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 8. LEASES

(a) Capital Leases     The Company leases certain buildings under capital leases. The asset values of $26.4 million at June 26, 2002 and $6.5 million at June 27, 2001, respectively, and the related accumulated amortization of $6.8 million and $6.1 million at June 26, 2002 and June 27, 2001, respectively, are included in property and equipment. Amortization of assets under capital lease is included in depreciation and amortization expense. As part of the Sydran acquisition in November 2001, the Company recorded $19.9 million in capital lease assets. (b) Operating Leases     The Company leases restaurant facilities, office space, and certain equipment under operating leases having terms expiring at various dates through fiscal 2095. The restaurant leases have renewal clauses of 1 to 35 years at the option of the Company and have provisions for contingent rent based upon a percentage of gross sales, as defined in the leases. Rent expense for fiscal 2002, 2001, and 2000 was $100.4 million, $89.2 million, and $81.8 million, respectively. Contingent rent included in rent expense for fiscal 2002, 2001, and 2000 was $9.7 million, $8.9 million, and $7.2 million, respectively.     In fiscal 1998 and 2000, the Company entered into equipment leasing facilities totaling $55.0 million and $25.0 million, respectively. The leasing facilities were accounted for as operating leases and had expiration dates of 2004 and 2006, respectively. The Company guaranteed a residual value of approximately 87% of the total amount funded under the leases. The Company had the option to purchase all of the leased equipment for an amount equal to the unamortized lease balance, which could not exceed 75% of the total amount funded through the leases. In February 2002, the Company acquired the remaining assets leased under the equipment leasing facilities for $36.2 million and terminated the lease arrangements.     In fiscal 2000, the Company entered into a $50.0 million real estate leasing facility. During fiscal 2001, the Company increased the facility to $75.0 million. The real estate facility was accounted for as an operating lease and was to expire in fiscal 2007. The Company guaranteed a residual value of approximately 87% of the total amount funded under the lease. The Company had the option to purchase all of the leased real estate for an amount equal to the unamortized lease balance. In February 2002, the Company acquired the remaining assets leased under the real estate leasing facility for $56.8 million and terminated the lease arrangement. (c) Commitments     At June 26, 2002, future minimum lease payments on capital and operating leases were as follows (in thousands): Fiscal Year   Capital Leases Operating Leases 2003 $ 3,506 $ 85,656 2004 3,469 83,512 2005 3,200 81,453 2006 3,165 77,618 2007 3,243 72,605 Thereafter 48,436 427,822   Total minimum lease payments 65,019 $ 828,666   Imputed interest (average rate of 8%) (28,972 )   Present value of minimum lease payments 36,047   Less current installments (836 )   Capital lease obligations—noncurrent $ 35,211     At June 26, 2002, the Company had entered into other lease agreements for restaurant facilities currently under construction or yet to be constructed. Classification of these leases as capital or operating has not been determined as construction of the leased properties has not been completed.