the first quarter of fiscal 2005, since the issuance
of the Debentures.&nbsp; The conversion
trigger price for the Company's second quarter of fiscal 2005 is $41.81.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The $14.9 million of unsecured senior notes
bear interest at an annual rate of 7.8%. Interest is payable semi-annually and
the remaining principal is due in fiscal 2005.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company has credit facilities
aggregating $325.0 million at June 30, 2004. A revolving credit facility of
$275.0 million bears interest at LIBOR (1.61% at June 30, 2004) plus a maximum
of 1.375% (0.65% at June 30, 2004) and expires in fiscal 2006. The remaining
credit facility is uncommitted and bears interest based upon the lower of the
banks' &quot;Base&quot; rate, certificate of deposit rate, negotiated rate, or LIBOR rate
plus 0.375%, and expires in fiscal 2005. Unused credit facilities available to
the Company totaled $325.0 million at June 30, 2004. </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The mortgage loan obligations require
monthly principal and interest payments, mature on various dates through March
2020, and bear interest at rates ranging from 8.44% to 10.75% per year.&nbsp; The obligations are collateralized by the
underlying restaurant properties. </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company's debt agreements contain
various restrictive covenants that, among other things, require the maintenance
of certain fixed charge, net worth, and leverage ratios.&nbsp; The Company is currently in compliance with
all covenants.</font></p>

<hr><P STYLE="page-break-after: always"></P>


<p><font size="2">&nbsp;&nbsp;&nbsp; Excluding capital lease
obligations (see Note 9), the Company's long-term debt maturities for the five
years following June 30, 2004 are as follows (in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Fiscal<br>
  </font>
  <u><font size="2">&nbsp;Year </font> </u></p>
  </td>
  <td width=84 valign=top>

  </td>
  <td width=85 valign=top>

  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">2005</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">$ 17,195</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">2006</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">2,431</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">2007</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">2,302</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">2008</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">2,139</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">2009</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><font size="2">2,210</font></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p><font size="2">Thereafter</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">&nbsp;595,187 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><u><font size="2">$621,464</font></u></p>
  </td>
 </tr>
</table>



<p><b><font size="2">8.&nbsp; DERIVATIVE FINANCIAL INSTRUMENTS</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company entered into two interest rate
swaps in April 2000 with a total notional value of $14.2 million at June 30,
2004.&nbsp; These fair value hedges change
the fixed-rate interest on the senior notes to variable-rate interest.&nbsp; 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 (1.61% at June 30, 2004) plus 0.530% for one of the swaps and
180-Day LIBOR (1.94% at June 30, 2004) plus 0.395% for the other swap, in
arrears, compounded at three-month intervals.&nbsp;
The Company receives semi-annually the fixed interest rate of 7.8% on
the senior notes. The estimated fair values of these agreements at June 30,
2004 and June 25, 2003 were approximately $700,000 and $2.5 million,
respectively, which are included in other assets in the Company's consolidated
balance sheets. The Company's interest rate swap hedges meet the criteria for
the &quot;short-cut method&quot; under SFAS No. 133, &quot;Accounting for Derivative
Instruments and Hedging Activities.&quot;&nbsp;
Accordingly, changes in the fair value of the swaps are offset by a like
adjustment to the carrying value of the debt and no hedge ineffectiveness is
assumed.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company entered into three interest rate
swaps in December 2001 with a total notional value of $115.2 million at June
30, 2004.&nbsp; 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.&nbsp; Under the terms of the hedges
(which expire in fiscal 2018), the Company pays monthly a variable rate based
on 30-Day LIBOR (1.37% at June 30, 2004) plus 1.26%.&nbsp; The Company receives monthly the fixed interest rate of 7.156% on
the lease.&nbsp; The estimated fair values of
these agreements at June 30, 2004 and June 25, 2003 were assets of
approximately $7.7 million and $21.4 million, respectively.&nbsp; There was no hedge ineffectiveness during
fiscal 2004, 2003, or 2002.&nbsp; Changes in
the fair value of the swaps are recorded in other assets with a like adjustment
in other liabilities.</font></p>

<p><b><font size="2">&nbsp;9.&nbsp; LEASES</font></b></p>



<p><b><font size="2">(a) Capital Leases</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company leases certain buildings under
capital leases. The asset values of $27.5 million at June 30, 2004 and June 25,
2003, and the related accumulated amortization of $9.5 million and $8.2 million
at June 30, 2004 and June 25, 2003, respectively, are included in property and
equipment. Amortization of assets under capital leases is included in
depreciation and amortization expense.</font></p>



<p><b><font size="2">(b) Operating Leases</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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, in some
cases, have provisions for contingent rent based upon a percentage of gross
sales, as defined in the leases.&nbsp; Rent
expense for fiscal 2004, 2003, and 2002 was $118.2 million, $107.2 million, and
$100.4 million, respectively.&nbsp;
Contingent rent included in rent expense for fiscal 2004, 2003, and 2002
was $11.6 million, $10.3 million, and $9.7 million, respectively. </font> </p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal 1998 and 2000, the Company entered
into equipment leasing facilities totaling $55.0 million and $25.0 million,
respectively.&nbsp; The leasing facilities
were accounted for as operating leases and had expiration dates of 2004 and
2006, respectively.&nbsp; The Company
guaranteed a residual value of approximately 87% of the total amount funded
under the leases.&nbsp; 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.&nbsp; In February
2002, the Company acquired the remaining assets leased under the equipment
leasing facilities for $36.2 million and terminated the lease arrangements.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal 2000, the Company entered into a
$50.0 million real estate leasing facility.&nbsp;
During fiscal 2001, the Company increased the facility to $75.0
million.&nbsp; The real estate facility was
accounted for as an operating lease and was to expire in fiscal 2007.&nbsp; The Company guaranteed a residual value of
approximately 87% of the total amount funded under the lease.&nbsp; The Company had the option to purchase all
of the leased real estate for an amount equal to the unamortized lease balance.&nbsp; 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.</font></p>



<p><b><font size="2">(c) Commitments</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; At June 30, 2004, future minimum lease
payments on capital and operating leases were as follows (in thousands):</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=655 colspan=3 valign=top>

  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">Fiscal<br>
  </font>
  <u><font size="2">&nbsp;Year </font> </u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">Capital<br>
  </font>
  <u><font size="2">&nbsp;Leases&nbsp; </font>
  </u></p>
  </td>
  <td width=114 valign=top align="right">
  <p><font size="2">Operating<br>
  </font>
  <u><font size="2">&nbsp;Leases&nbsp;&nbsp;&nbsp; </font>
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=114 valign=top align="right">
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">2005</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp; 3,390</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><font size="2">&nbsp;$ 104,356</font></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">2006</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">&nbsp; 3,361</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><font size="2">101,778</font></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">2007</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">&nbsp;3,447</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><font size="2">97,256</font></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">2008</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">3,534</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><font size="2">91,241</font></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">2009</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">3,623</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><font size="2">82,785</font></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">Thereafter</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u><font size="2">&nbsp; 43,597</font></u></p>
  </td>
  <td width=114 valign=top>
  <p align=right><u><font size="2">&nbsp; 404,512</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">&nbsp; Total minimum lease payments</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">60,952</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right><u><font size="2">$
  881,928</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">&nbsp; Imputed interest (average rate of 7%)</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u><font size="2">&nbsp;(25,026</font></u><font size="2">)</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">&nbsp; Present value of minimum lease payments</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">35,926</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p><font size="2">&nbsp; Less current installments</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; (904</font></u><font size="2">)</font></p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=right><u><font size="2">$
  35,022</font></u></p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; At June 30, 2004, 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.</font></p>



<p><b><font size="2">10. STOCK OPTION PLANS</font></b></p>



<p><b><font size="2">(a) 1983, 1992, and 1998 Employee Incentive Stock
Option Plans</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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. </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In October 1993, the 1983 Incentive Stock
Option Plan (the &quot;1983 Plan&quot;) expired. Consequently, no options were granted
under the 1983 Plan subsequent to fiscal 1993. Options granted prior to the
expiration of the 1983 Plan were exercisable through April 2003.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In October 1998, the Stock Option and
Incentive Plan (the &quot;1998 Plan&quot;) was adopted and no additional options were
granted under the 1992 Incentive Stock Option Plan (the &quot;1992 Plan&quot;).&nbsp; Options granted under the 1992 Plan prior to
the adoption of the 1998 Plan remain exercisable through March 2008.</font></p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">&nbsp;&nbsp;&nbsp; Transactions during fiscal 2004, 2003, and
2002 were as follows (in thousands, except option prices):</font></p>



<table border=0 cellspacing=0 cellpadding=0 width=667>
 <tr>
  <td width=217 colspan=2 valign=top>

  </td>
  <td width=198 colspan=5 valign=top>
  <p align=center><font size="2">Number of<br>
  Company Options</font></p>
  </td>
  <td width=18 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=234 colspan=5 valign=top>
  <p align=center><font size="2">Weighted
  Average Share<br>
  Exercise Price</font></p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>

  </td>
  <td width=60 colspan=2 valign=top>
  <p align="center"><u><font size="2">&nbsp;2004 </font> </u></p>
  </td>
  <td width=66 valign=top>
  <p align="center"><font size="2">&nbsp;</font><u><font size="2">&nbsp;2003 </font> </u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align="center"><font size="2">&nbsp;</font><u><font size="2">&nbsp;2002 </font> </u></p>
  </td>
  <td width=18 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align="center"><font size="2">&nbsp; </font>
  <u><font size="2">&nbsp;2004 </font> </u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align="center"><font size="2">&nbsp;<u>&nbsp;2003 </u>&nbsp;</font></p>
  </td>
  <td width=84 valign=top>
  <p align="center"><font size="2">&nbsp;&nbsp; </font>
  <u><font size="2">&nbsp;2002 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p><font size="2">Options outstanding at</font></p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">&nbsp; beginning
  of year</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><font size="2">9,611</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">9,944</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">10,759</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><font size="2">$24.07</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">$20.50</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$16.91 </font> </p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">Granted</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><font size="2">2,879</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">2,639</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">2,512</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><font size="2">32.53</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">30.68</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">27.90</font></p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">Exercised</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><font size="2">(1,978)</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">(2,477)</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">(2,892)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><font size="2">20.54</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><font size="2">16.05</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">13.09</font></p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">&nbsp;Forfeited</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;
  (653</font></u><font size="2">)</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;
  (495</font></u><font size="2">)</font></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;
  (435</font></u><font size="2">)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;29.08</font></u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;27.54</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;23.38 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p><font size="2">Options outstanding at </font> </p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">&nbsp; end
  of year</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;9,859</font></u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;9,611</font></u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;9,944</font></u></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><u><font size="2">$26.92</font></u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">$24.07</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$20.50 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p><font size="2">Options exercisable at </font> </p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p><font size="2">&nbsp; end
  of year</font></p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;3,918</font></u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;3,809</font></u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;4,091</font></u></p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right><u><font size="2">$20.64</font></u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u><font size="2">$16.69</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$13.38</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=127 valign=top>

  </td>
  <td width=329 colspan=8 valign=top>
  <p><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Options Outstanding&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></p>
  </td>
  <td width=211 colspan=4 valign=top>
  <p><u><font size="2">&nbsp;
  Options Exercisable&nbsp; </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p align=center><font size="2"><br>
  <br>
  Range of<br>
  exercise<br>
  </font>
  <u><font size="2">prices</font></u></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2"><br>
  <br>
  <br>
  Number
  of<br>
  </font>
  <u><font size="2">options</font></u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><font size="2">Weighted<br>
  average<br>
  remaining<br>
  contractual<br>
  </font>
  <u><font size="2">life (years)</font></u></p>
  </td>
  <td width=95 colspan=3 valign=top>
  <p align=center><font size="2"><br>
  Weighted<br>
  average<br>
  exercise<br>
  </font>
  <u><font size="2">price</font></u></p>
  </td>
  <td width=121 colspan=2 valign=top>
  <p align=center><font size="2"><br>
  <br>
  <br>
  Number of<br>
  </font>
  <u><font size="2">options</font></u></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2"><br>
  Weighted<br>
  average<br>
  exercise<br>
  </font>
  <u><font size="2">price</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p><font size="2">$ 7.42-$11.58</font></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2">&nbsp;&nbsp; 655</font></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><font size="2">2.56</font></p>
  </td>
  <td width=95 colspan=3 valign=top align="center">
  <p><font size="2">$ 8.52</font></p>
  </td>
  <td width=121 colspan=2 valign=top>
  <p align=center><font size="2">&nbsp;&nbsp; 655</font></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2">$ 8.52</font></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p><font size="2">$13.58-$18.67</font></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2">1,377</font></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><font size="2">4.90</font></p>
  </td>
  <td width=95 colspan=3 valign=top align="center">
  <p><font size="2">17.09</font></p>
  </td>
  <td width=121 colspan=2 valign=top>
  <p align=center><font size="2">1,377</font></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><font size="2">&nbsp;17.09</font></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p><font size="2">$25.50-$37.25</font></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><u><font size="2">7,827</font></u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><u><font size="2">8.22</font></u></p>
  </td>
  <td width=95 colspan=3 valign=top align="center">
  <p><u><font size="2">&nbsp;30.19</font></u></p>
  </td>
  <td width=121 colspan=2 valign=top>
  <p align=center><u><font size="2">1,886</font></u></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><u><font size="2">&nbsp;27.45</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>

  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><u><font size="2">9,859</font></u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><u><font size="2">7.38</font></u></p>
  </td>
  <td width=95 colspan=3 valign=top align="center">
  <p><u><font size="2">$26.92</font></u></p>
  </td>
  <td width=121 colspan=2 valign=top>
  <p align=center><u><font size="2">3,918</font></u></p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><u><font size="2">$20.64</font></u></p>
  </td>
 </tr>
 <tr height=0>
  <td width=127></td>
  <td width=90></td>
  <td width=1></td>
  <td width=60></td>
  <td width=66></td>
  <td width=18></td>
  <td width=54></td>
  <td width=18></td>
  <td width=23></td>
  <td width=55></td>
  <td width=66></td>
  <td width=6></td>
  <td width=84></td>
 </tr>
</table>



<p><b><font size="2">(b) 1991
and 1999 Non-Employee Stock Option Plans</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In accordance with the Stock Option Plan for
Non-Employee Directors and Consultants adopted in May 1991 (the &quot;1991 Plan&quot;),
options to purchase 881,250 shares of Company common stock were authorized for
grant. In fiscal 2000, the 1991 Plan 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.&nbsp; The authority to issue the remaining stock
options under the 1991 Plan has been terminated.&nbsp; 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. </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Transactions during fiscal 2004, 2003, and
2002 were as follows (in thousands, except option prices):</font></p>



<table cellspacing=0 cellpadding=0>
 <tr>
  <td width=235 valign=top>

  </td>
  <td width=174 colspan=3 valign=top>
  <p align=center><font size="2">Number
  of<br>
  Company Options</font></p>
  </td>
  <td width=240 colspan=3 valign=top>
  <p align="center"><font size="2">Weighted Average Share<br>
  Exercise Price</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><u><font size="2">2004</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">2003</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">&nbsp;</font><u><font size="2">2002</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align="right"><u><font size="2">&nbsp;2004</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><font size="2">&nbsp; </font> <u><font size="2">&nbsp;2003</font></u></p>
  </td>
  <td width=66 valign=top>
  <p align="right"><u><font size="2">&nbsp;2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p><font size="2">Options
  outstanding at</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">&nbsp; beginning of year</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="2">440</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">353</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">351</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$21.21</font></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><font size="2">&nbsp; $17.79</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">$13.96</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">Granted</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="2">83</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">102</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">82</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">32.80</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">32.18</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">30.06</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">Exercised</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="2">(35)</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">(15)</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="2">(70)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">10.60</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">15.36</font></p>
  </td>
  <td width=66 valign=top>
  <p align=right><font size="2">11.24</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">Forfeited</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;(10</font></u><font size="2">)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; - </font> </u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">&nbsp;30.06</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p><font size="2">Options
  outstanding at</font></p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">&nbsp; end of year</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><u><font size="2">&nbsp;488</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;440</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;353 </font> </u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$23.90</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$21.21</font></u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">$17.79</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>

  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p><font size="2">Options
  exercisable at </font> </p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p><font size="2">&nbsp; end of year</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><u><font size="2">&nbsp;244</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;238</font></u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u><font size="2">&nbsp;199</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$16.24</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$13.57</font></u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u><font size="2">$12.61</font></u></p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; At June 30, 2004, the range of exercise
prices for options outstanding was $8.33 to $33.26 with a weighted average
remaining contractual life of 6.48 years.</font></p>

<hr><P STYLE="page-break-after: always"></P>

<p><b><font size="2">11. SHAREHOLDERS' EQUITY</font></b></p>



<p align=left><b><font size="2">(a) Stockholder Protection Rights Plan</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company maintains a Stockholder
Protection Rights Plan (the &quot;Plan&quot;).&nbsp;
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.</font></p>



<p><b><font size="2">(b) Preferred
Stock</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company's Board of Directors is
authorized to provide for the issuance of 1.0 million 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.&nbsp; As of June 30, 2004,
no preferred shares were issued. </font> </p>



<p><b><font size="2">(c) Treasury Stock</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In
April 2004, the Board of Directors authorized an increase in the stock
repurchase plan of $500.0 million, bringing the total to $1,010.0 million.&nbsp; Pursuant to the Company's stock repurchase
plan, the Company repurchased approximately 9.3 million shares of its common
stock for $322.6 million during fiscal 2004.&nbsp;
As of June 30, 2004, approximately 27.5 million shares had been
repurchased for $714.7 million under the stock repurchase plan.&nbsp; The Company's stock repurchase plan will be
used to minimize the dilutive impact of a potential conversion of the
convertible debt and stock option exercises.&nbsp;
The
repurchased common stock is reflected as a reduction of shareholders'
equity.&nbsp; </font> </p>



<p><b><font size="2">(d) Restricted
Stock</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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
stock.&nbsp; During fiscal 2004 and 2003,
respectively, approximately 66,000 and 131,000 shares of restricted 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.&nbsp; </font> </p>

<p><b><font size="2">12. SAVINGS PLANS</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company sponsors a qualified defined
contribution retirement plan (&quot;Plan I&quot;) covering salaried employees who have
attained the age of twenty-one and hourly employees who have completed one year
of service and have attained the age of twenty-one. Plan I allows eligible
employees to contribute, subject to Internal Revenue Service limitations on
total annual contributions, up to 50% of their base compensation and 100% of
their eligible bonuses, as defined in the plan, to various investment funds.
The Company matches in cash at a rate of 25% of the first 5% a salaried
employee contributes. Hourly employees do not receive matching
contributions.&nbsp; Employee contributions
vest immediately while Company contributions vest 25% annually beginning in the
participant's second year of eligibility. In fiscal 2004, 2003, and 2002, the
Company contributed approximately $797,000, $889,000, and $828,000,
respectively.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company sponsors a non-qualified defined contribution
retirement plan (&quot;Plan II&quot;) 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 </font> </p>

<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">and 100% of their eligible bonuses, as defined in the plan.
The Company matches in cash at a rate of 25% of the first 5% of contributions.
Employee contributions vest immediately while Company contributions vest 25%
annually beginning in the participant's second year of eligibility. In fiscal
2004, 2003, and 2002, the Company contributed approximately $799,000, $724,000,
and $657,000, 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.</font></p>

<p><b><font size="2">13. SUPPLEMENTAL CASH FLOW INFORMATION</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Cash paid for interest and income taxes is
as follows (in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0 width=654>
 <tr>
  <td width=402 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p><font size="2">Income taxes, net of refunds</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$40,677</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$7,553</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$48,801 </font>
  </p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p><font size="2">Interest, net of amounts capitalized</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">&nbsp; 3,977</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">&nbsp; 3,215</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">&nbsp;8,229 </font> </p>
  </td>
 </tr>
</table>



<p><font size="2">&nbsp;&nbsp;&nbsp; Non-cash investing and financing activities
are as follows (in thousands):</font></p>



<table border=0 cellspacing=0 cellpadding=0 width=654>
 <tr>
  <td width=402 valign=top>

  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2004</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2003</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u><font size="2">&nbsp; 2002</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>

  </td>
  <td width=84 valign=top>

  </td>
  <td width=84 valign=top>

  </td>
  <td width=84 valign=top>

  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p><font size="2">Retirement
  of fully depreciated assets</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$14,235</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$164,509 </font>
  </p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$10,487 </font>
  </p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p><font size="2">Net
  (decrease) increase in fair value of interest rate swaps </font> </p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">(15,523)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">15,063</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">5,953</font></p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p><font size="2">Restricted
  common stock issued, net of forfeitures</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">2,374</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">4,490</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">2,435 </font>
  </p>
  </td>
 </tr>
</table>



<p><b><font size="2">14. RELATED PARTY TRANSACTIONS</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company entered into a note agreement
with Rockfish Partnership in December 2002.&nbsp;
During fiscal 2004, the note was amended and restated, increasing the
amount available under the note to $6.8 million, extending the maturity date to
December 2005, and increasing the interest rate to the prime rate plus 1.5%
(5.5% at June 30, 2004).&nbsp; The note
requires quarterly interest payments until maturity.&nbsp; At June 30, 2004, the Company's note receivable from Rockfish
Partnership totaled $6.8 million.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In fiscal 2002, the Company recorded an
approximate $8.7 million charge to reduce its notes receivable from Eatzi's
Corporation (&quot;Eatzi's&quot;) to their
net realizable value of $11.0 million.&nbsp;
In November 2002, the Company completed the divestiture of Eatzi's and
received an $11.0 million cash payment and a $4.0 million promissory note.&nbsp; The promissory note is unsecured and payable
only upon the closing of an initial public offering by Eatzi's.&nbsp; Due to the uncertainty of collecting the
promissory note, the Company has established a reserve for the entire principal
balance.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; Notes receivable are included in other
assets in the accompanying consolidated balance sheets.</font></p>



<p><b><font size="2">15. CONTINGENCIES</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; In January 1996, the Company entered into a Tip Reporting
Alternative Commitment agreement (the &quot;Contract&quot;) with the Internal Revenue
Service (the &quot;IRS&quot;).&nbsp; The Contract required the Company, among other
things, to implement tip reporting educational programs for its hourly
restaurant employees and to establish tip reporting procedures.&nbsp; The IRS
has alleged that the Company did not meet the requirements of the Contract and
has retroactively and unilaterally revoked&nbsp;it.&nbsp; As a result of the
revocation, the IRS commenced an examination during fiscal 2004 of the Company's
2000 through 2002 calendar years, which involved interviews of current and
former employees for the purpose of assessing employer-only Federal Insurance
Contributions Act (&quot;FICA&quot;) taxes on estimated unreported cash tips.&nbsp; In
connection with this examination, the IRS has also alleged that some portion of
these unreported tips should have been treated as service charges subject to
employment taxes.&nbsp; </font> </p>



<hr><P STYLE="page-break-after: always"></P>



<p><font size="2">On August 30, 2004, the IRS notified the Company that it
intends to issue a notice and demand, on or after September 29, 2004, for the
employer's share of FICA taxes on unreported tips.&nbsp; The Company believes
that it has complied and continues to comply with all of the terms of the
Contract and with the law pertaining to the employment tax treatment of service
charges.&nbsp; The Company intends to vigorously contest the accuracy of any
assessment that may be proposed with respect to either unreported tips or
service charges and, in the case of tips, to assert that the Contract precludes
the retroactive assessment of employer-only FICA taxes.&nbsp; It is not possible
at this time to reasonably estimate the possible loss or range of loss, if any,
with respect to either issue.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The Company is engaged in various other 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 other 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.
</font> </p>



<p><b><font size="2">16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)</font></b></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; The following table summarizes the unaudited
consolidated quarterly results of operations for fiscal 2004 and 2003 (in
thousands, except per share amounts):</font></p>



<table cellspacing=0 cellpadding=0 width=661>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p align="center"><font size="2">&nbsp;Fiscal Year 2004</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p align="center"><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Quarters Ended&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align="right"><u><font size="2">Sept.
  24</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align="right"><font size="2">&nbsp;</font><u><font size="2">Dec. 24 </font> </u></p>
  </td>
  <td width=102 valign=top>
  <p align="right"><font size="2">&nbsp;</font><u><font size="2">March 24</font></u></p>
  </td>
  <td width=108 valign=top>
  <p align="right"><font size="2">&nbsp;</font><u><font size="2">&nbsp;June 30
  </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=108 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Revenues</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$870,898</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$886,490</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$931,922</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$1,018,176</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Income before provision for</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">income taxes </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  65,872</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  65,157</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$
  12,854</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$
  &nbsp;&nbsp;94,048</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Net
  income</font></p>

  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  44,595</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  44,111</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp; 738</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 64,517</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Basic
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.46</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.46</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.01</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 0.68</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Diluted
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.45</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.45</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.01</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; 0.67</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>

  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Basic weighted average</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">shares outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">97,404</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">96,156</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">95,973</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">94,854</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Diluted
  weighted average</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">shares outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">99,367</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">97,731</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">98,007</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">96,806</font></p>
  </td>
 </tr>
</table>





<table cellspacing=0 cellpadding=0 width=661>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p>&nbsp;</p>
  <p align="center"><font size="2">Fiscal Year 2003</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p align="center"><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Quarters Ended&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align="right"><u><font size="2">Sept.
  25</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align="right"><font size="2">&nbsp;</font><u><font size="2">Dec. 25 </font> </u></p>
  </td>
  <td width=102 valign=top>
  <p align="right"><font size="2">&nbsp;</font><u><font size="2">March 26</font></u></p>
  </td>
  <td width=108 valign=top>
  <p align="right"><font size="2">&nbsp;&nbsp; </font>
  <u><font size="2">June 25 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=108 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Revenues</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$773,892</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$794,510</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$840,776</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$876,216</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Income
  before provision for</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">income
  taxes</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  67,777</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  55,809</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$
  69,205</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$
  60,796</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Net income </font> </p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  45,004</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  37,225</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$
  46,160</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$
  40,247</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=108 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Basic
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.46</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.38</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.48</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.41</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">Diluted
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.45</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.38</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.47</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 0.40</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>

  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Basic weighted average</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">shares outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">97,177</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">96,784</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">97,025</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">97,405</font></p>
  </td>
 </tr>
 <tr>
  <td width=661 colspan=5 valign=top>
  <p><font size="2">Diluted weighted average</font></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p><font size="2">shares outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">99,235</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">98,848</font></p>
  </td>
  <td width=102 valign=top>
  <p align=right><font size="2">98,901</font></p>
  </td>
  <td width=108 valign=top>
  <p align=right><font size="2">99,579</font></p>
  </td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P>

<p align=center><b><font size="2">REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</font></b></p>





<p><font size="2">The
Board of Directors<br>
Brinker International, Inc.:</font></p>





<p><font size="2">&nbsp;&nbsp;&nbsp; We have audited the accompanying
consolidated balance sheets of Brinker International, Inc. and subsidiaries as
of June 30, 2004 and June 25, 2003, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the years in the
three-year period ended June 30, 2004.&nbsp;
These consolidated financial statements are the responsibility of the
Company's management.&nbsp; Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United
States).&nbsp; Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.&nbsp; An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.&nbsp; An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.&nbsp; We believe that our
audits provide a reasonable basis for our opinion.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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
30, 2004 and June 25, 2003, and the results of their operations and their cash
flows for each of the years in the three-year period ended June 30, 2004 in conformity
with accounting principles generally accepted in the United States of America.</font></p>







<p align="center"><font size="2">KPMG LLP</font></p>









<p><font size="2">Dallas,
Texas<br>
August
5, 2004, except for Note 15,<br>
as to
which the date is as of August 30, 2004</font></p>

<hr><P STYLE="page-break-after: always"></P>

<p align=center><b><font size="2">MANAGEMENT'S
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS</font></b></p>





<p><font size="2">To Our
Shareholders:</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; 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.&nbsp;
We believe that the representations made to the independent auditors
were valid and appropriate.&nbsp; </font> </p>



<p><font size="2">&nbsp;&nbsp;&nbsp; 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.&nbsp; 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.&nbsp; Both our independent
auditors and internal auditors have free access to the Audit Committee.&nbsp; 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 30, 2004 provide reasonable assurance that the
consolidated financial statements are reliable.</font></p>

















<p><u><font size="2">&nbsp;&nbsp;&nbsp; /s/ Douglas H. Brooks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</font>
</u><font size="2">DOUGLAS H. BROOKS<br>
President and
Chief Executive Officer</font></p>















<p><u><font size="2">&nbsp;&nbsp;&nbsp; /s/ Charles M. Sonsteby&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</font>
</u><font size="2">CHARLES M. SONSTEBY<br>
Executive
Vice President and Chief Financial Officer</font></p>

<p align=left>&nbsp;</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>ex21_form10k041.htm
<DESCRIPTION>EXHIBIT 21
<TEXT>
<html>

<head>

<title>EXHIBIT 21</title>

</head>

<body>

<p align="center"> <u>EXHIBIT
21</u></p>



<p align="center">&nbsp;BRINKER
INTERNATIONAL, INC., A DELAWARE CORPORATION</p>



<p align="center">SUBSIDIARIES</p>





<p>REGISTRANT'S subsidiaries operate
full-service restaurants in various locations throughout the United States
under the names Chili's Grill&nbsp;&amp; Bar, Romano's Macaroni Grill, On The
Border Mexican Grill &amp; Cantina, Maggiano's Little Italy, Corner Bakery
Cafe, and Big Bowl.</p>



<p align=center>BRINKER
RESTAURANT CORPORATION, a Delaware corporation<br>
MAGGIANO'S/CORNER
BAKERY, INC., an Illinois corporation<br>
BRINKER
ALABAMA, INC., a Delaware corporation<br>
BRINKER
ARKANSAS, INC., a Delaware corporation<br>
BRINKER
OF CARROLL COUNTY, INC., a Maryland corporation<br>
BRINKER
CONNECTICUT CORPORATION, a Delaware corporation<br>
BRINKER
DELAWARE, INC., a Delaware corporation<br>
BRINKER
OF FREDERICK COUNTY, INC., a Maryland corporation<br>
BRINKER
FLORIDA, INC., a Delaware corporation<br>
BRINKER
GEORGIA, INC., a Delaware corporation<br>
BRINKER
INDIANA, INC., a Delaware corporation<br>
BRINKER
IOWA, INC., a Delaware corporation<br>
BRINKER
KENTUCKY, INC., a Delaware corporation<br>
BRINKER
LOUISIANA, INC., a Delaware corporation<br>
BRINKER
MASSACHUSETTS CORPORATION, a Delaware corporation<br>
BRINKER
MISSISSIPPI, INC., a Delaware corporation<br>
BRINKER
MISSOURI, INC., a Delaware corporation<br>
BRINKER
OF MONTGOMERY COUNTY, INC., a Maryland corporation<br>
BRINKER
NEVADA, INC., a Nevada corporation<br>
BRINKER
NEW JERSEY, INC., a Delaware corporation<br>
BRINKER
NORTH CAROLINA, INC., a Delaware corporation<br>
BRINKER
OHIO, INC., a Delaware corporation<br>
BRINKER
OKLAHOMA, INC., a Delaware corporation<br>
BRINKER
SOUTH CAROLINA, INC., a Delaware corporation<br>
BRINKER
UK CORPORATION, a Delaware corporation<br>
BRINKER
VIRGINIA, INC., a Delaware corporation<br>
BRINKER
TEXAS, L.P., a Texas limited partnership<br>
CHILI'S
BEVERAGE COMPANY, INC., a Texas corporation<br>
CHILI'S, INC., a Tennessee
corporation<br>
CHILI'S
OF MINNESOTA, INC., a Minnesota corporation<br>
CHILI'S
OF KANSAS, INC., a Kansas corporation<br>
BRINKER
PENN TRUST, a Pennsylvania business trust<br>
CHILI'S
OF WEST VIRGINIA, INC., a West Virginia corporation<br>
CHILI'S
OF WISCONSIN, INC., a Wisconsin corporation<br>
BRINKER
FREEHOLD, INC., a New Jersey corporation<br>
MAGGIANO'S
OF TYSON'S, INC., a Virginia corporation<br>
ROMANO'S
OF ANNAPOLIS, INC., a Maryland corporation<br>
CHILI'S
OF BEL AIR, INC., a Maryland corporation<br>
CHILI'S
OF MARYLAND, INC., a Maryland corporation<br>
BRINKER
OF BALTIMORE COUNTY, INC., a Maryland corporation<br>
BRINKER
OF HOWARD COUNTY, INC., a Maryland corporation<br>
BRINKER
RHODE ISLAND, INC., a Rhode Island corporation<br>
BRINKER
OF D.C., INC., a Delaware corporation<br>
CHILI'S,
INC., a Delaware corporation</p>

<hr><P STYLE="page-break-after: always"></P>



<p align=center>&nbsp;</p>

<p align=center>MAGGIANO'S/CORNER
BAKERY BEVERAGE COMPANY, a Texas corporation<br>
MAGGIANO'S/CORNER
BAKERY HOLDING CORPORATION, a Delaware corporation<br>
MAGGIANO'S/CORNER
BAKERY, L.P., a Texas limited partnership<br>
BIG
BOWL HOLDING CORPORATION, a Delaware corporation<br>
BIG
BOWL, INC., an Illinois corporation<br>
BIG
BOWL TEXAS, L.P., a Texas limited partnership<br>
BRINKER
VERMONT, INC., a Vermont corporation<br>
BRINKER
NEW ENGLAND I, LLC, a Delaware limited liability company<br>
BRINKER
NEW ENGLAND II, LLC, a Delaware limited liability company<br>
BRINKER OF CHARLES COUNTY, INC., a Maryland corporation<br>
BRINKER
CORNER BAKERY, L.P., a Texas limited partnership<br>
BRINKER
CORNER BAKERY I, LLC, a Delaware limited liability company<br>
BRINKER
CORNER BAKERY II, LLC, a Delaware limited liability company<br>
BRINKER
MICHIGAN, INC., a Delaware corporation</p>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>5
<FILENAME>ex23form10k041.htm
<DESCRIPTION>EXHIBIT 23
<TEXT>
<html>

<head>

<title>EXHIBIT 23</title>

</head>

<body>

<p align="center">EXHIBIT 23</p>















<p align="center">Consent of Independent Registered Public Accounting Firm</p>



<p>The
Board of Directors<br>
Brinker International, Inc.:</p>

<p align="justify">We consent to the incorporation by
reference in Registration Statement Nos. 33-61594, 33-56491, 333-02201,
333-93755, 333-42224 and 333-105720 on Form S-8, 333-74902 on Form S-3 and
333-116879 on Form S-4 of Brinker International, Inc. of our report dated
August 5, 2004, except for Note 15, as to which the date is as of August 30,
2004, relating to the consolidated balance sheets of Brinker International,
Inc. and subsidiaries as of June 30, 2004 and June 25, 2003 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended June 30, 2004, which report is incorporated
by reference in the June 30, 2004 annual report on Form 10&#8209;K of Brinker
International, Inc.</p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; KPMG
LLP</p>

<p>&nbsp;Dallas,
Texas<br>
&nbsp;September 13, 2004</p>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>6
<FILENAME>ex31aform10k041.htm
<DESCRIPTION>EXHIBIT 31(A)
<TEXT>
<html>

<head>

<title>EXHIBIT 31a</title>

</head>

<body>

<p align=right>Exhibit 31a</p>

<p align="center">CERTIFICATION</p>

<blockquote>

<p align="justify">I, Douglas H. Brooks, certify that:</p>



<p align="justify">1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this
Annual Report on Form 10-K of Brinker International, Inc.;</p>

<p align="justify">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</p>

<p align="justify">3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge,
the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;</p>

<p align="justify">4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the registrant and have:</p>

  <blockquote>

<p align="justify">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</p>

<p align="justify">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</p>

<p align="justify">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Disclosed in this report
any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and</p>

  </blockquote>

<p align="justify">5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);</p>

  <blockquote>

<p align="justify">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report
financial information; and</p>

<p align="justify">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any fraud, whether or not
material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.</p>

  </blockquote>
</blockquote>

<p>Date: September 13, 2004</p>





<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p><u>&nbsp;&nbsp;&nbsp; /s/&nbsp; Douglas H.
  Brooks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Douglas
  H. Brooks</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>President
  and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Chief
  Executive Officer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>(Principal
  Executive Officer)</p>
  </td>
 </tr>
</table>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>7
<FILENAME>ex31bform10k041.htm
<DESCRIPTION>EXHIBIT 31(B)
<TEXT>
<html>

<head>

<title>EXHIBIT 31b</title>

</head>

<body>

<p align=right>Exhibit 31b</p>

<p align="center">CERTIFICATION</p>

<blockquote>

<p align="justify">I, Charles M. Sonsteby, certify that:</p>



<p align="justify">1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this
Annual Report on Form 10-K of Brinker International, Inc.;</p>

<p align="justify">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this report;</p>

<p align="justify">3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;</p>

<p align="justify">4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other
certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the registrant and have:</p>

  <blockquote>

<p align="justify">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this
report is being prepared;</p>

<p align="justify">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and</p>

<p align="justify">c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Disclosed in this report
any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and</p>

  </blockquote>

<p align="justify">5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The registrant's other
certifying officer(s) and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions);</p>

  <blockquote>

<p align="justify">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely
affect the registrant's ability to record, process, summarize and report
financial information; and</p>

<p align="justify">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any fraud, whether or
not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.</p>

  </blockquote>
</blockquote>

<p>Date: September 13, 2004</p>





<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p><u>_/s/ Charles M. Sonsteby&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Charles
  M. Sonsteby</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Executive
  Vice President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Chief
  Financial Officer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>(Principal
  Financial Officer)</p>
  </td>
 </tr>
</table>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>8
<FILENAME>ex32aform10k041.htm
<DESCRIPTION>EXHIBIT 32(A)
<TEXT>
<html>

<head>

<title>Exhibit 32a</title>

</head>

<body>

<p align=right>Exhibit 32(a)</p>

<p align=right>&nbsp;</p>

<p align=center><b>CERTIFICATION</b></p>

<p align="justify">Pursuant to 18 U.S.C. Section 1350, the undersigned
officer of Brinker International, Inc. (the &quot;Company&quot;), hereby certifies that
the Company's Annual Report on Form 10-K for the year ended June 30, 2004 (the
&quot;Report&quot;) fully complies with the requirements of Section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934 and that the information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</p>







<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Dated:
  September 13, 2004</p>
  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>By:<u>&nbsp;&nbsp; /s/ Douglas H. Brooks&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Name:
  Douglas H. Brooks</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Title:&nbsp;&nbsp; President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Executive Officer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Principal Executive Officer)</p>
  </td>
 </tr>
</table>



</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>9
<FILENAME>ex32bform10k041.htm
<DESCRIPTION>EXHIBIT 32(B)
<TEXT>
<html>

<head>

<title>Exhibit 32b</title>

</head>

<body>

<p align=right>Exhibit 32(b)</p>

<p align=right>&nbsp;</p>

<p align=center><b>CERTIFICATION</b></p>

<p align="justify">Pursuant to 18 U.S.C. Section 1350, the undersigned
officer of Brinker International, Inc. (the &quot;Company&quot;), hereby certifies that
the Company's Annual Report on Form 10-K for the year ended June 30, 2004 (the
&quot;Report&quot;) fully complies with the requirements of Section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934 and that the information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.</p>







<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Dated:
  September 13, 2004</p>
  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>By:<u>&nbsp;&nbsp; /s/ Charles M. Sonsteby&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Name:
  Charles M. Sonsteby</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Title:&nbsp;&nbsp; Executive Vice President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Financial Officer</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Principal Financial Officer)</p>
  </td>
 </tr>
</table>



</body>

</html>

</TEXT>
</DOCUMENT>
</SUBMISSION>
