<SUBMISSION>
<ACCESSION-NUMBER>0000703351-05-000088
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>8
<PERIOD>20050629
<FILING-DATE>20050912
<DATE-OF-FILING-DATE-CHANGE>20050909
<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>051078599
</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>form10k051.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 29, 2005</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. <br>
$3,059,776,156</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 18, 2005</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Common
  Stock, $0.10 par value</p>
  </td>
  <td width=319 valign=top>
  <p>87,993,539
  shares</p>
  </td>
 </tr>
</table><hr><P STYLE="page-break-after: always"></P>&nbsp;<p align=center>DOCUMENTS INCORPORATED BY REFERENCE</p>

<p>Portions of the registrant's Annual Report to Shareholders
for the fiscal year ended June 29, 2005, 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 October 20, 2005, to be dated on or about September
9, 2005, 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>



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



<p>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;), and Corner Bakery Cafe (&quot;Corner Bakery&quot;)
restaurant concepts.&nbsp; Additionally, the
Company owns an approximate 43% interest in the legal entities owning Rockfish
Seafood Grill (&quot;Rockfish&quot;), which interests were acquired in July 2001 and
October 2002.&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, and Corner Bakery in
November 1989, May 1994, August 1995, and August 1995, respectively.</p>



<p><b><u>Primary Restaurant Concepts</u></b></p>



<p><u>Chili's Grill &amp; Bar</u></p>



<p>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 serving alcohol,
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>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 or 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>Entree selections range in menu price from $5.99 to
$14.99, with the average revenue per meal, including alcoholic beverages,
approximating $12.03 per person.&nbsp; During
the year ended June 29, 2005, food and non-alcoholic beverage sales constituted
approximately 86.4% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 13.6%.</p>



<p><u>Romano's Macaroni Grill</u></p>



<p>Macaroni Grill is an exciting casual Italian
restaurant that ignites the senses.&nbsp;
Guests enjoy culinary masterpieces inspired by the Italian passion and
culinary heritage of Macaroni Grill.&nbsp;
Menu selections include signature pastas, grilled steak, seafood, salads
and delicious desserts - all prepared by talented chefs in open kitchens.&nbsp; Macaroni Grill features brick ovens, festive
string lights, fresh gladiolus, and a broad selection of house and premium
wines.&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 enjoy at home.</p>



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



<p>Entree selections range in menu price from $9.49 to
$19.99 with chef features priced separately.&nbsp;
The average revenue per meal, including alcoholic beverages, is
approximately $14.66 per person.&nbsp; During
the year ended June 29, 2005, food and non-alcoholic beverage sales constituted
approximately 87.5% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 12.5%.</p>



<p><u>Maggiano's Little Italy</u></p>



<p>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>Entree selections range in menu price from $8.95 to
$37.95, with the average revenue per meal, including alcoholic beverages,
approximating $25.00 per person.&nbsp; During
the year ended June 29, 2005, food and non-alcoholic beverage sales constituted
approximately 79.7% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 20.3%.</p>



<p><u>On The Border Mexican Grill &amp; Cantina</u></p>



<p>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 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>Entree selections range in menu price from $6.99 to
$13.99, with the average revenue per meal, including alcoholic beverages,
approximating $12.89 per person.&nbsp; During
the year ended June 29, 2005, food and non-alcoholic beverage sales constituted
approximately 81.3% of the concept's total restaurant revenues, with alcoholic
beverage sales accounting for the remaining 18.7%.</p>



<p><u>Corner Bakery Cafe</u></p>



<p>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>Prices for menu items range from $1.19 to $6.99 with
the average revenue per meal approximating $7.44 per person.&nbsp; During the fiscal year ended June 29, 2005,
food and non-alcoholic beverage sales constituted all of the concept's total
restaurant revenues.&nbsp; Catering sales
constituted approximately 21.2% of sales.</p>



<p><b><u>Jointly-Developed Concept</u></b></p>



<p><u>Rockfish Seafood Grill</u></p>



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



<p>Rockfish offers fresh, flavorful seafood dishes served
in a fun, comfortable environment.&nbsp;
Rockfish's 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 shrimp and
crab.&nbsp; Daily chalkboard specials
featuring various seasonal items are also very popular with diners.&nbsp; In addition to items from the
&quot;Stream&quot;, Rockfish serves items from the &quot;Field&quot; like
Louisiana Pot Roast and Campfire Smoked Ribs.&nbsp;
Friendly, knowledgeable 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 available.</p>



<p>Entree selections range in menu price from $5.87 to
$16.42 with chalkboard specials priced on a daily basis.&nbsp; The average revenue per meal, including
alcoholic beverages, is approximately $14.50 per person.&nbsp; During the year ended June 29, 2005, food
and non-alcoholic beverage sales constituted approximately 86.5% of the
concept's total revenues, with alcoholic beverage sales accounting for the
remaining 13.5%.</p>



<p><b><u>Business Development</u></b></p>



<p>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.&nbsp; The Company also continues to consider
development in countries outside of the United States.&nbsp; </p>



<p>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 existing and potential
competition.&nbsp; Members of each restaurant
concept's executive management inspect, review and approve each restaurant site
prior to its acquisition for that restaurant concept.</p>



<p>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, relating to the Company's primary restaurant concepts,
the Company has closed 99 restaurants, including 22 in fiscal 2005, 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>The following table illustrates the system-wide
restaurants opened in fiscal 2005 and the planned openings in fiscal 2006:</p>



<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 2005 Openings</p>
  </td>
  <td width=198 valign=top>
  <p align=right>Fiscal 2006 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>
  82<br>
  26</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  97-100<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>
  6</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  6-7<br>
  4-5</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <hr><P STYLE="page-break-after: always"></P>
  <p>Maggiano's</p>
  </td>
  <td width=167 valign=top>
  <hr><P STYLE="page-break-after: always"></P>
  <p align=right>5</p>
  </td>
  <td width=198 valign=top>
  <hr><P STYLE="page-break-after: always"></P>
  <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>
  8<br>
  0</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  6-8<br>
  3-4</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>
  6<br>
  0</p>
  </td>
  <td width=198 valign=top>
  <p align=right><br>
  7-9<br>
  0-1</p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>
  <p>Rockfish</p>
  </td>
  <td width=167 valign=top>
  <p align=right><u>0</u></p>
  </td>
  <td width=198 valign=top>
  <p align=right><u>0</u></p>
  </td>
 </tr>
 <tr>
  <td width=159 valign=top>

  </td>
  <td width=167 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=198 valign=top>
  <p align=right>&nbsp;</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><u>151</u></p>
  </td>
  <td width=198 valign=top>
  <p align=right><u>152-169</u></p>
  </td>
 </tr>
</table>

</div>



<p>The Company anticipates that some of the fiscal 2006
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>The following table illustrates the approximate
average capital investment for a typical unit in the Company's primary
restaurant concepts:</p>





<div align=center>

<table border=1 cellspacing=0 cellpadding=0 bordercolordark="#C0C0C0" style="border-collapse: collapse" bordercolor="#111111">
 <tr>
  <td width=81 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=center>Chili's</p>
  </td>
  <td width=82 valign=top>
  <p align=center>Macaroni<br>
  Grill</p>
  </td>
  <td width=78 valign=top>
  <p align=center>Maggiano's</p>
  </td>
  <td width=82 valign=top>
  <p align=center>On The<br>
  Border</p>
  </td>
  <td width=82 valign=top>
  <p align=center>Corner<br>
  Bakery</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top>
  <p align=center>Land</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$&nbsp;&nbsp;&nbsp;&nbsp; 650,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$ 1,000,000</p>
  </td>
  <td width=78 valign=top>
  <p align=center>$ 2,700,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$&nbsp;&nbsp; 850,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$&nbsp;&nbsp; 950,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top>
  <p align=center>Building</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp; 1,207,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp; 1,462,000</p>
  </td>
  <td width=78 valign=top>
  <p align=center>&nbsp;&nbsp; 3,600,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp; 1,320,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp; 435,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top>
  <p align=center>Furniture &amp;<br>
  Equipment</p>
  </td>
  <td width=82 valign=top>
  <p align=center><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  500,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 550,000</p>
  </td>
  <td width=78 valign=top>
  <p align=center><br>
  &nbsp;&nbsp; 1,200,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 520,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 303,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top>
  <p align=center>Other</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  40,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  55,000</p>
  </td>
  <td width=78 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 140,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  60,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 20,000</p>
  </td>
 </tr>
 <tr>
  <td width=81 valign=top>
  <p align=center>Total</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$&nbsp; 2,397,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$ 3,067,000</p>
  </td>
  <td width=78 valign=top>
  <p align=center>$ 7,640,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$ 2,750,000</p>
  </td>
  <td width=82 valign=top>
  <p align=center>$ 1,708,000</p>
  </td>
 </tr>
</table>

</div>



<p>The specific rate at which the Company is able to
open new restaurants is determined, in part, 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>



<p><b><u>Franchise Operations</u></b></p>



<p>The Company also intends to continue its expansion
through franchise development, both domestically and internationally.&nbsp; At June 29, 2005, 46 total franchise
development or joint venture arrangements existed.&nbsp; During the year ended June 29, 2005, 26 Chili's franchised restaurants
were opened, 14 Company-owned Chili's restaurants were sold to two franchisees,
and 6 Macaroni Grill franchised restaurants were opened.</p>



<p>In fiscal 2005, of the 26 new Chili's franchised
restaurants, 8 were kiosk locations.&nbsp;
The first franchised Macaroni Grill airport location opened in Orlando,
Florida, and the first franchised Macaroni Grill location in the Pacific Rim
region opened in Taipei.&nbsp; Additionally,
in connection with the sale of the Company-owned Chili's restaurants, the
Company entered into two franchise development agreements for 18 Chili's
restaurants over the next 7 years in Kentucky and parts of Illinois, Indiana
and Tennessee, and for 20 Chili's restaurants over the next 6 years in parts of
Alabama and Mississippi.&nbsp; The Company also
entered into a franchise development agreement for 5 Macaroni Grill restaurants
over the next 6 years in Hawaii.</p>



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



<p>The Company intends to selectively pursue domestic and
international franchise expansion.&nbsp; A
typical franchise development agreement provides for payment of 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><b><u>Jointly-Developed Operations</u></b></p>



<p>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 29, 2005, 21 Rockfish
restaurants were operating, located in the states of Arizona, New Mexico, North
Carolina, and Texas.</p>



<p><b><u>Restaurant Management</u></b></p>



<p>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 of each concept 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>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>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, which may include 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>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>



<p>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><b><u>Purchasing</u></b></p>



<p>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 </p>



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



<p>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><b><u>Advertising and Marketing</u></b></p>



<p>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, with each of its restaurant concepts utilizing one
or more of such mediums to meet the concept's needs and direction.</p>



<p>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><b><u>Employees</u></b></p>



<p>At June 29, 2005, the Company employed approximately
108,500 persons, of whom approximately 1,100 were corporate personnel, 6,400
were restaurant area directors, managers or trainees and 101,000 were employed
in non-management restaurant positions.&nbsp;
The executive officers of the Company have an average of over 16 years
of experience in the restaurant industry.</p>



<p>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><b><u>Trademarks</u></b></p>



<p>The Company has registered and/or has pending, among
other marks, &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>



<p><b><u>Risk Factors/Forward-Looking Statements</u></b></p>



<p>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 or electronic 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 </p>



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



<p>&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><u>Competition may adversely affect the Company's
operations and financial results</u>.</p>



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



<p>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><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>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>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>



<p>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><u>Inflation may increase the Company's operating
expenses</u>.</p>



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



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



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



<p>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><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>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><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>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>



<p><u>Identification of material weakness in internal
control may adversely affect the Company's financial results</u>.&nbsp; </p>



<p>The Company is subject to the ongoing internal
control provisions of Section 404 of the Sarbanes-Oxley Act of 2002.&nbsp; Those provisions provide for the
identification of material weaknesses in internal control which could indicate
a lack of adequate controls to generate accurate financial statements.&nbsp; Though the Company routinely assesses its
internal controls, there can be no assurance that the Company will be able to
timely remediate material weaknesses, if any, that may be identified in future
periods, or maintain all of the controls necessary for continued
compliance.&nbsp; There likewise can be no
assurance that the Company will be able to retain sufficient skilled finance and
accounting personnel, especially in light of the increased demand for such
personnel among publicly traded companies.&nbsp;
</p>



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



<p>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.</p>



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



<p><b><u>Available Information</u></b></p>



<p>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>





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



<p><b><u>Restaurant Locations</u></b></p>



<p>At June 29, 2005, the Company's system of
company-operated, jointly-developed and franchised units included 1,588
restaurants located in forty-nine states, Washington, D.C., Australia, Bahrain,
Canada, Egypt, Great Britain, Germany, 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>
  811 <br>
  263</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>
  220 <br>
  15</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>Maggiano's</p>

  </td>
  <td width=76 valign=top>
  <p align=right>33</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>
  117<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>
  87<br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3</p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p><br>
  Rockfish</p>
  </td>
  <td width=76 valign=top>
  <p align="right"><br>
  &nbsp;&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21</u></p>
  </td>
 </tr>
 <tr>
  <td width=297 valign=top>
  <p>&nbsp; <br>
  &nbsp;&nbsp; Total</p>
  </td>
  <td width=76 valign=top>
  <p align=right><br>
  1,588 </p>
  </td>
 </tr>
</table>



<p>The 1,074 Chili's restaurants include domestic
locations in 49 states and foreign locations in 23 countries.&nbsp; The 235 Macaroni Grill restaurants include
domestic locations in 41 states and foreign locations in Canada, Great Britain,
Mexico, Puerto Rico and Taiwan.&nbsp; The
Maggiano's, On The Border, and Corner Bakery restaurants are located
exclusively within the United States in 17 (and the District of Columbia), 32
and 8 (and the District of Columbia) states, respectively.</p>





<p><b><u>Restaurant Property Information</u></b></p>



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



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



<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="550">
 <tr>
  <td width=101 valign=top>

  </td>
  <td width=102 valign=top>
  <p align="center">Chili's</p>
  </td>
  <td width=113 valign=top>
  <p align="center">Macaroni Grill</p>
  </td>
  <td width=115 valign=top>
  <p align="center">Maggiano's</p>
  </td>
  <td width=119 valign=top>
  <p align="center">On The Border</p>
  </td>
 </tr>
 <tr>
  <td width=101 valign=top>
  <p>Square Feet</p>
  </td>
  <td width=102 valign=top>
  <p align="center">4,000 - 5,900</p>
  </td>
  <td width=113 valign=top>
  <p align="center">6,300 - 7,000</p>
  </td>
  <td width=115 valign=top>
  <p align="center">12,000 - 18,000</p>
  </td>
  <td width=119 valign=top>
  <p align="center">5,200 - 6,200</p>
  </td>
 </tr>
 <tr>
  <td width=101 valign=top>
  <p>Dining Seats</p>
  </td>
  <td width=102 valign=top>
  <p align="center">150 - 220</p>
  </td>
  <td width=113 valign=top>
  <p align="center">235 - 280</p>
  </td>
  <td width=115 valign=top>
  <p align="center">500 - 725</p>
  </td>
  <td width=119 valign=top>
  <p align="center">195 - 265</p>
  </td>
 </tr>
 <tr>
  <td width=101 valign=top>
  <p>Dining Tables</p>
  </td>
  <td width=102 valign=top>
  <p align="center">35 - 50</p>
  </td>
  <td width=113 valign=top>
  <p align="center">50 - 70</p>
  </td>
  <td width=115 valign=top>
  <p align="center">100 - 150</p>
  </td>
  <td width=119 valign=top>
  <p align="center">45 - 65</p>
  </td>
 </tr>
</table>

</div>



<p>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>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 29, 2005, the Company owned the land and/or building for
937 of the 1,268 Company-operated restaurants.&nbsp;
The Company considers that its properties are suitable, adequate,
well-maintained and sufficient for the operations contemplated.</p>



<p><b><u>Other Properties</u></b></p>



<p>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 197,461 square
feet is currently utilized by the Company or reserved for future expansion of
the Company headquarters, and the remaining 539 square feet is under lease.&nbsp; The Company also leases office space in
Arizona, California, Colorado, Florida, Georgia, 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; </p>





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



<p>In January 1996, the Company entered into a Tip
Reporting Alternative Commitment (&quot;TRAC&quot;) agreement with the Internal Revenue
Service (the &quot;IRS&quot;).&nbsp; The TRAC agreement
required the Company, among other things, to implement tip reporting
educational programs for its hourly restaurant employees and to establish tip
reporting procedures, although employees remain ultimately responsible for
accurately reporting their tips.&nbsp; The
IRS alleged that the Company did not meet the requirements of the TRAC
agreement and retroactively and unilaterally revoked it.&nbsp; As a result of the revocation, the IRS
commenced an examination of the Company's 2000 through 2002 calendar years for
payroll tax purposes.&nbsp; In December 2004,
the Company paid an assessment of $17.3 million for employer-only FICA taxes on
unreported cash tips for the examination period.&nbsp; The Company recorded the $17.3 million payment in restaurant
expenses in the second quarter of fiscal 2005 and recorded a related income tax
benefit of approximately $16.9 million, consisting of federal income tax
credits related to additional FICA taxes paid.&nbsp;
The Company continues to believe that it was in full compliance with the
TRAC agreement and that the IRS' retroactive revocation was unjustified,
particularly in light of compliance reviews conducted by the IRS prior to the
revocation.&nbsp; Nevertheless, the Company
agreed to the resolution to avoid potentially costly and protracted litigation.&nbsp; </p>



<p>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>





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





<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 STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.</p>



<p>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>Fiscal year ended June 29, 2005:</p>



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

  </td>
  <td width=134 valign=top>
  <p>High</p>
  </td>
  <td width=126 valign=top>
  <p>Low</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p>First Quarter</p>
  </td>
  <td width=134 valign=top>
  <p>$36.47</p>
  </td>
  <td width=126 valign=top>
  <p>$29.49</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p>Second Quarter</p>
  </td>
  <td width=134 valign=top>
  <p>$35.18</p>
  </td>
  <td width=126 valign=top>
  <p>$30.64</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p>Third Quarter</p>
  </td>
  <td width=134 valign=top>
  <p>$39.00</p>
  </td>
  <td width=126 valign=top>
  <p>$33.90</p>
  </td>
 </tr>
 <tr>
  <td width=197 valign=top>
  <p>Fourth Quarter</p>
  </td>
  <td width=134 valign=top>
  <p>$41.85</p>
  </td>
  <td width=126 valign=top>
  <p>$33.50</p>
  </td>
 </tr>
</table>



<p>Fiscal year ended June 30, 2004:</p>



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

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





<p>As of August 18, 2005, there were 1,088 holders of
record of the Company's common stock.</p>



<p>The Company has never paid cash dividends on its
common stock as profits are currently reinvested into the Company to fund
expansion of its restaurant business.&nbsp;
Additionally, the Company has been active in its share repurchase
program.&nbsp; </p>



<p>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;) and received proceeds totaling
approximately $250 million prior to debt issuance costs.&nbsp; The Debentures became redeemable at the
Company's option beginning on October 10, 2004.&nbsp; On December 22, 2004, the Company exercised its right to redeem
all of the Debentures.&nbsp; Holders had the
option to convert the Debentures into shares of the Company's common stock or
receive cash until the close of business on January 20, 2005.&nbsp; Holders chose to convert a total of $10.8
million of the accreted debenture value into 308,092 shares of the Company's
common stock and the remaining accreted debenture value of $262.7 million was redeemed
for cash on January 24, 2005.</p>



<p>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 </p>



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



<p>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>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>Except as described in the immediately preceding
paragraphs, during the three-year period ended on August 18, 2005, the Company
issued no securities which were not registered under the Securities Act of
1933, as amended.</p>



<p>Shares repurchased during the fourth quarter of fiscal
2005 are as follows (in thousands, except share and per share amounts):</p>



<table border=0 cellspacing=0 cellpadding=0 style="text-align: left" width="629">
 <tr>
  <td valign=top width="233">
  <p>&nbsp;</p>
  </td>
  <td valign=top width="121">
  <p align=center><b><br>
  Total Number of
  <br>
  Shares <u><br>
  Purchased(a)</u></b></p>
  </td>
  <td valign=top width="108">
  <p align=center><b><br>
  <br>
  Average Price <u><br>
  Paid
  per Share</u></b></p>
  </td>
  <td valign=top width="167">
  <p align=center><b>Maximum Dollar
  Value<br>
  that May Yet be<br>
  Purchased Under the<u><br>
  Program</u></b></p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style="text-align: left" width="233">
  <p>March 31, 2005
  through May 4, 2005</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="121">
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 92,000</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="108">
  <p align=center>$33.69</p>
  </td>
  <td nowrap valign=bottom width="167">
  <p align=center>$ 129,327</p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style="text-align: left" width="233">
  <p>May 5, 2005
  through June 1, 2005</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="121">
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 122,000</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="108">
  <p align=center>$34.50</p>
  </td>
  <td nowrap valign=bottom width="167">
  <p align=center>$ 125,113</p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style="text-align: left" width="233">
  <p>June 2, 2005
  through June 29, 2005</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="121">
  <p align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</u></p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="108">
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  &nbsp; -</p>
  </td>
  <td nowrap valign=bottom width="167">
  <p align=center>$ 125,113</p>
  </td>
 </tr>
 <tr>
  <td valign=bottom style="text-align: left" width="233">
  <p><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Total</p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="121">
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>&nbsp;214,000</u></p>
  </td>
  <td nowrap valign=bottom style="text-align: left" width="108">
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$34.15</p>
  </td>
  <td nowrap valign=bottom width="167">
  <p align=center>&nbsp;</p>
  </td>
 </tr>
</table>







<blockquote>







<p><font size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp; All of the shares purchased during the
fourth quarter of fiscal 2005 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 2005 Annual Report to
Shareholders and is presented on pages F-6 through F-7 of Exhibit 13 to this
report.</font></p>





</blockquote>





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



<p>&quot;Selected Financial Data&quot; is incorporated herein by
reference from the 2005 Annual Report to Shareholders and is presented on page
F-1 of Exhibit 13 to this report.</p>





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



<p>&quot;Management's Discussion and Analysis of Financial
Condition and Results of Operations&quot; is incorporated herein by reference from
the 2005 Annual Report to Shareholders and is presented on pages F-2 through F&#8209;9
of Exhibit 13 to this report.</p>





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



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



<p>&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 2005 Annual Report to Shareholders and is presented on page
F-6 of Exhibit 13 to this report.</p>





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



<p>Reference is made to the Index to Financial
Statements attached hereto on page 18 for a listing of all financial statements
incorporated by reference from the 2005 Annual Report to Shareholders attached
as part of Exhibit 13 to this report.</p>





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



<p>None.</p>





<p>Item 9A. CONTROLS AND PROCEDURES.</p>



<p><b><u>Disclosure
Controls and Procedures</u></b></p>



<p>Based on their evaluation of the Company's disclosure
controls and procedures (as defined in Rules 13a-15 and 15d-15 under the
Securities Exchange Act of 1934 [the &quot;Exchange Act&quot;]), as of the end of the
period covered by this Annual Report on Form 10-K, the Company's principal
executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures are effective for the purpose of
ensuring that material information required to be in this Annual Report on Form
10-K is accumulated and made known to them by others to allow timely decisions
regarding required disclosure.&nbsp;&nbsp;&nbsp; </p>



<p><b><u>Management's
Report on Internal Control over Financial Reporting</u></b></p>

<p>&quot;Management's Report on Internal Control over
Financial Reporting&quot; and the attestation report of the independent
registered public accounting firm of KPMG, LLP on internal control over
financial reporting are incorporated herein by reference from the 2005 Annual
Report to Shareholders and is presented on pages F-31 of Exhibit
13 to this report. </p>

<p><b><u>Internal
Control over Financial Reporting</u></b></p>



<p>There were no changes in the Company's internal
control over financial reporting during the Company's fourth quarter ended June
29, 2005, that have materially affected or are reasonably likely to materially
affect, the Company's internal control over financial reporting.&nbsp; </p>





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



<p>None.</p>





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

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



<p>&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 9, 2005, for the annual meeting of
shareholders on October 20, 2005, are incorporated herein by reference.</p>



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



<p>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.asp.&nbsp; Copies of the code may be obtained free of
charge from the Company's website at the above internet address.</p>





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



<p>&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 9, 2005, for the annual meeting of shareholders on October 20,
2005, are incorporated herein by reference.</p>





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



<p>&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 9, 2005, for the annual meeting of shareholders on
October 20, 2005, are incorporated herein by reference.</p>





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



<p>&quot;Compensation Committee Interlocks and Insider
Participation&quot; in the Company's Proxy Statement to be dated on or about
September 9, 2005, for the annual meeting of shareholders on October 20, 2005,
is incorporated herein by reference.</p>





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



<p>&nbsp;&quot;Ratification of Independent Auditors&quot; in the Company's Proxy
Statement to be dated on or about September 9, 2005, for the annual meeting of
shareholders on October 20, 2005, is incorporated herein by reference.</p>





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

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



<p>(a)&nbsp;&nbsp;&nbsp; (1)
Financial Statements.</p>



<p>Reference is made to the Index to Financial
Statements attached hereto on page 18 for a listing of all financial statements
attached as Exhibit 13 to this report.</p>



<p>(a)&nbsp;&nbsp;&nbsp; (2)
Financial Statement Schedules.</p>



<p>None.</p>



<p>(a)&nbsp;&nbsp;&nbsp; (3)
Exhibits.</p>



<p>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>



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



<p align=center>SIGNATURES</p>

<p>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>&nbsp;</p>
  <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>
  <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 9, 2005</p>
  </td>
  <td width=319 valign=top>

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



<hr><P STYLE="page-break-after: always"></P>&nbsp;<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 9, 2005.</p>





<table border=0 cellspacing=0 cellpadding=0 width="652">
 <tr>
  <td width=319 valign=top>
  <p align=center><u>Name</u></p>
  </td>
  <td width=333 valign=top>
  <p align=center><u>Title</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Douglas H. Brooks</p>
  </td>
  <td width=333 valign=top>

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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Charles M. Sonsteby</p>
  </td>
  <td width=333 valign=top>

  <p><br>
  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=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><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;
  <br>
  </u>Dan W. Cook, III</p>
  </td>
  <td width=333 valign=top>

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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &nbsp;&nbsp;/s/ Robert M. Gates&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
  </u>Robert M. Gates</p>
  </td>
  <td width=333 valign=top>

  <p><br>
  <br>
  Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Marvin J. Girouard</p>
  </td>
  <td width=333 valign=top>


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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Ronald Kirk</p>
  </td>
  <td width=333 valign=top>

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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &nbsp;&nbsp;/s/ George R. Mrkonic&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
  </u>George R. Mrkonic</p>
  </td>
  <td width=333 valign=top>

  <p><br>
  <br>
  Director</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Erle Nye</p>
  </td>
  <td width=333 valign=top>


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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &nbsp;&nbsp;/s/ James E. Oesterreicher &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
  </u>James E. Oesterreicher</p>
  </td>
  <td width=333 valign=top>

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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &nbsp;&nbsp;/s/ Rosendo G. Parra&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <br>
  </u>Rosendo G. Parra</p>
  </td>
  <td width=333 valign=top>

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

  </td>
  <td width=333 valign=top>

  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p><u><br>
  &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;
  <br>
  </u>Cece Smith</p>
  </td>
  <td width=333 valign=top>

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



<hr><P STYLE="page-break-after: always"></P>&nbsp;<p align=center>INDEX
TO FINANCIAL STATEMENTS</p>

<p>&nbsp;</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>

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  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>

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  Consolidated Statements of
  Income - Fiscal Years<br>
  &nbsp;&nbsp;&nbsp; Ended June 29, 2005, June 30, 2004, and June 25, 2003</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-10</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  Consolidated Balance
  Sheets - June 29, 2005 and June 30, 2004 </p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-11</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  Consolidated Statements of
  Shareholders' Equity - Fiscal<br>
  &nbsp;&nbsp;&nbsp; Years Ended June 29, 2005, June 30, 2004, and June 25, 2003</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>

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  Consolidated Statements of
  Cash Flows - Fiscal Years<br>
  &nbsp;&nbsp;&nbsp; Ended June 29, 2005, June 30, 2004, and June 25, 2003</p>
  </td>
  <td width=121 valign=top>
  <p align=right><br>
  F-13</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p><br>
  Notes to Consolidated
  Financial Statements</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>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=517 valign=top>
  <p>Reports of Independent
  Registered Public Accounting Firm</p>
  </td>
  <td width=121 valign=top>
  <p align=right>F-28</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>
 <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 Report on
  Internal Control over Financial Reporting</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>



<hr><P STYLE="page-break-after: always"></P>&nbsp;<p align=center>INDEX
TO EXHIBITS</p>

<p align=center>&nbsp;</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 5.75% Note due
  2014.&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 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(c)</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; (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>10(b)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's 1992
  Incentive Stock Option Plan.&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>10(c)</p>
  </td>
  <td width=571 valign=top>
  <p>Registrant's Stock Option
  and Incentive 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(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; (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(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;
  (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(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>2005 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; (10)</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;
  (10)</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, Chairman of the Board, 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; (10)</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; (10)</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, Chairman of the Board, 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; (10)</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; (10)</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

  </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; (11)</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>

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

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

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

  </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>Included in exhibit 4(d)
  to annual report on Form 10-K for year ended June 30, 2004, and incorporated
  herein by reference.&nbsp; </p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(4)</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>(5)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as Appendix A to Proxy Statement of Registrant, to be filed on or
  about September 9, 2005.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=67 valign=top>
  (6)</td>
  <td width=571 valign=top>
  Filed as Appendix B to Proxy Statement of Registrant, to be filed on or about
  September 9, 2005.</td>
 </tr>
 <tr>
  <td width=67 valign=top>
  &nbsp;</td>
  <td width=571 valign=top>
  &nbsp;</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 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>(8)</p>
  </td>
  <td width=571 valign=top>
  <p>Filed as an exhibit to
  annual report on Form 10-K for the year ended June 30, 2004, 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>(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>
  (10)</td>
  <td width=571 valign=top>
  Filed herewith.</td>
 </tr>
 <tr>
  <td width=67 valign=top>
  &nbsp;</td>
  <td width=571 valign=top>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=67 valign=top>
  <p>(11)</p>
  </td>
  <td width=571 valign=top>
  <p>To be filed on or about
  September 9, 2005.</p>
  </td>
 </tr>
 <tr>
  <td width=67 valign=top>

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

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



</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>2
<FILENAME>ex13_10k051.htm
<DESCRIPTION>EXHIBIT 13
<TEXT>
<html>

<head>

<title>EXHIBIT 13</title>

</head>

<body link=blue vlink=purple>

<p align="center">EXHIBIT 13</p>

<p align=center><b>&nbsp;</b></p>

<table cellspacing=0 cellpadding=0 width=697>
 <tr>
  <td width=697 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=695 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;&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>&nbsp;</p>
  </td>
  <td width=90 valign=top>
  <p align="center"><u><b><font size="2">2005</font></b></u></td>
  <td width=97 colspan=2 valign=top>
  <p align="center"><u><b><font size="2">2004(a)</font></b></u></td>
  <td width=93 valign=top>
  <p align="center"><u><b><font size="2">2003</font></b></u></td>
  <td width=93 colspan=3 valign=top>
  <p align="center"><u><b><font size="2">2002</font></b></u></td>
  <td width=80 valign=top>
  <p align="center"><u><b><font size="2">2001</font></b></u></td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 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">$3,912,850</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$3,707,486</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$3,285,394</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$2,887,111 </font>
  </u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">$2,406,874</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 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">1,100,842</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">1,024,724</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">900,379</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">796,714</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">663,357</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">2,180,239</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">2,030,044</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">1,799,721</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">1,583,511</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">1,304,468</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">190,889</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">178,879</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">161,071</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">132,535</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">101,514</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">156,151</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">153,231</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 131,763</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 121,420&nbsp; </font>
  </p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 109,110</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">&nbsp;&nbsp;&nbsp;&nbsp; 63,422</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 74,237</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 29,744</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8,723&nbsp; </font>

  </u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">&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=695 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 <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; expenses</font></p>
  </td>
  <td width=90 valign=top>
  <p align="right"><u><font size="2"><br>
  &nbsp;&nbsp;3,691,543</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;3,461,115</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;3,022,678</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2"><br>
  &nbsp; </font>  <u><font size="2">&nbsp;2,642,903&nbsp; </font>
  </u> </p>
  </td>
  <td width=80 valign=top>
  <p align="right"><u><font size="2"><br>
  &nbsp;&nbsp;2,178,449</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">221,307</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">246,371</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">262,716</font></p>
  </td>
  <td width=93 colspan=3 valign=top>

  <p align=right><font size="2">244,208</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">228,425</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">25,368</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2">11,603</font></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2">12,449</font></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2">13,327</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2">8,608</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; 1,526</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,742</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 567</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 2,332</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 459</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p></td>
  <td width=241 valign=top>
  <p><font size="2"><br>
  Income
  before provision for income taxes</font></p>
  </td>
  <td width=90 valign=top>

  <p align=right><font size="2"><br>
  194,413</font></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><font size="2"><br>
  233,026</font></p>
  </td>
  <td width=93 valign=top>

  <p align=right><font size="2"><br>
  249,700</font></p>
  </td>
  <td width=93 colspan=3 valign=top>

  <p align=right><font size="2"><br>
  228,549</font></p>
  </td>
  <td width=80 valign=top>
  <p align=right><font size="2"><br>
  219,358</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; 34,194</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 82,108</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 83,500</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 77,904</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 75,805</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">$&nbsp; 160,219</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp; 150,918&nbsp; </font>
  </u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp; 166,200</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp; 150,645</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">$&nbsp; 143,553</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>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=90 valign=top>

  </td>
  <td width=81 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">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.81</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1.57</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1.71</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1.54</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; 1.45
  </font> </u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=241 valign=top>
  <p><font size="2">Diluted
  net income per share</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.73</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; 1.48</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; 1.61&nbsp;
  </font> </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.47</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.41</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; &nbsp;shares
  outstanding</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 88,530</font></u></p>
  </td>
  <td width=97 colspan=2 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 96,072</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 97,096</font></u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 97,862</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp;&nbsp; 99,101</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;&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; 94,229</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; 105,739</font></u></p>
  </td>
  <td width=93 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp; 106,935&nbsp; </font>
  </u></p>
  </td>
  <td width=93 colspan=3 valign=top>
  <p align=right><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp; 105,563</font></u></p>
  </td>
  <td width=80 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp;&nbsp; 102,098</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 colspan=9 valign=top>
  <p><font size="2"><br>
  </font>
  <b><font size="2">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">$
  (179,738)</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp; 21,758</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">$
  (143,744)</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">$
  (160,266)</font></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><font size="2">$
  (110,006)</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">2,156,124</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">2,254,424</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">1,978,895</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,811,252</font></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><font size="2">1,466,267</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">635,925</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">864,840</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">539,642</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">542,108</font></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><font size="2">323,854</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">1,100,282</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">1,010,422</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">1,127,642</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">966,924</font></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 892,183</font></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 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=695 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">1,268</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="2">1,194</font></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><font size="2">1,145</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><font size="2">1,039 </font> </p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><font size="2">899</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; 320</font></u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 282</font></u></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 257</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 229</font></u></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 244</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">&nbsp;&nbsp;&nbsp;&nbsp; Total</font></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,588</font></u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,476</font></u></p>
  </td>
  <td width=96 colspan=3 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,402</font></u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,268</font></u></p>
  </td>
  <td width=81 colspan=2 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,143</font></u></p>
  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 colspan=9 valign=top>

  </td>
 </tr>
 <tr>
  <td
  width=2><p><font size="2">&nbsp;</font></td>
  <td width=695 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=80></td>
 </tr>
</table>

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

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

<p align=left>&nbsp;</p>



<p><b>GENERAL</b></p>



<p>&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.</p>

<p>&nbsp;&nbsp; The Company has a 52/53 week fiscal year
ending on the last Wednesday in June. Fiscal years 2005 and 2003, which ended
on June 29, 2005 and June 25, 2003, respectively, contained 52 weeks, while
fiscal year 2004, which ended on June 30, 2004, contained 53 weeks. </p>



<p><b>RESULTS
OF OPERATIONS FOR FISCAL YEARS 2005, 2004, AND 2003</b></p>



<p>&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:</p>





<p>&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p align="left"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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; <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fiscal Years&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>&nbsp;2005 </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; <u>&nbsp;2004 </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;<u>&nbsp;
  2003&nbsp;</u></b></p>

  </td>
 </tr>
 <tr>
  <td width=367 valign=top>

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

  </td>
  <td width=24 valign=top>

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

  </td>
  <td width=30 valign=top>

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

  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Revenues</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; </p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>100.0%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>100.0%</u></p>
  </td>
  <td width=30 valign=top>
  <p>&nbsp; </p>
  </td>
  <td width=66 valign=top>
  <p align="right"><u>100.0%</u></p>
  </td>
 </tr>
 <tr>
  <td width=625 colspan=6 valign=top>
  <p>Operating Costs and Expenses:</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>&nbsp; Cost of sales</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp;28.1%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp;27.6%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp;27.4%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>&nbsp; Restaurant
  expenses</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp;55.7%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp;54.8%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp;54.8%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>&nbsp; Depreciation and
  amortization</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp; 4.9%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 4.8%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 4.9%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>&nbsp; General and administrative</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp; 4.0%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 4.1%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 4.0%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>&nbsp; Restructure
  charges and other impairments</p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>&nbsp; 1.6%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 2.0%</u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 0.9%</u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Total operating costs and expenses</p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>&nbsp;94.3%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp;93.3%</u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp;92.0%</u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Operating income</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp; 5.7%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 6.7%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 8.0%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Interest expense</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp; 0.6%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 0.3%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 0.4%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Other, net</p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>&nbsp; 0.0%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 0.1%</u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Income before provision for income taxes</p>
  </td>
  <td width=72 valign=top>
  <p align="right">&nbsp; 5.1%</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 6.3%</p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right">&nbsp; 7.6%</p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Provision for income taxes</p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>&nbsp; 1.0%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 2.2%</u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 2.5%</u></p>
  </td>
 </tr>
 <tr>
  <td width=367 valign=top>
  <p>Net income</p>
  </td>
  <td width=72 valign=top>
  <p align="right"><u>&nbsp; 4.1%</u></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 4.1%</u></p>
  </td>
  <td width=30 valign=top>

  </td>
  <td width=66 valign=top>
  <p align="right"><u>&nbsp; 5.1%</u></p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>&nbsp;<p><b>OVERVIEW&nbsp; </b></p>



<p>&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;), and Corner Bakery Cafe (&quot;Corner Bakery&quot;) restaurant concepts.&nbsp; In addition, the Company has a 43% ownership
interest in Rockfish Seafood Grill (&quot;Rockfish&quot;).&nbsp; At June 29, 2005, the Company owned, operated, franchised, or was
involved in the ownership of 1,588 restaurants.&nbsp; </p>



<p>&nbsp;&nbsp;&nbsp; The Company intends to continue the expansion
of its restaurant concepts by opening units in strategically desirable domestic
markets and continues to contemplate development in other countries. 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.&nbsp; In addition, the Company intends to
selectively pursue domestic and international franchise expansion.&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.&nbsp; 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>



<p>&nbsp;&nbsp;&nbsp; The restaurant industry is a highly competitive business, which
is sensitive to changes in economic conditions, trends in lifestyles and
fluctuating costs. 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.</p>



<p>&nbsp;&nbsp;&nbsp; Revenues for the first quarter of fiscal 2006 are estimated to
increase by 11% to 12% compared to the same quarter in fiscal 2005, driven
primarily by capacity gains of 7% to 8%.&nbsp;
Cost of sales is estimated to be 0.5% to 0.6% higher than last year due
primarily to negative shifts in product mix and higher meat and poultry
costs.&nbsp; Restaurant expenses are
estimated to be 0.1% to 0.2% lower than last year primarily driven by
improvements in labor efficiencies and sales leverage, partially offset by
stock-based compensation expense to be recognized beginning in the first
quarter of fiscal 2006.&nbsp; General and
administrative expenses are estimated to be 0.9% to 1.0% higher due
primarily to an increase in incentive based compensation programs (including
stock-based compensation expense) and the implementation of a new annual merit
increase process.&nbsp; The effective tax
rate during the first quarter is estimated to be approximately 34.5%. </p>

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

<p><b>REVENUES</b></p>



<p>&nbsp;&nbsp; Revenues for fiscal 2005 increased to $3,912.9 million,
5.5% over the $3,707.5 million generated for fiscal 2004 (7.7% excluding
revenues of $73.9 million for the additional week in fiscal 2004).&nbsp; Revenues for fiscal 2004 increased 12.8%
from fiscal 2003 revenues of $3,285.4 million.&nbsp;
The increases were primarily attributable to a net increase of 74 and 49
company-owned restaurants in fiscal 2005 and 2004, respectively, and an
increase in comparable store sales.&nbsp;
Revenues for fiscal 2005 increased due to a 1.9% increase in capacity
(as measured by average-weighted sales weeks) and a 2.5% increase in comparable
store sales.&nbsp; Capacity increased 3.9%
for fiscal 2005 on a comparable 52-week basis.&nbsp;
Revenues for fiscal 2004 increased due to a 10.5% increase in capacity,
of which 2.1% was due to the additional week in fiscal 2004, and a 2.3%
increase in comparable store sales.&nbsp;&nbsp;&nbsp;
Menu prices in the aggregate increased 2.7% and 1.8% in fiscal 2005 and
2004, respectively.&nbsp; </p>



<p><b>COSTS
AND EXPENSES </b></p>



<p>&nbsp;&nbsp; Cost of sales, as a percent of revenues,
increased 0.5% in fiscal 2005 due primarily to a 0.9% increase in commodity
prices for meat, poultry and produce and a 0.5% unfavorable product mix shift
for meat and seafood, partially offset by a 0.9% increase in menu prices.&nbsp; Cost of sales, as a percent of revenues,
increased 0.2% in fiscal 2004 due primarily 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; </p>



<p>&nbsp;&nbsp; Restaurant expenses, as a percent of
revenues, increased 0.9% in fiscal 2005.&nbsp;
The increase was primarily due to the $17.3 million FICA tax assessment
paid in resolution of the Internal Revenue Service (&quot;IRS&quot;) dispute, increases
in labor costs related to new product rollouts and service initiatives,
increases in utility and vacation costs resulting from the correction of
accounting policies, and increases in repair and maintenance expenses.&nbsp; These increases were partially offset by a
decrease in advertising costs, gains totaling $8.7 million related to the sale
of fourteen Chili's restaurants and all three of the Corner Bakery
commissaries, and a $1.8 million gain related to the early extinguishment of
certain mortgage loan obligations.&nbsp;
Restaurant expenses, as a percent of revenues, remained flat in fiscal
2004.&nbsp; 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 were offset by
increased sales leverage from the additional week in fiscal 2004, decreases in
pre-opening costs due to a lower number of store openings in fiscal 2004 as
compared to fiscal 2003, and a $2.4 million gain from the sale of four Chili's
restaurants and the sale of one real estate property.</p>



<p>&nbsp;&nbsp; Depreciation and amortization increased $12.0
million and $17.8 million in fiscal 2005 and 2004, respectively.&nbsp; The increases were due to new unit
construction and ongoing remodel costs, partially offset by a decrease in
depreciation related to the disposition of stores and a declining depreciable
asset base for older units.&nbsp; </p>



<p>&nbsp;&nbsp; General and administrative expenses increased
$2.9 million and $21.5 million in fiscal 2005 and 2004, respectively.&nbsp; The increases were due primarily to
increased costs related to consumer research and an increase in payroll costs
resulting from an increase in headcount.&nbsp; The increase in fiscal 2005 was partially
offset by a decrease in performance based compensation.</p>



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



<p><b>&nbsp;&nbsp; </b>Restructure
charges and other impairments recorded during fiscal 2005 consist of a $36.4
million charge related to the disposition of the remaining Big Bowl Asian Kitchen
(&quot;Big Bowl&quot;) restaurants, a $16.9 million charge to fully impair the investment
and notes receivable associated with Rockfish, and a $10.1 million charge
related primarily to restaurant closures.&nbsp;
Restructure charges and other impairments recorded during fiscal 2004
consist of a $39.5 million charge related to store closures, a $27.0 million
charge to impair Big Bowl goodwill, and a $7.7 million charge related to the
final disposition of the Cozymel's Coastal Grill (&quot;Cozymel's&quot;) restaurants.&nbsp; See Note 2 to our consolidated financial
statements for additional discussion of restructure charges and other
impairments.</p>



<p>&nbsp;&nbsp; Interest expense increased by $13.8 million
in fiscal 2005 due primarily to interest related to the 5.75% notes (the
&quot;Notes&quot;) issued in May 2004 and increased average borrowings on the Company's
lines-of-credit.&nbsp; These increases were
partially offset by a decrease in interest expense due to the redemption of the
convertible senior debentures in January 2005 and the final scheduled repayment
of the senior notes in April 2005.&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
Notes and a decrease in capitalized interest due to lower interest rates.&nbsp; </p>



<p>&nbsp;&nbsp; Other, net decreased $216,000 in fiscal 2005
due primarily to a decrease in the Company's share of losses in equity method
investees, as well as an increase in interest income associated with the
investment of proceeds received from the issuance of the Notes, partially
offset by an increase in expense related to the Company's net savings plan
obligations.&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;
</p>



<p><b>INCOME TAXES </b></p>



<p>&nbsp;&nbsp; The Company's effective income tax rate was
17.6%, 35.2%, and 33.4% in fiscal 2005, 2004, and 2003, respectively. The
decrease in fiscal 2005 was primarily due to the disposition of Big Bowl, which
allowed the Company to take tax deductions for goodwill impairment charges
totaling $48.6 million ($21.6 million recorded in fiscal 2005 and $27.0 million
recorded in fiscal 2004), an income tax benefit of approximately $16.9 million,
consisting of federal income tax credits related to the additional FICA taxes paid
as a result of the IRS resolution, and a $6.6 million tax benefit related to
the correction of deferred tax liabilities as a result of an analysis of the
tax basis of certain property and equipment balances.&nbsp; The increase in fiscal 2004 was primarily due to the Big Bowl
goodwill impairment charge, which was not deductible for tax purposes until
fiscal 2005, partially offset by an increase in the FICA tax credit resulting
from increased tip reporting.&nbsp; </p>



<p><b>IMPACT OF
INFLATION</b></p>



<p>&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.</p>

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

<p><b>LIQUIDITY AND
CAPITAL RESOURCES</b></p>



<p>&nbsp;&nbsp; Working capital decreased to a deficit of $179.7 million at June
29, 2005 from a surplus of $21.8 million at June 30, 2004, primarily due to the
cash redemption of the convertible senior debentures and purchases of treasury
stock during fiscal 2005.&nbsp; Net cash
provided by operating activities decreased to $443.5 million for fiscal 2005
from $489.7 million for fiscal 2004 due to 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.</p>



<p>&nbsp;&nbsp; Payments due under the Company's contractual
obligations for outstanding indebtedness, purchase obligations as defined by
the Securities and Exchange Commission (&quot;SEC&quot;), and the expiration of credit
facilities as of June 29, 2005 are as follows:</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>Payments Due by Period<br>
  (in
  thousands)</b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=center><b><u><br>
  &nbsp;Total</u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b>Less than<u><br>
  1 Year</u></b></p>
  </td>
  <td width=78 valign=top>
  <p align=center><b>1-3<br>
  <u>Years</u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b>3-5<br>
  <u>Years</u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b>More than<br>
  <u>5 Years</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p>Long-term
  debt(a)</p>
  </td>
  <td width=84>
  <p align=right>$535,420</p>
  </td>
  <td width=90>
  <p align=right>$ 66,878</p>
  </td>
  <td width=78>
  <p align=right>$ 37,247</p>
  </td>
  <td width=90>
  <p align=right>$ 52,110</p>
  </td>
  <td width=90>
  <p align=right>$379,185</p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p>Capital
  leases</p>
  </td>
  <td width=84>
  <p align=right>57,562</p>
  </td>
  <td width=90>
  <p align=right>3,361</p>
  </td>
  <td width=78>
  <p align=right>6,981</p>
  </td>
  <td width=90>
  <p align=right>7,339</p>
  </td>
  <td width=90>
  <p align=right>39,881</p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p>Operating leases </p>
  </td>
  <td width=84>
  <p align=right>892,375</p>
  </td>
  <td width=90>
  <p align=right>111,568</p>
  </td>
  <td width=78>
  <p align=right>210,093</p>
  </td>
  <td width=90>
  <p align=right>179,859</p>
  </td>
  <td width=90>
  <p align=right>390,855</p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p>Purchase
  obligations(b)</p>
  </td>
  <td width=84>
  <p align=right>120,563</p>
  </td>
  <td width=90>
  <p align=right>44,080</p>
  </td>
  <td width=78>
  <p align=right>62,993</p>
  </td>
  <td width=90>
  <p align=right>13,490</p>
  </td>
  <td width=90>
  <p align=right>-</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><br>
  Amount of Credit Facility
  Expiration by Period<br>
  (in
  thousands)</b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=center><b>Total<br>
  Commitment</b></td>
  <td width=90 valign=top>
  <p align=center><b>Less than<br>
  <u>1 year(c)</u></b></p>
  </td>
  <td width=78 valign=top>
  <p align=center><b>1-3<br>
  <u>Years</u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b>3-5<br>
  <u>Years</u></b></p>
  </td>
  <td width=90 valign=top>
  <p align=center><b>More than <u><br>
  5 Years</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=199>
  <p>Credit
  facilities</p>
  </td>
  <td width=84>
  <p align=right>$375,000</p>
  </td>
  <td width=90>
  <p align=right>$&nbsp;&nbsp; 75,000</p>
  </td>
  <td width=78>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; -</p>
  </td>
  <td width=90>
  <p align=right>$300,000</p>
  </td>
  <td width=90>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; - </p>
  </td>
 </tr>
</table>



<blockquote>



<p><font size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Long-term
debt consists of amounts owed on the 5.75% notes, mortgage loan obligations,
credit facilities and accrued interest on fixed-rate obligations totaling
$162.1 million.</font></p>



<p><font size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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, certain non-alcoholic beverages and baked goods and
exclude agreements that are cancelable without significant penalty.</font></p>

<p><font size="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 October 2009.<br>
&nbsp;</font></p>



</blockquote>



<p>&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 $334.9
million in fiscal 2005 compared to $314.3 million in fiscal 2004.&nbsp; The Company estimates that its fiscal 2006
capital expenditures will approximate $434.0 million.&nbsp; These capital expenditures will be funded entirely from
operations and existing credit facilities. </p>



<p>&nbsp;&nbsp; In
April 2005, the Company paid the remaining $14.9 million principal balance on
the senior notes.&nbsp; In January 2005, the
Company redeemed all of its convertible senior debentures.&nbsp; Debenture holders chose to convert a total
of $10.8 million of the accreted debenture value into 308,092 shares of common
stock.&nbsp; The Company redeemed the balance
of $262.7 million of the accreted debenture value for cash.&nbsp; In November 2004, the Company paid $23.9
million as a result of the early extinguishment of certain mortgage loan
obligations.&nbsp; The Company funded these
payments with cash on hand and available lines of credit.</p>



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



<p>&nbsp;&nbsp; In
December 2004, the Company resolved a dispute with the IRS and paid an
assessment of $17.3 million for employer-only FICA taxes. In connection with
this payment, the Company also recorded an income tax benefit of approximately
$16.9 million, consisting of federal income tax credits related to the
additional FICA taxes paid. </p>



<p>&nbsp;&nbsp; During
fiscal 2005, the Company received cash proceeds totaling $31.5 million related
to the sale of fourteen Chili's restaurants to new franchisees, the sale of the
remaining nine Big Bowl restaurants, and the sale of all three of the Corner
Bakery commissaries.</p>



<p>&nbsp;&nbsp; During fiscal 2005, the Company received cash
proceeds of $13.0 million from the sale of real estate in connection with
restaurant closings and expects to receive an additional $21.0 million in fiscal
2006.</p>



<p>&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 5.0
million shares of its common stock for $170.2 million during fiscal 2005, of
which 3.5 million shares were acquired under forward purchase contracts settled
on October 21, 2004.&nbsp; As of June 29,
2005, approximately 32.5 million shares had been repurchased for $884.9 million
under the stock repurchase plan.&nbsp; The
Company's stock repurchase plan will be used to minimize the dilutive impact of
stock options.&nbsp; The repurchased common
stock is reflected as a reduction of shareholders' equity.</p>



<p>&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. </p>

<p><b>QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</b></p>



<p>&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.</p>

<p>&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 outstanding borrowings on credit
facilities and the notional amounts of interest rate swaps, totaled $176.6
million at June 29, 2005.&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 29, 2005 would be approximately $1.8 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.</p>

<p>&nbsp;&nbsp; The Company purchases certain commodities
such as meat, poultry, produce, and dairy. These commodities are generally
purchased based upon market prices established with vendors. These purchase
arrangements may contain contractual features that fix the price paid for
certain commodities.&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.</p>



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



<p>&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.</p>

<p><b>CRITICAL
ACCOUNTING POLICIES</b></p>



<p>&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.</p>



<p>&nbsp;&nbsp; <b>Property
and Equipment</b>&nbsp; </p>



<p>&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.</p>



<p>&nbsp;&nbsp; <b>Impairment of Long-Lived Assets</b>&nbsp;
</p>



<p>&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 related to
its restaurant concepts.&nbsp; This impairment
test requires 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 related to goodwill.</p>



<p>&nbsp;&nbsp; <b>Financial Instruments</b>&nbsp; </p>



<p>&nbsp;&nbsp; The Company enters into
interest rate swaps to maintain the value of certain 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.</p>



<p>&nbsp;&nbsp; <b>Self-Insurance</b>&nbsp;</p>



<p>&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 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. </p>



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



<p><b>RECENT ACCOUNTING PRONOUNCEMENT</b></p>



<p>&nbsp;&nbsp; In
December 2004, the Financial Accounting Standards Board (&quot;FASB&quot;) issued
Statement of Financial Accounting Standards (&quot;SFAS&quot;) No. 123 (Revised 2004),
&quot;Share-Based Payment,&quot; (&quot;SFAS 123R&quot;), which amends SFAS No. 123 and SFAS No.
95. SFAS 123R requires all companies to measure and record compensation cost
for all share-based payments, including employee stock options, at fair value
and will be effective for annual periods beginning after June 15, 2005. The
Company estimates that stock-based compensation expense for fiscal 2006 will be
$31.0 to $33.0 million ($24.0 to $26.0 million after tax).&nbsp; This estimate includes costs related to
unvested stock options and restricted stock grants associated with new
compensation programs.</p>



<p><b>FORWARD-LOOKING
STATEMENTS</b></p>



<p>&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 or electronic
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><i>Competition
may adversely affect the Company's operations and financial results.</i></p>



<p>&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.</p>



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



<p><i>The Company's sales volumes
generally decrease in winter months.</i></p>



<p>&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.</p>



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



<p>&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.</p>



<p>&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.</p>



<p><i>Inflation may increase the
Company's operating expenses.</i></p>



<p>&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.</p>



<p><i>Increased energy costs may
adversely affect the Company's profitability.</i></p>



<p>&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 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>



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



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



<p>&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.</p>



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



<p>&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.</p>



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



<p>&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.</p>



<p><i>Identification of material
weakness in internal control may adversely affect the Company's financial
results.&nbsp; </i></p>

<p><i>&nbsp;</i>&nbsp;&nbsp; The Company is
subject to the ongoing internal control provisions of Section 404 of the
Sarbanes-Oxley Act of 2002.&nbsp; Those
provisions provide for the identification of material weaknesses in internal
control which could indicate a lack of adequate controls to generate accurate
financial statements.&nbsp; Though the
Company routinely assesses its internal controls, there can be no assurance
that the Company will be able to timely remediate material weaknesses, if any,
that may be identified in future periods, or maintain all of the controls
necessary for continued compliance.&nbsp;
There likewise can be no assurance that the Company will be able to
retain sufficient skilled finance and accounting personnel, especially in light
of the increased demand for such personnel among publicly traded companies.<i>&nbsp; </i></p>

<p><i>&nbsp;Other risk factors may adversely
affect the Company's financial performance.</i></p>



<p>&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.</p>

&nbsp;<hr><P STYLE="page-break-after: always"></P>
<table border=0 cellspacing=0 cellpadding=0 width=666>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p align=center><b>BRINKER
  INTERNATIONAL, INC.</b></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p align=center><b>CONSOLIDATED
  STATEMENTS OF INCOME</b></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p align=center><b>(In
  thousands, except per share amounts)</b></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>&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; </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>

  </td>
  <td width=106 valign=top>
  <p align="center"><b>&nbsp; <u>2005&nbsp;</u></b></p>
  </td>
  <td width=117 valign=top>
  <p align=center><b><u>2004&nbsp;</u></b></p>
  </td>
  <td width=101 valign=top>
  <p align=center><b><u>2003 &nbsp;</u></b></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>


  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Revenues</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>$3,912,850</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>$3,707,486</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>$3,285,394</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p>Operating
  Costs and Expenses:</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; Cost of sales </p>
  </td>
  <td width=106 valign=top>
  <p align=right>1,100,842</p>
  </td>
  <td width=117 valign=top>
  <p align=right>1,024,724</p>
  </td>
  <td width=101 valign=top>
  <p align=right>900,379</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; Restaurant expenses </p>
  </td>
  <td width=106 valign=top>
  <p align=right>2,180,239</p>
  </td>
  <td width=117 valign=top>
  <p align=right>2,030,044</p>
  </td>
  <td width=101 valign=top>
  <p align=right>1,799,721</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; Depreciation and amortization </p>
  </td>
  <td width=106 valign=top>
  <p align=right>190,889</p>
  </td>
  <td width=117 valign=top>
  <p align=right>178,879</p>
  </td>
  <td width=101 valign=top>
  <p align=right>161,071</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; General and administrative </p>
  </td>
  <td width=106 valign=top>
  <p align=right>156,151</p>
  </td>
  <td width=117 valign=top>
  <p align=right>153,231</p>
  </td>
  <td width=101 valign=top>
  <p align=right>131,763</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; Restructure charges and other impairments</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 63,422</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 74,237</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 29,744</u></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp;&nbsp;&nbsp; Total operating costs and expenses </p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;3,691,543</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;3,461,115</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;3,022,678</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Operating
  income </p>
  </td>
  <td width=106 valign=top>
  <p align=right>221,307</p>
  </td>
  <td width=117 valign=top>
  <p align=right>246,371</p>
  </td>
  <td width=101 valign=top>
  <p align=right>262,716</p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Interest
  expense</p>
  </td>
  <td width=106 valign=top>
  <p align=right>25,368</p>
  </td>
  <td width=117 valign=top>
  <p align=right>11,603</p>
  </td>
  <td width=101 valign=top>
  <p align=right>12,449</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Other,
  net</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 1,526</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 1,742</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 567</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p>Income before provision for</p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; income taxes</p>
  </td>
  <td width=106 valign=top>
  <p align=right>194,413</p>
  </td>
  <td width=117 valign=top>
  <p align=right>233,026</p>
  </td>
  <td width=101 valign=top>
  <p align=right>249,700</p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Provision
  for income taxes </p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 34,194</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 82,108</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 83,500</u></p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp;&nbsp;&nbsp; Net income</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>$&nbsp; 160,219</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>$ &nbsp;150,918</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>$&nbsp; 166,200</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Basic
  net income per share</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.81</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1.57</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1.71</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>Diluted
  net income per share</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; 1.73</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.48</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.61</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p>Basic weighted average </p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; shares outstanding</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;&nbsp; 88,530</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 96,072</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 97,096</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p>Diluted weighted average </p>
  </td>
 </tr>
 <tr>
  <td width=343 valign=top>
  <p>&nbsp; shares outstanding</p>
  </td>
  <td width=106 valign=top>
  <p align=right><u>&nbsp;&nbsp; 94,229</u></p>
  </td>
  <td width=117 valign=top>
  <p align=right><u>&nbsp;&nbsp; 105,739</u></p>
  </td>
  <td width=101 valign=top>
  <p align=right><u>&nbsp;&nbsp; 106,935</u></p>
  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=666 colspan=4 valign=top>
  <p>See accompanying notes to
  consolidated financial statements.</p>
  </td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P>&nbsp;<table cellspacing=0 cellpadding=0 width=651 bordercolorlight="#C0C0C0" bordercolordark="#C0C0C0">
 <tr>
  <td width=651 colspan=4 valign=top>
  <p align=center><b>BRINKER
  INTERNATIONAL, INC.</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p align=center><b>CONSOLIDATED
  BALANCE SHEETS</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p align=center><b>(In
  thousands, except share and per share amounts)</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <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; </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align="center"><b>&nbsp;<u>&nbsp;&nbsp; 2005&nbsp;&nbsp;
  </u></b></p>
  </td>
  <td width=97 valign=top>
  <p align="center"><b> <u>&nbsp;&nbsp;&nbsp;2004&nbsp;&nbsp; </u>&nbsp;</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p><b>ASSETS</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>Current
  Assets:</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Cash and cash equivalents</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>$&nbsp;&nbsp; 42,253</p>
  </td>
  <td width=97 valign=top>
  <p align=right>$&nbsp;&nbsp; 47,437</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Short-term investments</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>-</p>
  </td>
  <td width=97 valign=top>
  <p align=right>179,325</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Accounts receivable </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>45,155</p>
  </td>
  <td width=97 valign=top>
  <p align=right>37,934</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Inventories</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>49,503</p>
  </td>
  <td width=97 valign=top>
  <p align=right>38,113</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Prepaid expenses and other</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>81,312</p>
  </td>
  <td width=97 valign=top>
  <p align=right>74,764</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Deferred income taxes</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 21,956</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 23,347</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>

  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=97 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp;&nbsp; Total current assets </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp; 240,179</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp; 400,920</u></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp;</p>
  <p>Property
  and Equipment, at Cost:</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Land</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>284,885</p>
  </td>
  <td width=97 valign=top>
  <p align=right>283,777</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Buildings and leasehold improvements </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>1,570,787</p>
  </td>
  <td width=97 valign=top>
  <p align=right>1,413,980</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Furniture and equipment</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>729,193</p>
  </td>
  <td width=97 valign=top>
  <p align=right>666,415</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Construction-in-progress</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 87,192</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 72,818</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; &nbsp;</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>2,672,057</p>
  </td>
  <td width=97 valign=top>
  <p align=right>2,436,990</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Less accumulated depreciation and
  amortization </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp; (963,892</u>)</p>

  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp; (823,106</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp;&nbsp; Net property and equipment </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;1,708,165</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;1,613,884</u></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>

  <p>Other
  Assets:</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Goodwill</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>135,754</p>
  </td>
  <td width=97 valign=top>
  <p align=right>158,068</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Other</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 72,026</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 81,552</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp;&nbsp; Total other assets</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp; 207,780</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp; 239,620</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp;&nbsp; Total assets </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>$2,156,124</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>$2,254,424</u></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp;</p>
  <p><b>LIABILITIES AND SHAREHOLDERS' EQUITY</b></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>Current
  Liabilities:</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Current installments of long-term debt </p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 1,805</p>
  </td>
  <td width=97 valign=top>
  <p align=right>$&nbsp; &nbsp;&nbsp; 18,099</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Accounts payable</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>133,096</p>
  </td>
  <td width=97 valign=top>
  <p align=right>105,795</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Accrued liabilities</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>262,277</p>
  </td>
  <td width=97 valign=top>
  <p align=right>218,225</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp; Income taxes payable</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 22,739</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 37,043</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>&nbsp;&nbsp; Total current liabilities</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right><u>&nbsp;&nbsp; 419,917</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;&nbsp; 379,162</u></p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>Long-term debt, less current
  installments</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>406,505</p>
  </td>
  <td width=97 valign=top>
  <p align=right>639,291</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>Deferred
  income taxes</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>56,189</p>
  </td>
  <td width=97 valign=top>
  <p align=right>72,453</p>
  </td>
 </tr>
 <tr>
  <td width=451 valign=top>
  <p>Other
  liabilities</p>
  </td>
  <td width=102 colspan=2 valign=top>
  <p align=right>173,231</p>
  </td>
  <td width=97 valign=top>
  <p align=right>153,096</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p><br>
  Commitments
  and Contingencies (Notes 8 and 14)</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p><br>
  Shareholders'
  Equity:</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp; Common stock - 250,000,000 authorized
  shares; </p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; $.10 par value; 117,499,541 shares issued </p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp; &nbsp;&nbsp; and 89,182,804 shares outstanding at</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp; June 29, 2005, and 117,499,541 shares
  issued</p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp; &nbsp;&nbsp; and 90,647,745 shares outstanding at June
  30, 2004</p>
  </td>
  <td width=96 valign=top>
  <p align=right>11,750</p>
  </td>
  <td width=97 valign=top>
  <p align=right>11,750</p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp; Additional paid-in capital</p>
  </td>
  <td width=96 valign=top>
  <p align=right>369,813</p>
  </td>
  <td width=97 valign=top>
  <p align=right>356,094</p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp; Accumulated other
  comprehensive income</p>
  </td>
  <td width=96 valign=top>
  <p align=right>700</p>
  </td>
  <td width=97 valign=top>
  <p align=right>737</p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp; Retained earnings</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;1,421,866</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;1,261,647</u></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>1,804,129</p>
  </td>
  <td width=97 valign=top>
  <p align=right>1,630,228</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp; Less treasury stock, at cost (28,316,737
  shares at</p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>
  <p>&nbsp;&nbsp; June 29, 2005 and 26,851,796 shares at </p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  &nbsp;&nbsp; June 30, 2004)</td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; (703,847</u>)</td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp; (619,806</u>)</td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp;&nbsp; Total shareholders' equity </p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;1,100,282</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>&nbsp;1,010,422</u></p>
  </td>
 </tr>
 <tr>
  <td width=457 colspan=2 valign=top>
  <p>&nbsp;&nbsp; Total
  liabilities and shareholders' equity</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$2,156,124</u></p>
  </td>
  <td width=97 valign=top>
  <p align=right><u>$2,254,424</u></p>
  </td>
 </tr>
 <tr>
  <td width=651 colspan=4 valign=top>


  <p><br>
  See accompanying notes to
  consolidated financial statements.</p>
  </td>
 </tr>
 <tr height=0>
  <td width=451></td>
  <td width=6></td>
  <td width=96></td>
  <td width=97></td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P>&nbsp;<table cellspacing=0 cellpadding=0 width=695>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p align=center><b><font size="2">BRINKER INTERNATIONAL, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p align=center><b><font size="2">CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p align=center><b><font size="2">(In thousands)</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p align=center>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 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=181 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=119 colspan=2 valign=top>
  <p align=center><b><u><font size="2"><br>
  <br>
  Common Stock</font></u></b></p>
  </td>
  <td width=82 valign=top>
  <p align=center><b><font size="2">&nbsp;<br>
  Additional<br>
  Paid-In</font></b></p>
  </td>
  <td width=78 valign=top>
  <p align=center><b><font size="2"><br>
  <br>
  &nbsp;Retained</font></b></p>
  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="2"><br>
  <br>
  Treasury</font></b></p>
  </td>
  <td width=84 valign=top>
  <p align=center><b><font size="2">Accumulated<br>
  Other<br>
  Comprehensive</font></b></p>
  </td>
  <td width=82 valign=top>
  <p align=center>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=57 valign=top>
  <p align=center><b><u><font size="2">&nbsp;Shares</font></u></b></p>
  </td>
  <td width=62 valign=top>
  <h4 align="center"><b><u><font size="2">Amount</font></u><font size="2">
  </font> </b></h4>
  </td>
  <td width=82 valign=top>
  <p align=center><b><u><font size="2">&nbsp;Capital </font> </u></b></p>
  </td>
  <td width=78 valign=top>
  <p align=center><b><u><font size="2">&nbsp;Earnings </font> </u></b></p>
  </td>
  <td width=69 valign=top>
  <p align="center"><b><u><font size="2">Stock&nbsp; </font>
  </u>
  </b>
  </td>
  <td width=84 valign=top>
  <p align=center><b><u><font size="2">&nbsp;Income&nbsp; </font> </u> </b>
  </td>
  <td width=82 valign=top>
  <p align="center">
  <b> <u><font size="2">Total&nbsp; </font>
  </u>
  </b>
  </td>
 </tr>
 <tr>
  <td width=494 colspan=6 valign=top>

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

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

  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Balances
  at June 26, 2002</font></p>
  </td>
  <td width=57 valign=top>
  <p align="right"><font size="2">97,440</font></p>
  </td>
  <td width=62 valign=top>
  <p align="right"><font size="2">$11,750</font></p>
  </td>
  <td width=82 valign=top>
  <p align="right"><font size="2">$
  328,319</font></p>
  </td>
  <td width=78 valign=top>
  <p align="right"><font size="2">$&nbsp; 944,529</font></p>
  </td>
  <td width=69 valign=top>
  <p align="right"><font size="2">$
  (317,674)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">$&nbsp; 966,924</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Net
  income </font> </p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">166,200</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">166,200</font></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p><font size="2">Change
  in fair value of</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;investments, net of tax</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">609</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 609</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>

  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2"><br>
  &nbsp;Comprehensive income</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2"><br>
  &nbsp;&nbsp; 166,809 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">(2,208)</font></p>
  </td>
  <td width=62 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=78 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>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(64,477)</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">2,492</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(1,748)</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">42,048</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">40,300</font></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;&nbsp;options exercised</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">13,710</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">13,710</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=57 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=left>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=left>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">2,101</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 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>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 131</font></u></p>
  </td>
  <td width=62 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 118</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 2,157</font></u></p>
  </td>
  <td width=84 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;&nbsp; 2,275 </font> </u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Balances
  at June 25, 2003</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">97,855 </font> </p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">11,750</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">342,500 </font>
  </p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">1,110,729 </font>
  </p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">(337,946)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">609</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,127,642</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Net
  income</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">150,918</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">150,918</font></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>
  <p><font size="2">Change
  in fair value of</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;investments, net of tax</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">128</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 128</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;Comprehensive income</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 151,046</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">(9,326)</font></p>
  </td>
  <td width=62 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=78 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>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(322,615)</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">2,053</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; &nbsp;&nbsp;-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">2,049</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">39,538</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">41,587</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;options exercised</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">9,752</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">9,752</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,770</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 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>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 66</font></u></p>
  </td>
  <td width=62 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 23</font></u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; 1,217</font></u></p>
  </td>
  <td width=84 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;&nbsp; 1,240</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Balances
  at June 30, 2004 </font> </p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">90,648 </font> </p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;11,750</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">&nbsp; 356,094 </font> </p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">&nbsp;1,261,647 </font> </p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">&nbsp;(619,806)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 737</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">&nbsp;1,010,422</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Net
  income </font> </p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">160,219</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">160,219</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Change
  in fair value of</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;investments, net of tax</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">(37)</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (37</font></u><font size="2">)</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;Comprehensive income </font> </p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp; 160,182</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Purchases
  of treasury stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">(4,953)</font></p>
  </td>
  <td width=62 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=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">(170,210)</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(170,210)</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuances
  of common stock</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">3,449</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">(3,271)</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">85,180</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">81,909</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Tax
  benefit from stock</font></p>
  </td>
  <td width=57 valign=top>

  </td>
  <td width=62 valign=top>

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

  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;options exercised</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 16,088</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp; 16,088</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Amortization
  of unearned</font></p>
  </td>
  <td width=57 valign=top>

  </td>
  <td width=62 valign=top>

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

  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;compensation</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,252</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=69 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=84 valign=top>
  <p align=right><font size="2">-</font></p>
  </td>
  <td width=82 valign=top>
  <p align=right><font size="2">1,252</font></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Issuance
  of restricted</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">&nbsp;stock, net of forfeitures</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp; 39 </font> </u></p>
  </td>
  <td width=62 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp; (350</font></u><font size="2">)</font></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</font></u></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;989</font></u></p>
  </td>
  <td width=84 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;&nbsp;&nbsp;&nbsp; 639</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>

  </td>
  <td width=57 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=69 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=82 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=181 valign=top>
  <p><font size="2">Balances
  at June 29, 2005</font></p>
  </td>
  <td width=57 valign=top>
  <p align=right><u><font size="2">89,183 </font> </u></p>
  </td>
  <td width=62 valign=top>
  <p align=right><u><font size="2">$11,750</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">$
  369,813 </font> </u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u><font size="2">$1,421,866 </font>
  </u></p>
  </td>
  <td width=69 valign=top>
  <p align=right><u><font size="2">$
  (703,847)</font></u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u><font size="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 700</font></u></p>
  </td>
  <td width=82 valign=top>
  <p align=right><u><font size="2">$1,100,282</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=633 colspan=8 valign=top>

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

<hr><P STYLE="page-break-after: always"></P>&nbsp;<table border=0 cellspacing=0 cellpadding=0 width=703>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b>BRINKER INTERNATIONAL, INC.</b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b>CONSOLIDATED STATEMENTS OF CASH
  FLOWS</b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p align=center><b>(In
  thousands)</b></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

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

  </td>
  <td width=90 valign=top>
  <p align="center"><b>&nbsp;<u>&nbsp;&nbsp;
  2005&nbsp; </u></b></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><b>&nbsp;<u>&nbsp;&nbsp;
  2004&nbsp; </u></b></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><b>&nbsp;<u>&nbsp;&nbsp;
  2003&nbsp; </u></b></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>

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

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

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

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>Cash Flows from Operating
  Activities:</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net income</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$ 160,219</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$ 150,918</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$ 166,200</p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>Adjustments
  to reconcile net income to net cash</p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>&nbsp; provided by operating activities:</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp; Depreciation and amortization</p>
  </td>
  <td width=90 valign=top>
  <p align=right>190,889</p>
  </td>
  <td width=90 valign=top>
  <p align=right>178,879</p>
  </td>
  <td width=90 valign=top>
  <p align=right>161,071</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp; Restructure charges and other
  impairments</p>
  </td>
  <td width=90 valign=top>
  <p align=right>63,422</p>
  </td>
  <td width=90 valign=top>
  <p align=right>74,237</p>
  </td>
  <td width=90 valign=top>
  <p align=right>29,744</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp; Deferred
  income taxes</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(14,852)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>1,467</p>
  </td>
  <td width=90 valign=top>
  <p align=right>37,743</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Gain on sale of assets</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(9,278)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(2,452)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Gain on extinguishment of debt</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(1,750)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp; Amortization of deferred
  costs</p>
  </td>
  <td width=90 valign=top>
  <p align=right>4,365</p>
  </td>
  <td width=90 valign=top>
  <p align=right>9,318</p>
  </td>
  <td width=90 valign=top>
  <p align=right>11,721</p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>&nbsp;&nbsp; Changes in
  assets and liabilities, excluding</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp; effects of acquisitions and dispositions:</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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Receivables</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(5,984)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(2,515)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(8,956)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(12,630)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(14,047)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(2,726)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid
  expenses and other</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(3,804)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>2,182</p>
  </td>
  <td width=90 valign=top>
  <p align=right>392</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other
  assets</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(3,377)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(3,146)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>2,474</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current
  income taxes</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;&nbsp; 1,784</p>
  </td>
  <td width=90 valign=top>
  <p align=right>38,864</p>
  </td>
  <td width=90 valign=top>
  <p align=right>37,314</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts
  payable</p>
  </td>
  <td width=90 valign=top>
  <p align=right>27,301</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(2,273)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(10,350)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued
  liabilities</p>
  </td>
  <td width=90 valign=top>
  <p align=right>37,382</p>
  </td>
  <td width=90 valign=top>
  <p align=right>34,645</p>
  </td>
  <td width=90 valign=top>
  <p align=right>14,603</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other
  liabilities</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 9,793</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; 23,628</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; 15,114</u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
  cash provided by operating activities</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp; 443,480</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp; 489,705</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp; 454,344</u></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>Cash Flows from Investing Activities:</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Payments for property and
  equipment</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(334,911)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(314,345)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(331,998)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Proceeds from sale of assets</p>
  </td>
  <td width=90 valign=top>
  <p align=right>44,484</p>
  </td>
  <td width=90 valign=top>
  <p align=right>22,235</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Proceeds from sale of short-term investments</p>
  </td>
  <td width=90 valign=top>
  <p align=right>179,325</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp; 74,850</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Purchases of short-term investments</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(254,175)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net payments (to) from
  affiliates</p>
  </td>
  <td width=90 valign=top>
  <p align=right>-</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(2,252)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>7,372</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Investments in equity method
  investee</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; (1,750</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
  cash used in investing activities</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;(111,102</u>)</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;(473,687</u>)</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;(326,376</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>
  <p>Cash Flows from Financing Activities:</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Payments on long-term debt </p>
  </td>
  <td width=90 valign=top>
  <p align=right>(301,364)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(17,120)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(16,890)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Purchases of treasury stock</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(170,210)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;(322,615)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;(64,477)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Proceeds from issuances of
  treasury stock</p>
  </td>
  <td width=90 valign=top>
  <p align=right>71,112</p>
  </td>
  <td width=90 valign=top>
  <p align=right>41,587</p>
  </td>
  <td width=90 valign=top>
  <p align=right>40,300</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net borrowings (payments) on
  credit facilities </p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;&nbsp; 62,900</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp; (63,500)</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net proceeds from issuance of
  debt</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp; 296,075</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net cash used in financing
  activities</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;(337,562</u>)</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; (2,073</u>)</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;(104,567</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Net change in cash and cash
  equivalents</p>
  </td>
  <td width=90 valign=top>
  <p align=right>(5,184)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>13,945</p>
  </td>
  <td width=90 valign=top>
  <p align=right>23,401</p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Cash and cash equivalents at
  beginning of year</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; 47,437</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; 33,492</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp; 10,091</u></p>
  </td>
 </tr>
 <tr>
  <td width=433 valign=top>
  <p>Cash and cash equivalents at end
  of year</p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>$&nbsp; 42,253</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>$&nbsp; 47,437</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>$&nbsp; 33,492</u></p>
  </td>
 </tr>
 <tr>
  <td width=703 colspan=4 valign=top>

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

  <p>See accompanying notes to
  consolidated financial statements.</p>
  </td>
 </tr>
</table>

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

<p>&nbsp;</p>

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





<p><b>1.&nbsp; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>



<p><b>(a) Basis of Presentation</b></p>



<p>&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.</p>



<p>&nbsp;&nbsp;&nbsp; The Company has a 52/53 week fiscal year
ending on the last Wednesday in June. Fiscal years 2005 and 2003, which ended
on June 29, 2005 and June 25, 2003, respectively, each contained 52 weeks.
Fiscal year 2004 ended on June 30, 2004 and contained 53 weeks. </p>



<p><b>&nbsp;&nbsp;&nbsp; Reclassifications</b></p>



<p>&nbsp;&nbsp;&nbsp; As a result of the Company's review of its
lease accounting policies that began in December 2004, and consistent with the
views expressed by the SEC, the Company has adopted new accounting policies
associated with landlord contributions and rent holidays.&nbsp; The Company previously netted landlord
contributions against leasehold improvements, thereby reducing future
depreciation related to leased properties.&nbsp;
The landlord contributions are now recorded as a deferred rent liability
and amortized as a reduction of rent expense over the lease term.&nbsp; In addition, the Company previously began
calculating straight-line rent on the rent commencement date, which is
typically the date the restaurant is opened.&nbsp;
The straight-line rent calculation now includes the rent holiday period,
which is the period of time between the Company taking control of a leased site
(generally at the beginning of construction) and the rent commencement date.
The portion of straight-line rent allocated to the construction period is
capitalized. </p>



<p>&nbsp;&nbsp;&nbsp; These accounting policy changes resulted in
an increase to net property and equipment and other liabilities of $47.0
million as of June 30, 2004.&nbsp; In
addition, depreciation and amortization increased and restaurant expenses
decreased by $3.4 million and $2.9 million for fiscal 2004 and fiscal 2003,
respectively.&nbsp; These changes have no
impact on the Company's previously reported net income, earnings per share, revenues,
total operating costs and expenses, shareholders' equity, or compliance with
any covenants under its credit facility or other debt instruments.</p>



<p>&nbsp;&nbsp;&nbsp; Additionally, auction rate securities of
$179.3 million which were previously classified as cash and cash equivalents at
June 30, 2004 have been reclassified as short-term investments.&nbsp; The cash flows related to these investments
are now disclosed as investing activities in the Company's consolidated
statements of cash flows.</p>



<p>&nbsp;&nbsp;&nbsp; Certain other prior year amounts in the
accompanying consolidated financial statements have been reclassified to
conform with fiscal 2005 presentation.&nbsp;
These reclassifications have no effect on the Company's net income or
financial position as previously reported. </p>



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



<p><b>(b) Revenue Recognition</b></p>



<p>&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; </p>



<p><b>(c) Short-Term Investments</b></p>

<p>&nbsp;&nbsp;&nbsp; The Company's short-term investments are
variable rate bonds commonly known as auction rate securities.&nbsp; The Company invests primarily in municipal
and student obligations and these securities are purchased and sold at par
value.&nbsp; The underlying security is
issued as a long-term investment.&nbsp;
However, auction rate securities are classified as short-term
investments because they typically can be purchased and sold every 7, 28 and 35
days.&nbsp; The trading of auction rate
securities takes place through a dutch auction with an interest rate reset at
the beginning of each holding period. At the end of each holding period the
interest is paid to the investor.</p>

<p><b>(d) Financial Instruments</b></p>



<p>&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. </p>



<p>&nbsp;&nbsp;&nbsp; The Company's financial instruments at June
29, 2005 and June 30, 2004 consist of cash equivalents, short-term investments,
accounts receivable, notes receivable, and long-term debt. The fair value of
the Company's Notes and convertible debt, based on quoted market prices,
totaled approximately $318.0 million and $585.4 million at June 29, 2005 and
June 30, 2004, 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 Notes and
convertible debt: cash equivalents, short-term investments 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. </p>



<p>&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 lease obligations.&nbsp;
The Company records 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 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 lease obligations are recorded as
adjustments to restaurant expenses. Cash flows related to derivative
transactions are included in operating activities. See Note 7 for additional
discussion of hedging activities.</p>

<p><b>(e) Inventories</b></p>



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

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

<p><b>(f) Property and Equipment</b></p>



<p>&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.</p>



<p>&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.</p>

<p><b>(g) Operating Leases</b></p>

<p>&nbsp;&nbsp;&nbsp; Rent expense for leases that contain
scheduled rent increases is recognized on a straight-line basis over the lease
term, including cancelable option periods where failure to exercise such
options would result in an economic penalty such that the renewal appears
reasonably assured.&nbsp; The straight-line
rent calculation includes the rent holiday period, which is the period of time
between the Company taking control of a leased site and the rent commencement
date.&nbsp; The portion of straight-line rent
allocated to the construction period is capitalized and amortized to
depreciation and amortization expense over the useful life of the related
assets.&nbsp; </p>



<p>&nbsp;&nbsp;&nbsp; Contingent rents are generally amounts due
as a result of sales in excess of amounts stipulated in certain restaurant
leases and are included in rent expense as they are incurred.&nbsp; Landlord contributions are recorded when
received as a deferred rent liability and amortized as a reduction of rent
expense on a straight-line basis over the lease term.</p>

<p><b>(h) Capitalized Interest</b></p>

<p>&nbsp;&nbsp;&nbsp; Interest costs capitalized during the
construction period of restaurants were approximately $3.8 million, $3.4
million, and $5.6 million during fiscal 2005, 2004, and 2003, respectively.</p>



<p><b>(i) Advertising</b></p>



<p>&nbsp;&nbsp;&nbsp; Advertising costs are expensed as
incurred.&nbsp; Advertising costs were $126.0
million, $151.3 million, and $135.2 million in fiscal 2005, 2004, and 2003,
respectively, and are included in restaurant expenses in the consolidated
statements of income.</p>



<p><b>(j) Goodwill</b></p>



<p>&nbsp;&nbsp;&nbsp; Goodwill represents the residual purchase price after allocation
to all other identifiable net assets acquired.&nbsp;
Goodwill is not subject to amortization but is tested for impairment
annually or more frequently if events or changes in circumstances indicate that
the asset might be impaired.&nbsp; SFAS No.
142, &quot;Goodwill and Other Intangible Assets,&quot; requires a two-step process for
testing impairment of goodwill.&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 is measured
as the excess of its carrying value over its implied fair value.&nbsp; See Note 3 for additional disclosures
related to goodwill.</p>



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



<p><b>(k) Self-Insurance Program</b></p>



<p>&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; Accrued
expenses and other liabilities include the estimated incurred but unreported
costs to settle unpaid claims and estimated future claims. </p>



<p><b>(l) Income Taxes</b></p>



<p>&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.</p>



<p><b>(m)
Stock-Based Compensation</b></p>



<p>&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):</p>

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

  </td>
  <td width=96 valign=top>
  <p align="center"><u>&nbsp;
  2005&nbsp; </u></p>
  </td>
  <td width=102 valign=top>
  <p align="center"><u>&nbsp;
  2004&nbsp; </u></p>
  </td>
  <td width=96 valign=top>
  <p align="center"><u>&nbsp;
  2003&nbsp; </u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>

  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Net
  income - as reported </p>
  </td>
  <td width=96 valign=top>
  <p align=right>$160,219</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$150,918</p>
  </td>
  <td width=96 valign=top>
  <p align=right>$166,200</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Add:
  Reported stock-based compensation expense, net of taxes</p>
  </td>
  <td width=96 valign=top>
  <p align=right><br>
  1,383</p>
  </td>
  <td width=102 valign=top>
  <p align=right><br>
  1,756</p>
  </td>
  <td width=96 valign=top>
  <p align=right><br>
  1,863</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Deduct: Fair value based
  compensation expense, net of taxes(a)</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><br>
  &nbsp;&nbsp;(16,700</u>)</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u><br>
  &nbsp;(18,663</u>)</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u><br>
  &nbsp;(17,697</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Net
  income - pro forma</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$144,902</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$134,011</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$150,366</u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Earnings
  per share:</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Basic
  - as reported </p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.81</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.57</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.71</u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Basic
  - pro forma</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.64</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.39</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.55</u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Diluted
  - as reported</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.73</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.48</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.61</u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Diluted
  - pro forma</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.57</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.31</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$&nbsp;&nbsp; 1.47</u></p>
  </td>
 </tr>
</table>



<blockquote>



<p><font size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;The fiscal 2005 compensation expense includes prior
year forfeiture adjustments of $1.5 million, net of tax.</font></p>



</blockquote>



<p>&nbsp;&nbsp;&nbsp; The weighted average fair value of option
grants was $11.48, $11.38, and $10.76 during fiscal 2005, 2004, and 2003, respectively.&nbsp; The fair value is estimated using the
Black-Scholes option-pricing model with the following weighted average
assumptions:</p>



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

  </td>
  <td width=96 valign=top>
  <p align="right">&nbsp;<u>&nbsp;
  2005 </u></p>
  </td>
  <td width=102 valign=top>
  <p align="right">&nbsp;<u>&nbsp;
  2004 </u></p>
  </td>
  <td width=96 valign=top>
  <p align="right"><u>&nbsp; 2003 </u></p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Expected
  volatility</p>
  </td>
  <td width=96 valign=top>
  <p align=right>31.2%</p>
  </td>
  <td width=102 valign=top>
  <p align=right>33.0%</p>
  </td>
  <td width=96 valign=top>
  <p align=right>34.0%</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Risk-free
  interest rate</p>
  </td>
  <td width=96 valign=top>
  <p align=right>3.4%</p>
  </td>
  <td width=102 valign=top>
  <p align=right>3.4%</p>
  </td>
  <td width=96 valign=top>
  <p align=right>3.0%</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Expected
  lives</p>
  </td>
  <td width=96 valign=top>
  <p align=right>5 years</p>
  </td>
  <td width=102 valign=top>
  <p align=right>5 years</p>
  </td>
  <td width=96 valign=top>
  <p align=right>5 years</p>
  </td>
 </tr>
 <tr>
  <td width=361 valign=top>
  <p>Dividend
  yield</p>
  </td>
  <td width=96 valign=top>
  <p align=right>0.0%</p>
  </td>
  <td width=102 valign=top>
  <p align=right>0.0%</p>
  </td>
  <td width=96 valign=top>
  <p align=right>0.0%</p>
  </td>
 </tr>
</table>



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



<p>&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.&nbsp; The Company
will begin recognizing stock-based compensation expense in fiscal 2006 in
accordance with the provisions of SFAS 123R.&nbsp;
The estimated impact of adopting SFAS 123R for fiscal 2006 will be $31.0
to $33.0 million ($24.0 to $26.0 million, net of tax). &nbsp;This estimate includes costs
related to unvested stock options and restricted stock grants associated with
new compensation programs.</p>

<p><b>(n)
Comprehensive Income</b></p>



<p>&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 2005, 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;
</p>

<p><b>(o)
Net Income Per Share </b></p>



<p>&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 and convertible debt.&nbsp; The Company had approximately 700,000 stock
options outstanding at June 29, 2005 and June 30, 2004, and 1.4 million stock
options outstanding at June 25, 2003 that were not included in the dilutive
earnings per share calculation because the effect would have been
antidilutive.&nbsp; The components of basic
and diluted earnings per share are as follows:</p>



<table border=0 cellspacing=0 cellpadding=0 width=658>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=114 valign=top>
  <p align=center><u>&nbsp;&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=114 valign=top>
  <p align=center><u>&nbsp;&nbsp; 2004&nbsp;
  </u></p>
  </td>
  <td width=111 valign=top>
  <p align=center><u>&nbsp;&nbsp; 2003&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=114 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=111 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Net income - as reported(w)</p>
  </td>
  <td width=114 valign=top>
  <p align=right>$ 160,219 </p>
  </td>
  <td width=114 valign=top>
  <p align=right>$ 150,918</p>
  </td>
  <td width=111 valign=top>
  <p align=right>$ 166,200 </p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Adjustment for interest on convertible
  debt, net of tax</p>
  </td>
  <td width=114 valign=top>
  <p align=right> <u><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;2,650</u></p>
  </td>
  <td width=114 valign=top>
  <p align=right><br>
&nbsp;&nbsp;&nbsp;&nbsp; <u>&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;5,023 </u></p>
  </td>
  <td width=111 valign=top>
  <p align=right><u><br>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6,313</u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Net income - as adjusted(x)</p>
  </td>
  <td width=114 valign=top>
  <p align=right><u>$ 162,869 </u></p>
  </td>
  <td width=114 valign=top>
  <p align=right><u>$ 155,941</u></p>
  </td>
  <td width=111 valign=top>
  <p align=right><u>$ 172,513 </u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=111 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>
  <p>Basic weighted average shares outstanding(y)</p>
  </td>
  <td width=114 valign=top>
  <p align=right>88,530</p>
  </td>
  <td width=114 valign=top>
  <p align=right>96,072</p>
  </td>
  <td width=111 valign=top>
  <p align=right>97,096</p>
  </td>
 </tr>
 <tr>
  <td width=319>
  <p>Dilutive effect of stock
  options</p>
  </td>
  <td width=114>
  <p align=right>1,267</p>
  </td>
  <td width=114>
  <p align=right>1,867</p>
  </td>
  <td width=111>
  <p align=right>2,039</p>
  </td>
 </tr>
 <tr>
  <td width=319>
  <p>Dilutive effect of
  convertible debt</p>
  </td>
  <td width=114>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 4,432&nbsp; </u></p>
  </td>
  <td width=114>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 7,800</u></p>
  </td>
  <td width=111>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 7,800 </u></p>
  </td>
 </tr>
 <tr>
  <td width=319>
  <p><br>
  Diluted weighted average shares outstanding(z)</p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;&nbsp;&nbsp; 94,229</u></p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;&nbsp; 105,739</u></p>
  </td>
  <td width=111>
  <p align=right><u><br>
  &nbsp;&nbsp; 106,935</u></p>
  </td>
 </tr>
 <tr>
  <td width=319>

  <p><br>
  Basic earnings per share(w)/(y)</p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.81 </u></p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.57</u></p>
  </td>
  <td width=111>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.71 </u></p>
  </td>
 </tr>
 <tr>
  <td width=319>

  <p><br>
  Diluted earnings per share (x)/(z)</p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.73 </u></p>
  </td>
  <td width=114>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.48</u></p>
  </td>
  <td width=111>
  <p align=right><u><br>
  &nbsp;$&nbsp;&nbsp;&nbsp; 1.61 </u></p>
  </td>
 </tr>
</table>



<p><b>(p) Segment
Reporting</b></p>



<p>&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. </p>

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

<p><b>(q)
Use of Estimates</b></p>



<p>&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.</p>

<p><b>2.&nbsp; RESTRUCTURE CHARGES AND OTHER IMPAIRMENTS </b></p>



<p><b>(a) Fiscal 2005</b></p>



<p>&nbsp;&nbsp; A $36.4 million impairment charge was recorded primarily as a
result of the decision to sell nine Big Bowl restaurants and to close the
remaining five restaurants (the sale was finalized in February 2005).&nbsp; The decision to dispose of Big Bowl was the
result of research and testing of the brand's competitive positioning.&nbsp; The charge consists of goodwill totaling
$21.6 million, long-lived asset impairments totaling $9.6 million, lease
obligation charges totaling $3.8 million, and the write-off of inventory and
other supplies totaling $1.4 million. </p>



<p>&nbsp;&nbsp; A $16.9 million charge was recorded to fully impair the investment
and notes receivable associated with Rockfish as a result of recent declines in
operating performance and lower forecasted earnings.</p>



<p>&nbsp;&nbsp; A $12.6 million impairment charge was recorded primarily as a
result of the decision to close one
Corner Bakery commissary and fifteen restaurants, including ten Chili's, three
Macaroni Grill, and two On The Border restaurants. The decision to close the
restaurants was the result of an 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 $9.1 million, lease obligation charges
totaling $2.2 million, and the write-off of inventory and other supplies
totaling $1.3 million. The remaining carrying values of the long-lived assets
associated with the closed stores totaled approximately $9.7 million at June
29, 2005.&nbsp; The fair value of the
long-lived assets were primarily based on estimates from third party real
estate brokers who examined comparable property sales values in the respective
markets in which the restaurants operate.</p>



<p>&nbsp;&nbsp;&nbsp; Additionally, the Company recorded a $2.5 million gain related to
the thirty restaurants closed during fiscal 2004, consisting primarily of
increases in the estimated sales value of previously impaired owned units.&nbsp;&nbsp; </p>



<p><b>(b) Fiscal 2004</b></p>



<p>&nbsp;&nbsp;&nbsp; A $39.5
million charge was recorded as a result of 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 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 $4.6 million and $13.0 million at June 29, 2005 and June 30,
2004, respectively.&nbsp; The fair value of
the long-lived assets were primarily based on estimates from third party real
estate brokers who examined comparable property sales values in the respective
markets in which the restaurants operate.&nbsp;
In addition, the Company made lease payments related to the closed
stores totaling $3.3 million and $800,000 during fiscal 2005 and fiscal 2004,
respectively, reducing the lease obligation included in accrued liabilities to
$2.1 million and $5.4 million at June 29, 2005 and June 30, 2004,
respectively.&nbsp; </p>

<p>&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; </p>



<p>&nbsp;&nbsp;&nbsp; Additionally,
the Company recorded a $7.7 million charge as a result of the final disposition
of Cozymel's.</p>

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

<p><b>(c) Fiscal 2003</b></p>



<p>&nbsp;&nbsp;&nbsp; A $29.7
million charge was recorded primarily as a result of the decision to dispose of
Cozymel's and the decision to close ten restaurants.</p>



<p><b>3.&nbsp; GOODWILL</b></p>



<p>&nbsp;&nbsp;&nbsp; The changes in the carrying amount of
goodwill for the fiscal years ended June 29, 2005 and June 30, 2004 are as
follows (in thousands):</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=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=78 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </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>Balance
  at beginning of year</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$158,068</p>
  </td>
  <td width=78 valign=top>
  <p align=right>$185,068</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp; Impairment
  of goodwill (see Note 2)</p>
  </td>
  <td width=84 valign=top>
  <p align=right>(21,620)</p>
  </td>
  <td width=78 valign=top>
  <p align=right>(27,000)</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp; Other
  </p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; (694)</u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p align=left>Balance
  at end of year</p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>$135,754</u></p>
  </td>
  <td width=78 valign=top>
  <p align=right><u>$158,068</u></p>
  </td>
 </tr>
</table>



<p><b>4.&nbsp; ACCRUED AND OTHER LIABILITIES </b></p>



<p>&nbsp;&nbsp;&nbsp; Accrued liabilities consist of the following
(in thousands):</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Payroll</p>
  </td>
  <td width=96 valign=top>
  <p align=right>$ 89,659 </p>
  </td>
  <td width=96 valign=top>
  <p align=right>$ 84,776</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Gift
  cards</p>
  </td>
  <td width=96 valign=top>
  <p align=right>53,597</p>
  </td>
  <td width=96 valign=top>
  <p align=right>43,550</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Sales
  tax</p>
  </td>
  <td width=96 valign=top>
  <p align=right>28,041</p>
  </td>
  <td width=96 valign=top>
  <p align=right>28,254</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Property
  tax</p>
  </td>
  <td width=96 valign=top>
  <p align=right>22,661</p>
  </td>
  <td width=96 valign=top>
  <p align=right>21,404</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Insurance</p>
  </td>
  <td width=96 valign=top>
  <p align=right>25,044</p>
  </td>
  <td width=96 valign=top>
  <p align=right>19,640</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Other</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 43,275</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 20,601</u></p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><u>$262,277</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$218,225</u></p>
  </td>
 </tr>
</table>

<p>&nbsp;&nbsp;&nbsp; Other liabilities consist of the following
(in thousands):</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Straight-line
  rent</p>
  </td>
  <td width=96 valign=top>
  <p align=right>$ 61,562 </p>
  </td>
  <td width=96 valign=top>
  <p align=right>$ 58,424 </p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Retirement
  plan (see Note 11)</p>
  </td>
  <td width=96 valign=top>
  <p align=right>36,841</p>
  </td>
  <td width=96 valign=top>
  <p align=right>38,473</p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>
  <p>Other</p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 74,828 </u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 56,199</u></p>
  </td>
 </tr>
 <tr>
  <td width=463 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><u>$173,231
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$153,096</u></p>
  </td>
 </tr>
</table>

<p><b>5.&nbsp; INCOME TAXES </b></p>

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

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=655 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=355 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=102 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2003&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=4 valign=top>
  <p>Current income tax expense:</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp; Federal</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$
  33,070</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$
  65,977</p>
  </td>
  <td width=96 valign=top>
  <p align=right>$
  36,761</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp; State</p>
  </td>
  <td width=102 valign=top>
  <p align=right>10,074</p>
  </td>
  <td width=102 valign=top>
  <p align=right>12,885</p>
  </td>
  <td width=96 valign=top>
  <p align=right>8,107</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp; Foreign</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp; 1,184</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp; 1,098</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 889</u></p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp;&nbsp; Total current income tax expense</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 44,328</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 79,960</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 45,757</u></p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=655 colspan=4 valign=top>
  <p>Deferred
  income tax (benefit) expense:</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp; Federal</p>
  </td>
  <td width=102 valign=top>
  <p align=right>(8,912)</p>
  </td>
  <td width=102 valign=top>
  <p align=right>1,896</p>
  </td>
  <td width=96 valign=top>
  <p align=right>35,968</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp; State</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; (1,222</u>)</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 252</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;&nbsp; 1,775</u></p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>&nbsp;&nbsp;&nbsp; Total deferred income tax (benefit) expense </p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;(10,134</u>)</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; 2,148</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;&nbsp; 37,743</u></p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=right><u>$
  34,194</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$
  82,108</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$ 83,500</u></p>
  </td>
 </tr>
</table>

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


<p>&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):</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=355 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=102 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2003&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=4 valign=top>

  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>Income
  tax expense at statutory rate</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$
  68,045</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$
  81,559</p>
  </td>
  <td width=96 valign=top>
  <p align=right>$
  87,395</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>FICA
  tax credit</p>
  </td>
  <td width=102 valign=top>
  <p align=right>(30,032)</p>
  </td>
  <td width=102 valign=top>
  <p align=right>(17,506)</p>
  </td>
  <td width=96 valign=top>
  <p align=right>(13,236)</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>State
  income taxes, net of Federal benefit</p>
  </td>
  <td width=102 valign=top>
  <p align=right>5,753</p>
  </td>
  <td width=102 valign=top>
  <p align=right>8,539</p>
  </td>
  <td width=96 valign=top>
  <p align=right>6,423</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>Goodwill
  impairment</p>
  </td>
  <td width=102 valign=top>
  <p align=right>(9,450)</p>
  </td>
  <td width=102 valign=top>
  <p align=right>9,450</p>
  </td>
  <td width=96 valign=top>
  <p align=right>2,275</p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>
  <p>Other</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; (122</u>)</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 66</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp; 643</u></p>
  </td>
 </tr>
 <tr>
  <td width=355 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=right><u>$
  34,194</u></p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$
  82,108</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$
  83,500</u></p>
  </td>
 </tr>
</table>



<p>&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 29, 2005 and June 30, 2004 are as follows (in
thousands):</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=457 valign=top>

  </td>
  <td width=102 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=96 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=3 valign=top>
  <p>Deferred
  income tax assets:</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Restructuring charges and other impairments</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp; 8,081</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp; $ 17,399</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Employee benefit plans</p>
  </td>
  <td width=102 valign=top>
  <p align=right>11,911</p>
  </td>
  <td width=96 valign=top>
  <p align=right>13,863</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Leasing transactions</p>
  </td>
  <td width=102 valign=top>
  <p align=right>16,980</p>
  </td>
  <td width=96 valign=top>
  <p align=right>16,716</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Insurance reserves</p>
  </td>
  <td width=102 valign=top>
  <p align=right>7,548</p>
  </td>
  <td width=96 valign=top>
  <p align=right>&nbsp; 8,715</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Other, net</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 31,200</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 24,158</u></p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp;&nbsp; Total deferred income tax assets</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 75,720</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 80,851</u></p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=3 valign=top>

  </td>
 </tr>
 <tr>
  <td width=655 colspan=3 valign=top>

  </td>
 </tr>
 <tr>
  <td width=655 colspan=3 valign=top>
  <p>Deferred
  income tax liabilities:</p>
  </td>
 </tr>
 <tr>
  <td width=655 colspan=3 valign=top>
  <p>&nbsp; Depreciation and capitalized interest</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp;&nbsp; on property and equipment</p>
  </td>
  <td width=102 valign=top>
  <p align=right>47,360</p>
  </td>
  <td width=96 valign=top>
  <p align=right>88,509</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp;Prepaid
  expenses</p>
  </td>
  <td width=102 valign=top>
  <p align=right>19,711</p>
  </td>
  <td width=96 valign=top>
  <p align=right>10,456</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Goodwill and other amortization</p>
  </td>
  <td width=102 valign=top>
  <p align=right>11,887</p>
  </td>
  <td width=96 valign=top>
  <p align=right>11,887</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Captive insurance</p>
  </td>
  <td width=102 valign=top>
  <p align=right>10,946</p>
  </td>
  <td width=96 valign=top>
  <p align=right>3,998</p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp; Other, net</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 20,049</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp; 15,107</u></p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp;&nbsp; Total deferred income tax liabilities</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;109,953</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>&nbsp;129,957</u></p>
  </td>
 </tr>
 <tr>
  <td width=457 valign=top>
  <p>&nbsp;&nbsp; Net deferred income tax liability</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>$
  34,233</u></p>
  </td>
  <td width=96 valign=top>
  <p align=right><u>$
  49,106</u></p>
  </td>
 </tr>
</table>

<p><b>6.&nbsp; DEBT</b></p>



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



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

  </td>
  <td width=84 valign=top>
  <p align=center><u>&nbsp; 2005&nbsp;&nbsp;
  </u></p>
  </td>
  <td width=85 valign=top>
  <p align=center><u>&nbsp; 2004&nbsp;&nbsp;
  </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>5.75%
  notes</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$298,598</p>
  </td>
  <td width=85 valign=top>
  <p align=right>$298,449</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Credit
  facilities</p>
  </td>
  <td width=84 valign=top>
  <p align=right>62,900</p>
  </td>
  <td width=85 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Capital
  lease obligations (see Note 8)</p>
  </td>
  <td width=84 valign=top>
  <p align=right>35,022</p>
  </td>
  <td width=85 valign=top>
  <p align=right>35,926</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Mortgage
  loan obligations</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;
  11,790</p>
  </td>
  <td width=85 valign=top>
  <p align=right>&nbsp;
  38,931</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Convertible
  debt</p>
  </td>
  <td width=84 valign=top>
  <p align=right>-</p>
  </td>
  <td width=85 valign=top>
  <p align=right>269,233</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Senior
  notes</p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u>&nbsp; 14,851</u></p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right>408,310</p>
  </td>
  <td width=85 valign=top>
  <p align=right>657,390</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Less
  current installments</p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>&nbsp;
  (1,805</u>)</p>
  </td>
  <td width=85 valign=top>
  <p align=right><u>&nbsp;(18,099</u>)</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>

  </td>
  <td width=84 valign=top>
  <p align=right><u>$406,505</u></p>
  </td>
  <td width=85 valign=top>
  <p align=right><u>$639,291</u></p>
  </td>
 </tr>
</table>



<p>&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.</p>



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



<p>&nbsp;&nbsp;&nbsp; The Company has credit facilities
aggregating $375.0 million at June 29, 2005. A revolving credit facility of
$300.0 million bears interest at LIBOR (3.34% at June 29, 2005) plus a maximum
of 1.5% (0.625% at June 29, 2005) and expires in October 2009. At June 29,
2005, $15.0 million was outstanding under this facility. The remaining credit
facility is an uncommitted obligation giving the lenders the option not to
extend funding and bears interest based upon a negotiated rate (federal funds
rate plus 0.5% or 3.75% as of June 29, 2005).&nbsp;
At June 29, 2005, $47.9 million was outstanding under the uncommitted
facility. Unused credit facilities available to the Company totaled $312.1
million at June 29, 2005.&nbsp; Obligations
under the Company's credit facilities, which require short-term repayments,
have been classified as long-term debt, reflecting the Company's intent and ability
to refinance these borrowings through the existing credit facilities.</p>



<p>&nbsp;&nbsp;&nbsp; The unsecured senior notes required
semi-annual interest payments at an annual rate of 7.8%. The remaining
principal balance of $14.9 million was paid in April 2005.</p>



<p>&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 9.00% to 10.75% per year.&nbsp; The obligations are collateralized by the
underlying restaurant properties. </p>



<p>&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 required no interest payments and were issued at a
discount representing a yield to maturity of 2.75% per annum.&nbsp; The Debentures became redeemable at the
Company's option on October 10, 2004.&nbsp;
On December 22, 2004, the Company exercised its right to redeem all of
the Debentures.&nbsp; Holders had the option
to convert the Debentures into shares of the Company's common stock or cash
until the close of business on January 20, 2005. Holders chose to convert a
total of $10.8 million of the accreted debenture value into 308,092 shares of
common stock and the remaining accreted debenture value of $262.7 million was
redeemed for cash on January 24, 2005.</p>



<p>&nbsp;&nbsp;&nbsp; The Company's debt agreements contain
various financial covenants that, among other things, require the maintenance
of certain leverage and fixed charge coverage ratios.&nbsp; The Company is currently in compliance with all financial
covenants. </p>



<p>&nbsp;&nbsp;&nbsp; Excluding capital lease obligations (see
Note 8), the Company's long-term debt maturities for the five years following
June 29, 2005 are as follows (in thousands):</p>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=480 valign=top>
  <p>Fiscal<br>
  <u>&nbsp;Year </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>2006</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>$ 48,766</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>2007</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>632</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>2008</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>531</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>2009</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>576</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>2010</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right>15,624</p>
  </td>
 </tr>
 <tr>
  <td width=480 valign=top>
  <p>Thereafter</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=85 valign=top>
  <p align=right><u>&nbsp;307,159 </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>$373,288</u></p>
  </td>
 </tr>
</table>



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



<p><b>7.&nbsp; DERIVATIVE FINANCIAL INSTRUMENTS</b></p>



<p>&nbsp;&nbsp;&nbsp; The Company entered into three interest rate
swaps in December 2001 with a total notional value of $113.7 million at June
29, 2005.&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 (3.34% at June 29, 2005) 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 29, 2005 and June 30, 2004 were assets of
approximately $13.0 million and $7.7 million, respectively.&nbsp; There was no hedge ineffectiveness during
fiscal 2005, 2004, or 2003.&nbsp; 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; Accordingly, changes in the fair value of the swaps are recorded
in other assets with a like adjustment in other liabilities.</p>



<p>&nbsp;&nbsp;&nbsp; The interest rate swaps on the senior notes
expired in conjunction with the Company's payment of the remaining principal in
April 2005.</p>

<p><b>&nbsp;8.&nbsp; LEASES</b></p>



<p><b>(a) Capital Leases</b></p>



<p>&nbsp;&nbsp;&nbsp; The Company leases certain buildings under
capital leases. The asset values of $27.5 million at June 29, 2005 and June 30,
2004, and the related accumulated amortization of $10.6 million and $9.5
million at June 29, 2005 and June 30, 2004, respectively, are included in
property and equipment. Amortization of assets under capital leases is included
in depreciation and amortization expense.</p>

<p><b>(b) Operating Leases </b></p>



<p>&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 sales in
excess of specified levels, as defined in the leases.&nbsp; Rent expense for fiscal 2005, 2004, and 2003 was $127.9 million,
$119.6 million, and $108.1 million, respectively.&nbsp; Contingent rent included in rent expense for fiscal 2005, 2004,
and 2003 was $12.2 million, $11.6 million, and $10.3 million, respectively. </p>



<p><b>(c) Commitments</b></p>



<p>&nbsp;&nbsp;&nbsp; At June 29, 2005, future minimum lease
payments on capital and operating leases were as follows (in thousands):</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>Fiscal<br>
  <u>&nbsp;Year </u></p>
  </td>
  <td width=102 valign=top>
  <p align=center>Capital<br>
  <u>&nbsp;Leases&nbsp;
  </u></p>
  </td>
  <td width=114 valign=top>
  <p align="center">Operating<br>
  <u>&nbsp;Leases&nbsp;
  </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>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>2006</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp; 3,361</p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;$ 111,568</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>2007</p>
  </td>
  <td width=102 valign=top>
  <p align=right>&nbsp;3,447</p>
  </td>
  <td width=114 valign=top>
  <p align=right>107,942</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>2008</p>
  </td>
  <td width=102 valign=top>
  <p align=right>3,534</p>
  </td>
  <td width=114 valign=top>
  <p align=right>102,151</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>2009</p>
  </td>
  <td width=102 valign=top>
  <p align=right>3,624</p>
  </td>
  <td width=114 valign=top>
  <p align=right>94,451</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>2010</p>
  </td>
  <td width=102 valign=top>
  <p align=right>3,715</p>
  </td>
  <td width=114 valign=top>
  <p align=right>85,408</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>Thereafter</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp; 39,881</u></p>
  </td>
  <td width=114 valign=top>
  <p align=right><u>&nbsp; 390,855</u></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>&nbsp; Total minimum lease payments</p>
  </td>
  <td width=102 valign=top>
  <p align=right>57,562</p>
  </td>
  <td width=114 valign=top>
  <p align=right><u>$
  892,375</u></p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>&nbsp; Imputed interest (average rate of 7%)</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;(22,540</u>)</p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>&nbsp; Present value of minimum lease payments</p>
  </td>
  <td width=102 valign=top>
  <p align=right>35,022</p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=439 valign=top>
  <p>&nbsp; Less current installments</p>
  </td>
  <td width=102 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; (939</u>)</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>$
  34,083</u></p>
  </td>
  <td width=114 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
</table>



<p>&nbsp;&nbsp;&nbsp; At June 29, 2005, 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.</p>



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



<p><b>9.&nbsp; STOCK OPTION PLANS</b></p>



<p><b>(a) 1983, 1992, and 1998 Employee Incentive Stock
Option Plans</b></p>



<p>&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. </p>



<p>&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.</p>



<p>&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.</p>



<p>&nbsp;&nbsp;&nbsp; Transactions during fiscal 2005, 2004, and
2003 were as follows (in thousands, except option prices):</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>Number
  of<br>
  Company Options</p>
  </td>
  <td width=18 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=234 colspan=5 valign=top>
  <p align=center>Weighted
  Average Share<br>
  Exercise Price</p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>

  </td>
  <td width=60 colspan=2 valign=top>
  <p align="center"><u>&nbsp;2005 </u></p>
  </td>
  <td width=66 valign=top>
  <p align="center">&nbsp;<u>&nbsp;2004 </u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align="center">&nbsp;<u>&nbsp;2003 </u></p>
  </td>
  <td width=18 valign=top>
  <p align=center>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align="center">&nbsp;
  <u>&nbsp;2005 </u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align="center">&nbsp;<u>&nbsp;2004 </u>&nbsp;</p>
  </td>
  <td width=84 valign=top>
  <p align="center">&nbsp;&nbsp;
  <u>&nbsp;2003 </u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p>Options outstanding at</p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>&nbsp; beginning
  of year</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right>9,859</p>
  </td>
  <td width=66 valign=top>
  <p align=right>9,611</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>9,944</p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right>$26.92</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>$24.07</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$20.50</p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>Granted</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right>2,786</p>
  </td>
  <td width=66 valign=top>
  <p align=right>2,879</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>2,639</p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right>33.96</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>32.53</p>
  </td>
  <td width=84 valign=top>
  <p align=right>30.68</p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>Exercised</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right>(3,053)</p>
  </td>
  <td width=66 valign=top>
  <p align=right>(1,978)</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>(2,477)</p>
  </td>
  <td width=18 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=78 colspan=2 valign=top>
  <p align=right>22.76</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right>20.54</p>
  </td>
  <td width=84 valign=top>
  <p align=right>16.05</p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>&nbsp;Forfeited</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u>&nbsp;
  (896</u>)</p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>&nbsp;
  (653</u>)</p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>&nbsp;
  (495</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>&nbsp;32.13</u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>&nbsp;29.08</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>&nbsp;27.54</u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p>Options outstanding at </p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>&nbsp; end
  of year</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u>8,696</u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>&nbsp;9,859</u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>&nbsp;9,611</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>$30.10</u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>$26.92</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>$24.07</u></p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>
  <p>Options exercisable at </p>
  </td>
 </tr>
 <tr>
  <td width=217 colspan=2 valign=top>
  <p>&nbsp; end
  of year</p>
  </td>
  <td width=60 colspan=2 valign=top>
  <p align=right><u>2,864</u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>&nbsp;3,918</u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>&nbsp;3,809</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>$24.52</u></p>
  </td>
  <td width=72 colspan=2 valign=top>
  <p align=right><u>$20.64</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>$16.69</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>

  <p>

  </td>
  <td width=322 colspan=8 valign=top>
  <p align="center">&nbsp;</p>
  <p align="center"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Options Outstanding&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
  <td width=218 colspan=4 valign=top>
  <p align="center">&nbsp;</p>
  <p align="center"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Options Exercisable&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; </u></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p align=center><br>
  <br>
  Range of<br>
  exercise<br>
  <u>&nbsp;&nbsp;&nbsp;
  prices&nbsp;&nbsp; </u>&nbsp;</p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=center><br>
  <br>
  <br>
  Number
  of<br>
  <u>options</u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center>Weighted<br>
  average<br>
  remaining<br>
  contractual<br>
  <u>life (years)</u></p>
  </td>
  <td width=88 colspan=3 valign=top>
  <p align=center><br>
  Weighted<br>
  average<br>
  exercise<br>
  <u>&nbsp;
  price&nbsp; </u>&nbsp;</p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=center><br>
  <br>
  <br>
  Number of<br>
  <u>&nbsp;options </u></p>
  </td>
  <td width=120 colspan=2 valign=top>
  <p align=center><br>
  Weighted<br>
  average<br>
  exercise<br>
  <u>&nbsp;
  price&nbsp; </u>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=667 colspan=13 valign=top>

  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p>$ 7.42-$11.58</p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 144</p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center>1.87</p>
  </td>
  <td width=88 colspan=3 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp; $&nbsp; 8.64</p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 144</p>
  </td>
  <td width=120 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $&nbsp; 8.64</p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p>$13.58-$18.67</p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 736</p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center>3.93</p>
  </td>
  <td width=88 colspan=3 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 17.03</p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 736</p>
  </td>
  <td width=120 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 17.03</p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>
  <p>$25.50-$38.01</p>
  </td>
  <td width=90 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp; <u>7,816</u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><u>8.06</u></p>
  </td>
  <td width=88 colspan=3 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>&nbsp;31.73</u></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>1,984</u></p>
  </td>
  <td width=120 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>&nbsp;28.46</u></p>
  </td>
 </tr>
 <tr>
  <td width=127 valign=top>

  </td>
  <td width=90 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp; <u>8,696</u></p>
  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><u>7.61</u></p>
  </td>
  <td width=88 colspan=3 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp; <u>$30.10</u></p>
  </td>
  <td width=98 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>2,864</u></p>
  </td>
  <td width=120 colspan=2 valign=top>
  <p align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>$24.52</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=16></td>
  <td width=62></td>
  <td width=36></td>
  <td width=36></td>
  <td width=84></td>
 </tr>
</table>



<p><b>(b) 1991
and 1999 Non-Employee Stock Option Plans</b></p>



<p>&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. </p>



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



<p>&nbsp;&nbsp;&nbsp; Transactions during fiscal 2005, 2004, and
2003 were as follows (in thousands, except option prices):</p>



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

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

  </td>
  <td width=54 valign=top>
  <p align=center><u>2005
  </u></p>
  </td>
  <td width=60 valign=top>
  <p align=center><u>2004
  </u></p>
  </td>
  <td width=60 valign=top>
  <p align=center>&nbsp;<u>2003</u></p>
  </td>
  <td width=90 valign=top>
  <p align="center"><u>&nbsp;2005 </u></p>
  </td>
  <td width=84 valign=top>
  <p align="center">&nbsp; <u>&nbsp;2004 </u></p>
  </td>
  <td width=66 valign=top>
  <p align="center"><u>&nbsp;2003 </u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p>Options
  outstanding at</p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>&nbsp; beginning of year</p>
  </td>
  <td width=54 valign=top>
  <p align=right>488</p>
  </td>
  <td width=60 valign=top>
  <p align=right>440</p>
  </td>
  <td width=60 valign=top>
  <p align=right>353</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$23.90</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$21.21</p>
  </td>
  <td width=66 valign=top>
  <p align=right>$17.79</p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>Granted</p>
  </td>
  <td width=54 valign=top>
  <p align=right>80</p>
  </td>
  <td width=60 valign=top>
  <p align=right>83</p>
  </td>
  <td width=60 valign=top>
  <p align=right>102</p>
  </td>
  <td width=90 valign=top>
  <p align=right>35.53</p>
  </td>
  <td width=84 valign=top>
  <p align=right>32.80</p>
  </td>
  <td width=66 valign=top>
  <p align=right>32.18</p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>Exercised</p>
  </td>
  <td width=54 valign=top>
  <p align=right>(87)</p>
  </td>
  <td width=60 valign=top>
  <p align=right>(35)</p>
  </td>
  <td width=60 valign=top>
  <p align=right>(15)</p>
  </td>
  <td width=90 valign=top>
  <p align=right>18.14</p>
  </td>
  <td width=84 valign=top>
  <p align=right>10.60</p>
  </td>
  <td width=66 valign=top>
  <p align=right>15.36</p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>Forfeited</p>
  </td>
  <td width=54 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp; &nbsp; -</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; -</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; -</u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; - </u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p>Options
  outstanding at</p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>&nbsp; end of year</p>
  </td>
  <td width=54 valign=top>
  <p align=right><u>&nbsp;481</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;488</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;440</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>$26.86</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>$23.90</u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>$21.21</u></p>
  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>

  </td>
 </tr>
 <tr>
  <td width=649 colspan=7 valign=top>
  <p>Options
  exercisable at </p>
  </td>
 </tr>
 <tr>
  <td width=235 valign=top>
  <p>&nbsp; end of year</p>
  </td>
  <td width=54 valign=top>
  <p align=right><u>&nbsp;231</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;244</u></p>
  </td>
  <td width=60 valign=top>
  <p align=right><u>&nbsp;238</u></p>
  </td>
  <td width=90 valign=top>
  <p align=right><u>$19.92</u></p>
  </td>
  <td width=84 valign=top>
  <p align=right><u>$16.24</u></p>
  </td>
  <td width=66 valign=top>
  <p align=right><u>$13.57</u></p>
  </td>
 </tr>
</table>



<p>&nbsp;&nbsp;&nbsp; At June 29, 2005, the range of exercise
prices for options outstanding was $8.33 to $38.35 with a weighted average
remaining contractual life of 6.50 years.</p>

<p><b>10. SHAREHOLDERS' EQUITY</b></p>



<p align=left><b>(a) Stockholder Protection Rights Plan </b></p>



<p>&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.</p>



<p><b>(b) Preferred
Stock </b></p>



<p>&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 29, 2005,
no preferred shares were issued. </p>



<p><b>(c) Treasury Stock </b></p>



<p>&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 5.0 million shares of its common
stock for $170.2 million during fiscal 2005.&nbsp;
As of June 29, 2005, approximately 32.5 million shares had been
repurchased for $884.9 million under the stock repurchase plan.&nbsp; The Company's stock repurchase plan is
primarily used to minimize the dilutive impact of stock options.&nbsp; The repurchased common stock is
reflected as a reduction of shareholders' equity.&nbsp; </p>



<p><b>(d) Restricted
Stock </b></p>



<p>&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 2005 and 2004,
respectively, approximately 53,000 and 66,000 shares of restricted stock were
awarded, the majority of which vests over a three-year period.</p>

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

<p><b>11. SAVINGS PLANS</b></p>



<p>&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 IRS 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.&nbsp; In November 2004,
the plan was amended to change the vesting of Company contributions to 100% for
participants who cease to be employed by the Company because the restaurant
location at which the participant is employed is refranchised, effective upon
the date of the refranchising.&nbsp; In July
2005, the Company announced its intention to amend the plan effective January
1, 2006 by changing participant eligibility to include all employees who have
attained the age of twenty-one and have completed one year and 1,000 hours of
service.&nbsp; In addition, the Company
intends to increase its match to 100% of the first 3% an employee contributes
and 50% of the next 2% the employee contributes with immediate vesting. In
fiscal 2005, 2004, and 2003, the Company contributed approximately $940,000,
$797,000, and $889,000, respectively.</p>



<p>&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 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 December 2004, the IRS issued guidance on new rules for
non-qualified deferred compensation plans.&nbsp;
As a result, the Company closed the plan to future contributions
effective January 1, 2005.&nbsp; The Company
is evaluating the IRS guidance and will formalize any permanent changes to the
plan in fiscal 2006, subject to approval by the Company's Board of
Directors.&nbsp; In fiscal 2005, 2004, and
2003, the Company contributed approximately $456,000, $799,000, and $724,000,
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.</p>

<p><b>12. SUPPLEMENTAL CASH FLOW INFORMATION</b></p>



<p>&nbsp;&nbsp;&nbsp; Cash paid for interest and income taxes is
as follows (in thousands):</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>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u>&nbsp;&nbsp;2004&nbsp; </u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u>&nbsp; 2003&nbsp;
  </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>Income taxes, net of refunds</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$
  46,080</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$
  40,677</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$&nbsp; 7,553</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Interest, net of amounts capitalized</p>
  </td>
  <td width=84 valign=top>
  <p align=right>22,460</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp; 3,977</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp; 3,215</p>
  </td>
 </tr>
</table>



<p>&nbsp;&nbsp;&nbsp; Non-cash investing and financing activities
are as follows (in thousands):</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>&nbsp; 2005&nbsp;
  </u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u>&nbsp; 2004&nbsp;
  </u></p>
  </td>
  <td width=84 valign=top>
  <p align="right"><u>&nbsp; 2003&nbsp;
  </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>Retirement
  of fully depreciated assets</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$
  20,515 </p>
  </td>
  <td width=84 valign=top>
  <p align=right>$
  14,235</p>
  </td>
  <td width=84 valign=top>
  <p align=right>$164,509
  </p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Conversion of debt into
  common stock</p>
  </td>
  <td width=84 valign=top>
  <p align=right>10,796</p>
  </td>
  <td width=84 valign=top>
  <p align=right>-</p>
  </td>
  <td width=84 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Capitalized straight-line
  rent</p>
  </td>
  <td width=84 valign=top>
  <p align=right>5,748</p>
  </td>
  <td width=84 valign=top>
  <p align=right>3,376</p>
  </td>
  <td width=84 valign=top>
  <p align=right>3,735</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Net
  increase (decrease) in fair value of interest rate swaps </p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;&nbsp;&nbsp; 4,597&nbsp; </p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp;(15,523)</p>
  </td>
  <td width=84 valign=top>
  <p align=right>15,063</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Restricted
  common stock issued, net of forfeitures</p>
  </td>
  <td width=84 valign=top>
  <p align=right>1,361</p>
  </td>
  <td width=84 valign=top>
  <p align=right>2,374</p>
  </td>
  <td width=84 valign=top>
  <p align=right>4,490</p>
  </td>
 </tr>
 <tr>
  <td width=402 valign=top>
  <p>Issuance of notes for sale of Cozymel's</p>
  </td>
  <td width=84 valign=top>
  <p align=right>-</p>
  </td>
  <td width=84 valign=top>
  <p align=right>&nbsp; 14,455</p>
  </td>
  <td width=84 valign=top>
  <p align=right>-</p>
  </td>
 </tr>
</table>



<p><b>13. RELATED PARTY TRANSACTIONS</b></p>



<p>&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%.&nbsp; The note requires quarterly interest
payments until maturity.&nbsp; In fiscal
2005, the Company recorded a $6.8 million charge to fully impair the note (see
Note 2 for
additional discussion).</p>



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



<p><b>14. CONTINGENCIES</b></p>



<p>&nbsp;&nbsp; In January 1996, the Company entered into a
Tip Reporting Alternative Commitment (&quot;TRAC&quot;) agreement with the IRS.&nbsp; The agreement required the Company, among
other things, to implement tip reporting educational programs for its hourly
restaurant employees and to establish tip reporting procedures, although
employees remain ultimately responsible for accurately reporting their
tips.&nbsp; The IRS alleged that the Company
did not meet the requirements of the TRAC agreement and retroactively and
unilaterally revoked it. As a result of the revocation, the IRS commenced an
examination of the Company's 2000 through 2002 calendar years for payroll tax
purposes. In December 2004, the Company paid an assessment of $17.3 million for
employer-only FICA taxes on unreported cash tips for the examination
period.&nbsp; The Company recorded the $17.3
million payment in restaurant expenses and recorded a related income tax
benefit of approximately $16.9 million, consisting of federal income tax
credits related to the additional FICA taxes paid.&nbsp; The Company continues to believe that it was in full compliance
with the TRAC agreement and that the IRS' retroactive revocation was
unjustified, particularly in light of compliance reviews conducted by the IRS
prior to the revocation.&nbsp; Nevertheless,
the Company agreed to the resolution to avoid potentially costly and protracted
litigation.</p>



<p>&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. </p>



<p><b>15.&nbsp; SUBSEQUENT EVENT</b></p>



<p>&nbsp;&nbsp;&nbsp; In August 2005, the Company entered into a letter of intent to
sell its Corner Bakery restaurant concept.&nbsp;
The decision to sell the concept was a result of the Company's continued
focus on achieving minimum return on investment thresholds.&nbsp; The net assets to be sold as of June 29,
2005 totaled approximately $70.0 million and consisted primarily of property
and equipment of $61.0 million.&nbsp; The
sale is expected to be completed during the second quarter of fiscal 2006 at an
estimated pre-tax loss of $3.0 to $5.0 million, including expenditures to
complete construction-in-progress and selling costs.</p>

<p><b>16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)</b></p>



<p>&nbsp;&nbsp;&nbsp; The following table summarizes the unaudited
consolidated quarterly results of operations for fiscal 2005 and 2004 (in
thousands, except per share amounts):</p>





<table cellspacing=0 cellpadding=0 width=644>
 <tr>
  <td width=644 colspan=5 valign=top>
  <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;Fiscal Year 2005</p>
  </td>
 </tr>
 <tr>
  <td width=644 colspan=5 valign=top>
  <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; <u>&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; </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align="center"><u>Sept.
  29</u></p>
  </td>
  <td width=90 valign=top>
  <p align="center">&nbsp;<u>Dec. 29 </u></p>
  </td>
  <td width=102 valign=top>
  <p align="center">&nbsp;<u>&nbsp;March 30 </u></p>
  </td>
  <td width=91 valign=top>
  <p align="center">&nbsp;&nbsp;&nbsp; <u>&nbsp; June 29&nbsp; </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=91 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Revenues</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$910,478</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$950,793</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$1,009,529</p>
  </td>
  <td width=91 valign=top>
  <p align=right>$1,042,050</p>
  </td>
 </tr>
 <tr>
  <td width=644 colspan=5 valign=top>
  <p>Income before provision for</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>income taxes </p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;$&nbsp;&nbsp;&nbsp;
  7,788</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;$&nbsp; 44,258</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp; 81,333</p>
  </td>
  <td width=91 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp; 61,034</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Net
  income</p>

  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp; 13,909</p>
  </td>
  <td width=90 valign=top>
  <p align=right>&nbsp;$&nbsp; 41,403 </p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp; 55,144</p>
  </td>
  <td width=91 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp; 49,763</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Basic
  net income per share</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp;&nbsp; 0.15</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp;&nbsp; 0.47</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 0.63</p>
  </td>
  <td width=91 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 0.56</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Diluted
  net income per share</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp;&nbsp; 0.15</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp; &nbsp;&nbsp; 0.44</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 0.60</p>
  </td>
  <td width=91 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 0.55</p>
  </td>
 </tr>
 <tr>
  <td width=644 colspan=5 valign=top>

  </td>
 </tr>
 <tr>
  <td width=644 colspan=5 valign=top>
  <p>Basic weighted average</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>shares outstanding</p>
  </td>
  <td width=90 valign=top>
  <p align=right>89,761</p>
  </td>
  <td width=90 valign=top>
  <p align=right>87,505</p>
  </td>
  <td width=102 valign=top>
  <p align=right>88,109</p>
  </td>
  <td width=91 valign=top>
  <p align=right>88,746</p>
  </td>
 </tr>
 <tr>
  <td width=644 colspan=5 valign=top>
  <p>Diluted
  weighted average</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>shares outstanding</p>
  </td>
  <td width=90 valign=top>
  <p align=right>98,730</p>
  </td>
  <td width=90 valign=top>
  <p align=right>96,471</p>
  </td>
  <td width=102 valign=top>
  <p align=right>91,769</p>
  </td>
  <td width=91 valign=top>
  <p align=right>90,062</p>
  </td>
 </tr>
</table>

<hr><P STYLE="page-break-after: always"></P>&nbsp;<table cellspacing=0 cellpadding=0 width=640>
 <tr>
  <td width=640 colspan=5 valign=top>
  <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;Fiscal Year 2004</p>
  </td>
 </tr>
 <tr>
  <td width=640 colspan=5 valign=top>
  <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; <u>&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; </u></p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>

  </td>
  <td width=90 valign=top>
  <p align="center">&nbsp;&nbsp;&nbsp;&nbsp; <u>Sept.
  24</u></p>
  </td>
  <td width=90 valign=top>
  <p align="center">&nbsp;&nbsp;&nbsp; &nbsp;<u>Dec. 24 </u></p>
  </td>
  <td width=102 valign=top>
  <p align="center">&nbsp;&nbsp;&nbsp; &nbsp;<u>March 24</u></p>
  </td>
  <td width=87 valign=top>
  <p align="center">&nbsp;&nbsp; <u>&nbsp;&nbsp;June 30&nbsp; </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=87 valign=top>
  <p align=right>&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Revenues</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$870,898</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$886,490</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$931,922</p>
  </td>
  <td width=87 valign=top>
  <p align=right>$1,018,176</p>
  </td>
 </tr>
 <tr>
  <td width=640 colspan=5 valign=top>
  <p>Income before provision for</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>income taxes </p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp; 64,709</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;
  63,945</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp; 11,674</p>
  </td>
  <td width=87 valign=top>
  <p align=right>$&nbsp; &nbsp;&nbsp; 92,698</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Net
  income</p>

  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp; 43,873</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;
  43,359</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$ &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 6</p>
  </td>
  <td width=87 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp; 63,680</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Basic
  net income per share</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp; 0.45</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$ &nbsp;&nbsp;&nbsp;&nbsp; 0.45</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$ &nbsp;&nbsp; &nbsp; 0.00</p>
  </td>
  <td width=87 valign=top>
  <p align=right>$&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; &nbsp; 0.67</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>Diluted
  net income per share</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.42</p>
  </td>
  <td width=90 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 0.42</p>
  </td>
  <td width=102 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp; &nbsp; 0.00</p>
  </td>
  <td width=87 valign=top>
  <p align=right>$&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; 0.62</p>
  </td>
 </tr>
 <tr>
  <td width=640 colspan=5 valign=top>

  </td>
 </tr>
 <tr>
  <td width=640 colspan=5 valign=top>
  <p>Basic weighted average</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>shares outstanding</p>
  </td>
  <td width=90 valign=top>
  <p align=right>97,404</p>
  </td>
  <td width=90 valign=top>
  <p align=right>96,156</p>
  </td>
  <td width=102 valign=top>
  <p align=right>95,973</p>
  </td>
  <td width=87 valign=top>
  <p align=right>94,854</p>
  </td>
 </tr>
 <tr>
  <td width=640 colspan=5 valign=top>
  <p>Diluted
  weighted average</p>
  </td>
 </tr>
 <tr>
  <td width=271 valign=top>
  <p>shares outstanding</p>
  </td>
  <td width=90 valign=top>
  <p align=right>107,167</p>
  </td>
  <td width=90 valign=top>
  <p align=right>105,531</p>
  </td>
  <td width=102 valign=top>
  <p align=right>98,007</p>
  </td>
  <td width=87 valign=top>
  <p align=right>104,606</p>
  </td>
 </tr>
</table>



<hr><P STYLE="page-break-after: always"></P>&nbsp;<p align=center><b>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</b></p>





<p>The
Board of Directors<br>
Brinker International, Inc.:</p>





<p>&nbsp;&nbsp;&nbsp; We have audited the accompanying
consolidated balance sheets of Brinker International, Inc. and subsidiaries as
of June 29, 2005 and June 30, 2004, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the years in the
three-year period ended June 29, 2005.&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.</p>



<p>&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.</p>



<p>&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
29, 2005 and June 30, 2004, and the results of their operations and their cash
flows for each of the years in the three-year period ended June 29, 2005 in
conformity with U. S. generally accepted accounting principles.</p>



<p>&nbsp;&nbsp;&nbsp; We also have audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of the Company's internal control over financial reporting as of
June 29, 2005, based on criteria established in <i>Internal Control-Integrated
Framework</i> issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated August 8, 2005, except as to Note 15,
which is as of August 16, 2005, expressed an unqualified opinion on
management's assessment of, and the effective operation of, internal control
over financial reporting.</p>





<p align="center">KPMG LLP</p>









<p>&nbsp;</p>









<p>Dallas,
Texas<br>
August
8, 2005, except as to Note 15,<br>
which
is as of August 16, 2005</p>

<hr><P STYLE="page-break-after: always"></P>&nbsp;<p align=center><b>Report of
Independent Registered Public Accounting Firm</b></p>





<p>The
Board of Directors<br>
Brinker International, Inc.:</p>





<p>&nbsp;&nbsp;&nbsp; We have audited management's assessment,
included in the accompanying Management's Report on Internal Control over
Financial Reporting, that Brinker International, Inc. and subsidiaries
maintained effective internal control over financial reporting as of June 29,
2005, based on criteria established in <i>Internal Control-Integrated Framework</i>
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express an opinion on management's assessment and an opinion on the
effectiveness of the Company's internal control over financial reporting based
on our audit.</p>



<p>&nbsp;&nbsp;&nbsp; We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.</p>



<p>&nbsp;&nbsp;&nbsp; A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.&nbsp;
A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.&nbsp;
</p>



<p>&nbsp;&nbsp;&nbsp; Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.&nbsp; Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.</p>



<p>&nbsp;&nbsp;&nbsp; In
our opinion, management's assessment that Brinker International, Inc. and
subsidiaries maintained effective internal control over financial reporting as
of June 29, 2005, is fairly stated, in all material respects, based on criteria
established in <i>Internal Control-Integrated Framework</i> issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also,
in our opinion, Brinker International, Inc. and subsidiaries maintained, in all
material respects, effective internal control over financial reporting as of
June 29, 2005, based on criteria established in <i>Internal Control-Integrated
Framework</i> issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).</p><hr><P STYLE="page-break-after: always"></P>




<p>&nbsp;&nbsp;&nbsp; We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Brinker International, Inc. and subsidiaries as of June 29, 2005 and June 30,
2004, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the years in the three-year period ended June 29,
2005, and our report dated August 8, 2005, except as to Note 15, which is as of
August 16, 2005, expressed an unqualified opinion on those consolidated
financial statements.</p>









<p align="center">KPMG LLP</p>









<p>&nbsp;</p>









<p>Dallas,
Texas<br>
August 8, 2005, except as
to Note 15,<br>
which is as of August 16,
2005</p>

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


<p align=center><b>MANAGEMENT'S
RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS</b></p>



<p>&nbsp;&nbsp;&nbsp; Management is responsible for the
reliability of the consolidated financial statements and related notes, which
have been prepared in conformity with U. S. generally accepted accounting
principles 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 registered
public accounting firm, 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; </p>



<p>&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 29, 2005 provide reasonable assurance that the
consolidated financial statements are reliable.</p>





<p align=center><b>Management's Report On
Internal Control Over Financial Reporting</b></p>





<p>&nbsp;&nbsp;&nbsp; Management is responsible for
establishing and maintaining adequate internal control over financial
reporting.&nbsp; We have assessed the
effectiveness of the Company's internal control over financial reporting based
on the framework in <i>Internal Control - Integrated Framework</i> issued by
the Committee of Sponsoring Organizations of the Treadway Commission.&nbsp; Based on our assessment, we concluded that
our internal control over financial reporting was effective as of June 29,
2005.&nbsp; </p>



<p>&nbsp;&nbsp;&nbsp; Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements.&nbsp; Also, projection of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.</p>



<p>&nbsp;&nbsp;&nbsp; Our management's assessment of the effectiveness of our internal
control over financial reporting as of June 29, 2005 has been audited by KPMG
LLP, an independent registered public accounting firm, as stated in its report
which is included herein.</p>











<p>&nbsp;</p>











<p>DOUGLAS H. BROOKS<br>
Chairman of
the Board, President and Chief Executive Officer</p>











<p>CHARLES M. SONSTEBY<br>
Executive
Vice President and Chief Financial Officer</p>

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>3
<FILENAME>ex2110k051.htm
<DESCRIPTION>EXHIBIT 21
<TEXT>
<html>

<head>

<title>EXHIBIT 21</title>

</head>

<body>

<p align="center"> <u>EXHIBIT
21</u></p>



<p align="center">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, and Corner Bakery
Cafe.</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>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>
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>4
<FILENAME>ex23_10k051.htm
<DESCRIPTION>EXHIBIT 13
<TEXT>
<html>

<head>

<title>EXHIBIT 23</title>

</head>

<body>

<p align="center"><b>EXHIBIT 23</b></p>















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















<p align="center"><b>Consent of Independent Registered Public Accounting Firm</b></p>



<p>The
Board of Directors<br>
Brinker International, Inc.:</p>

<p>We consent to the incorporation by
reference in Registration Statement Nos. 33-61594, 33-56491, 333-02201,
333-93755, 333-42224, 333-105720, and 333-125289 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 8, 2005, except as to Note 15, which is as of August 16, 2005,
with respect to the consolidated balance sheets of Brinker International, Inc.
and subsidiaries as of June 29, 2005 and June 30, 2004, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended June 29, 2005, management's
assessment of the effectiveness of internal control over financial reporting as
of June 29, 2005 and the effectiveness of internal control over financial
reporting as of June 29, 2005, which reports appear in the Brinker
International, Inc. 2005 Annual Report to Shareholders, which is incorporated
by reference in this 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; KPMG LLP</p>

<p>&nbsp;Dallas,
Texas<br>
&nbsp;September 9, 2005</p>



</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>ex31a10k051.htm
<DESCRIPTION>EXHIBIT 31A
<TEXT>
<html>

<head>

<title>EXHIBIT 31a</title>

</head>

<body>

<p align=center>EXHIBIT 31a</p>

<p align="center"><b>CERTIFICATION</b></p>

<p align=center>&nbsp;</p>

<p>I, Douglas H. Brooks, certify that:</p>



<p>1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this
Annual Report on Form 10-K of Brinker International, Inc.;</p>

<p>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>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>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)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</p>

<blockquote>
  <ol type="a">
    <li>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;<br>
&nbsp;</li>
    <li>Designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
acceptable accounting principles;<br>
&nbsp;</li>
    <li>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<br>
&nbsp;</li>
    <li>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</li>
  </ol>
</blockquote>

<p>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>
  <ol type="a">
    <li>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<br>
&nbsp;</li>
    <li>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.</li>
  </ol>

<p>&nbsp;</p>

</blockquote>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Date: September 9, 2005</p>
  </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>
  <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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </u>
  </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>Chairman
  of the Board, President</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>and
  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>6
<FILENAME>ex31b10k051.htm
<DESCRIPTION>EXHIBIT 31B
<TEXT>
<html>

<head>

<title>EXHIBIT 31b</title>

</head>

<body>

<p align=center>EXHIBIT 31b</p>

<p align="center"><b>CERTIFICATION</b></p>

<p align=center>&nbsp;</p>

<p>I, Charles M. Sonsteby, certify that:</p>



<p>1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
I have reviewed this
Annual Report on Form 10-K of Brinker International, Inc.;</p>

<p>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>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>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)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:</p>

<blockquote>
  <ol type="a">
    <li>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;<br>
&nbsp;</li>
    <li>Designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
acceptable accounting principles;<br>
&nbsp;</li>
    <li>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<br>
&nbsp;</li>
    <li>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</li>
  </ol>
</blockquote>

<p>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>
  <ol type="a">
    <li>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<br>
&nbsp;</li>
    <li>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.<br>
&nbsp;</li>
  </ol>
</blockquote>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Date: September 9, 2005</p>
  </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/ 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;&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>7
<FILENAME>ex32a10k051.htm
<DESCRIPTION>EXHIBIT 32A
<TEXT>
<html>

<head>

<title>Exhibit 32a</title>

</head>

<body>

<p align=center>EXHIBIT 32(a)</p>

<p align=right>&nbsp;</p>

<p align=center><b>CERTIFICATION</b></p>

<p align=center>&nbsp;</p>

<p>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 29, 2005 (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>







<p>&nbsp;</p>







<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Dated:
  September 9, 2005</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; /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;&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; Chairman of the Board, President</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; and 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>8
<FILENAME>ex32b10k051.htm
<DESCRIPTION>EXHIBIT 32B
<TEXT>
<html>

<head>

<title>Exhibit 32b</title>

</head>

<body>

<p align=center>EXHIBIT 32(b)</p>

<p align=right>&nbsp;</p>

<p align=center><b>CERTIFICATION</b></p>

<p align=center>&nbsp;</p>

<p>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 29, 2005 (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>







<p>&nbsp;</p>







<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>
  <p>Dated:
  September 9, 2005</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; /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;&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>
