Cover Page About Brinker International Inc. Financial Highlights To Our Shareholders, Employees and Guests Chili's Romano's Macaroni Grill On The Border Mexican Grill & Cantina Maggiano's Little Italy Corner Bakery Cafe Cozymel's Coastal Grill Big Bowl Asian Kitchen Rockfish Seafood Grill Board of Directors Principal Officers Principal Officers in Restaurant Concepts Shareholder Information FINANCIAL INFORMATION    Selected Financial Data    Management's Discussion and Analysis    Consolidated Statements of Income    Consolidated Balance Sheets    Consolidated Statements of Shareholders' Equity    Consolidated Statements of Cash Flows    Notes to Consolidated Financial Statements    Independent Auditors' Report    Management's Responsibility Back Cover

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. BUSINESS COMBINATIONS AND INVESTMENT IN UNCONSOLIDATED ENTITIES

In November 2001, the Company acquired from its franchise partner, Sydran Group, LLC and Sydran Food Services III, L.P. (collectively, "Sydran"), thirty-nine Chili's restaurants for approximately $53.9 million. As part of the acquisition, the Company assumed $35.5 million in capital lease obligations ($19.9 million principal plus $15.6 million representing a debt premium) and recorded goodwill totaling approximately $52.5 million. The operations of the restaurants are included in the Company's consolidated results of operations from the date of the acquisition.     In July 2001, the Company formed a partnership with Rockfish, a privately held Dallas-based restaurant company with twelve locations currently in operation. The Company made a $12.3 million capital contribution to Rockfish in exchange for an approximate 40% ownership interest in the legal entities owning and developing the restaurant concept.     In June 2001, the Company acquired from its franchise partner, Hal Smith Restaurant Group, three On The Border restaurants for approximately $6.6 million. Goodwill of approximately $2.9 million was recorded in connection with the acquisition. The operations of the restaurants are included in the Company's consolidated results of operations from the date of the acquisition.     In April 2001, the Company acquired from its franchise partner, NE Restaurant Company, Inc. ("NERCO"), forty Chili's, three Chili's sites under construction, and seven On The Border locations. Total consideration was approximately $93.5 million, of which approximately $40.9 million represented the assumption of mortgage loan obligations and approximately $9.0 million was for certain other liabilities and transaction costs. Goodwill of approximately $20.5 million was recorded in connection with the acquisition. The operations of the restaurants are included in the Company's consolidated results of operations from the date of the acquisition.     In February 2001, the Company acquired the remaining 50% interest in the Big Bowl restaurant concept from its joint venture partner for approximately $38.0 million. The Company originally invested $20.8 million in the joint venture prior to February 1, 2001 and accounted for the joint venture under the equity method. Goodwill of approximately $48.9 million was recorded in connection with the acquisition. The operations of the restaurants are included in the Company's consolidated results of operations from the date of the acquisition.     In February 2001, the Company sold its interest in the Wildfire restaurant concept for $5.0 million, of which $4.0 million was included in accounts receivable in the Company's consolidated balance sheet at June 27, 2001. During fiscal 2002, the remaining balance of $4.0 million was collected.     The pro-forma effects of these acquisitions on the Company's historical results of operations are not material.