UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 23, 2020~~March 24, 2021

Commission File Number 1-10275

BRINKER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

75-1914582

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

3000 Olympus Blvd

Dallas

75019

(Address of principal executive offices)

(Zip Code)

(972)

980-9917

(Registrant’s telephone number, including area code)

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $0.10 par value

EAT

NYSE

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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of ~~October~~April 23, ~~2020: 45,289,445~~2021: 45,750,918 shares

BRINKER INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements			3
Consolidated Statements of Comprehensive Income (Unaudited) - Thirteen and Thirty-Nine Week Periods Ended ~~September~~ 23 ,March 24, 2021 and March 25, 2020 ~~and~~ ~~September~~ 2 5 ~~, 2019~~			3
Consolidated Balance Sheets -March ~~September 23, 2020~~2 4 , 202 1 (Unaudited) and June 24, 2020			4
Consolidated Statements of Cash Flows (Unaudited) - ~~Thirteen~~Thirty-Nine Week Periods Ended ~~September 23,~~March 24, 2021 and March 25, 2020 ~~and September 25, 2019~~			5
Notes to Consolidated Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2224
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3442
Item 4. Controls and Procedures			3442
PART II. OTHER INFORMATION			3543
Item 1. Legal Proceedings			3543
Item 1A. Risk Factors			3543
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3544
Item 5. Other Information			3544
Item 6. Exhibits			3645
SIGNATURES			3745

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(In millions, except per share amounts)


		Thirteen Week Periods Ended			Thirteen Week Periods Ended						Thirty-Nine Week Periods Ended
			September 23, 2020			September 25, 2019			March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020
Revenues	Revenues							Revenues
Company sales	Company sales		$	728.2		$	763.9	Company sales	$	813.7	$	840.4	$	2,288.1	$	2,451.8
Franchise and other revenues	Franchise and other revenues		11.9			22.1		Franchise and other revenues	14.7		19.6		41.1		63.5
Total revenues	Total revenues		740.1			786.0		Total revenues	828.4		860.0		2,329.2		2,515.3
Operating costs and expenses	Operating costs and expenses							Operating costs and expenses
Food and beverage costs	Food and beverage costs		193.5			203.8		Food and beverage costs	213.9		226.7		606.3		653.6
Restaurant labor	Restaurant labor		248.0			268.5		Restaurant labor	270.8		285.9		774.6		846.2
Restaurant expenses	Restaurant expenses		202.5			207.3		Restaurant expenses	216.1		220.2		629.9		652.2
Depreciation and amortization	Depreciation and amortization		37.4			38.1		Depreciation and amortization	37.4		43.5		112.0		120.9
General and administrative	General and administrative		30.5			38.0		General and administrative	33.7		23.3		94.2		95.9
Other (gains) and charges	Other (gains) and charges		3.8			(0.9)		Other (gains) and charges	4.3		19.3		13.5		30.7
Total operating costs and expenses	Total operating costs and expenses		715.7			754.8		Total operating costs and expenses	776.2		818.9		2,230.5		2,399.5
Operating income	Operating income		24.4			31.2		Operating income	52.2		41.1		98.7		115.8
Interest expenses	Interest expenses		14.6			14.9		Interest expenses	14.1		14.3		43.1		44.2
Other income, net	Other income, net		(0.4)			(0.5)		Other income, net	(0.3)		(0.4)		(1.2)		(1.4)
Income before income taxes	Income before income taxes		10.2			16.8		Income before income taxes	38.4		27.2		56.8		73.0
Provision (benefit) for income taxes	Provision (benefit) for income taxes		(0.5)			1.9		Provision (benefit) for income taxes	4.5		(3.6)		0.2		(0.6)
Net income	Net income		$	10.7		$	14.9	Net income	$	33.9	$	30.8	$	56.6	$	73.6

Basic net income per share	Basic net income per share		$	0.24		$	0.40	Basic net income per share	$	0.74	$	0.83	$	1.25	$	1.97

Diluted net income per share	Diluted net income per share		$	0.23		$	0.39	Diluted net income per share	$	0.73	$	0.81	$	1.22	$	1.94

Basic weighted average shares outstanding	Basic weighted average shares outstanding		45.1			37.5		Basic weighted average shares outstanding	45.5		37.2		45.3		37.3

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding		45.7			38.1		Diluted weighted average shares outstanding	46.7		37.8		46.2		38.0

Other comprehensive income (loss)	Other comprehensive income (loss)							Other comprehensive income (loss)
Foreign currency translation adjustment	Foreign currency translation adjustment		$	0.3		$	(0.2)	Foreign currency translation adjustment	$	0.3	$	(1.0)	$	1.1	$	(1.1)
Other comprehensive income (loss)	Other comprehensive income (loss)		0.3			(0.2)		Other comprehensive income (loss)	0.3		(1.0)		1.1		(1.1)
Comprehensive income	Comprehensive income		$	11.0		$	14.7	Comprehensive income	$	34.2	$	29.8	$	57.7	$	72.5

See accompanying Notes to ~~the~~ Consolidated Financial Statements (Unaudited)

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BRINKER INTERNATIONAL, INC.

Consolidated Balance Sheets

(In millions, except per share amounts)


		Unaudited					Unaudited
		September 23, 2020		June 24, 2020			March 24, 2021		June 24, 2020
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	58.8	$	43.9	Cash and cash equivalents	$	63.6	$	43.9
Accounts receivable, net	Accounts receivable, net	56.8		52.3		Accounts receivable, net	66.6		52.3
Inventories	Inventories	25.9		27.3		Inventories	27.1		27.3
Restaurant supplies	Restaurant supplies	51.6		51.6		Restaurant supplies	52.0		51.6
Prepaid expenses	Prepaid expenses	13.4		13.9		Prepaid expenses	11.6		13.9
Income taxes receivable, net	Income taxes receivable, net	33.1		35.4		Income taxes receivable, net	31.5		35.4
Total current assets	Total current assets	239.6		224.4		Total current assets	252.4		224.4
Property and equipment, at cost	Property and equipment, at cost					Property and equipment, at cost
Land	Land	34.2		34.2		Land	33.1		34.2
Buildings and leasehold improvements	Buildings and leasehold improvements	1,544.7		1,534.4		Buildings and leasehold improvements	1,556.8		1,534.4
Furniture and equipment	Furniture and equipment	788.3		785.7		Furniture and equipment	804.7		785.7
Construction-in-progress	Construction-in-progress	18.3		24.4		Construction-in-progress	14.5		24.4
		2,385.5		2,378.7			2,409.1		2,378.7
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,603.5)		(1,573.4)		Less accumulated depreciation and amortization	(1,657.5)		(1,573.4)
Net property and equipment	Net property and equipment	782.0		805.3		Net property and equipment	751.6		805.3
Other assets	Other assets					Other assets
Operating lease assets	Operating lease assets	1,041.3		1,054.6		Operating lease assets	1,025.8		1,054.6
Goodwill	Goodwill	187.7		187.6		Goodwill	188.1		187.6
Deferred income taxes, net	Deferred income taxes, net	39.1		38.2		Deferred income taxes, net	47.5		38.2
Intangibles, net	Intangibles, net	22.5		23.0		Intangibles, net	21.5		23.0
Other	Other	23.1		22.9		Other	22.1		22.9
Total other assets	Total other assets	1,313.7		1,326.3		Total other assets	1,305.0		1,326.3
Total assets	Total assets	$	2,335.3	$	2,356.0	Total assets	$	2,309.0	$	2,356.0
LIABILITIES AND SHAREHOLDERS’ DEFICIT	LIABILITIES AND SHAREHOLDERS’ DEFICIT					LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	99.4	$	104.9	Accounts payable	$	121.4	$	104.9
Gift card liability	Gift card liability	107.1		109.9		Gift card liability	110.9		109.9
Accrued payroll	Accrued payroll	63.3		65.2		Accrued payroll	112.0		65.2
Operating lease liabilities	Operating lease liabilities	117.8		117.3		Operating lease liabilities	117.2		117.3
Other accrued liabilities	Other accrued liabilities	121.9		100.6		Other accrued liabilities	116.3		100.6

Total current liabilities	Total current liabilities	509.5		497.9		Total current liabilities	577.8		497.9
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	1,158.3		1,208.5		Long-term debt and finance leases, less current installments	1,017.0		1,208.5
Long-term operating lease liabilities, less current portion	Long-term operating lease liabilities, less current portion	1,045.2		1,061.6		Long-term operating lease liabilities, less current portion	1,023.7		1,061.6
Other liabilities	Other liabilities	87.4		67.1		Other liabilities	81.1		67.1
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)					Commitments and contingencies (Note 14)	0		0
Shareholders’ deficit	Shareholders’ deficit					Shareholders’ deficit
Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued and 45.3 million shares outstanding at September 23, 2020, and 70.3 million shares issued and 45.0 million shares outstanding at June 24, 2020)		7.0		7.0
Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued and 45.7 million shares outstanding at March 24, 2021, and 70.3 million shares issued and 45.0 million shares outstanding at June 24, 2020)						Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued and 45.7 million shares outstanding at March 24, 2021, and 70.3 million shares issued and 45.0 million shares outstanding at June 24, 2020)	7.0		7.0
Additional paid-in capital	Additional paid-in capital	663.2		669.4		Additional paid-in capital	677.4		669.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5.9)		(6.2)		Accumulated other comprehensive loss	(5.1)		(6.2)
Accumulated deficit	Accumulated deficit	(386.8)		(397.5)		Accumulated deficit	(340.9)		(397.5)
Treasury stock, at cost (25.0 million shares at September 23, 2020, and 25.3 million shares at June 24, 2020)		(742.6)		(751.8)
Treasury stock, at cost (24.6 million shares at March 24, 2021, and 25.3 million shares at June 24, 2020)						Treasury stock, at cost (24.6 million shares at March 24, 2021, and 25.3 million shares at June 24, 2020)	(729.0)		(751.8)
Total shareholders’ deficit	Total shareholders’ deficit	(465.1)		(479.1)		Total shareholders’ deficit	(390.6)		(479.1)
Total liabilities and shareholders’ deficit	Total liabilities and shareholders’ deficit	$	2,335.3	$	2,356.0	Total liabilities and shareholders’ deficit	$	2,309.0	$	2,356.0

See accompanying Notes to ~~the~~ Consolidated Financial Statements (Unaudited)

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BRINKER INTERNATIONAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Thirteen Week Periods Ended					Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019			March 24, 2021		March 25, 2020
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	10.7	$	14.9	Net income	$	56.6	$	73.6
Adjustments to reconcile Net income to Net cash provided by operating activities:	Adjustments to reconcile Net income to Net cash provided by operating activities:					Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	37.4		38.1		Depreciation and amortization	112.0		120.9
Stock-based compensation	Stock-based compensation	3.9		7.1		Stock-based compensation	11.3		9.0
Restructure charges and other impairments		0.5		(3.2)
Restructure and impairment charges						Restructure and impairment charges	6.5		24.8
Net loss on disposal of assets	Net loss on disposal of assets	0.4		0.3		Net loss on disposal of assets	1.1		1.1
Other	Other	0.8		0.6		Other	2.7		1.7
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	0.6		7.0		Accounts receivable, net	(1.3)		12.8
Inventories	Inventories	1.4		0.1		Inventories	(0.4)		(1.2)

Restaurant supplies						Restaurant supplies	(0.4)		(0.3)
Prepaid expenses	Prepaid expenses	0.4		5.9		Prepaid expenses	2.3		10.8
Operating lease assets, net of liabilities	Operating lease assets, net of liabilities	(2.2)		(1.7)		Operating lease assets, net of liabilities	(9.1)		(6.3)
Deferred income taxes, net	Deferred income taxes, net	(0.9)		1.3		Deferred income taxes, net	(9.3)		4.2
Other assets	Other assets	0.0		(0.5)		Other assets	(0.2)		(0.4)
Accounts payable	Accounts payable	(4.9)		2.8		Accounts payable	19.0		(1.7)
Gift card liability	Gift card liability	(2.7)		(6.1)		Gift card liability	1.0		5.1
Accrued payroll	Accrued payroll	(1.9)		(12.1)		Accrued payroll	46.7		(26.6)
Other accrued liabilities	Other accrued liabilities	16.2		19.7		Other accrued liabilities	10.5		11.1
Current income taxes	Current income taxes	2.4		12.3		Current income taxes	6.4		(0.2)
Other liabilities	Other liabilities	20.7		0.1		Other liabilities	13.2		(0.6)
Net cash provided by operating activities	Net cash provided by operating activities	82.8		86.6		Net cash provided by operating activities	268.6		237.8
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Payments for property and equipment	Payments for property and equipment	(13.6)		(20.5)		Payments for property and equipment	(62.4)		(82.0)
Proceeds from sale of assets						Proceeds from sale of assets	1.6		1.0
Proceeds from note receivable	Proceeds from note receivable	0.6		0.7		Proceeds from note receivable	1.5		2.2
Payments for franchise restaurant acquisitions	Payments for franchise restaurant acquisitions	0		(96.2)		Payments for franchise restaurant acquisitions	0		(94.6)
Proceeds from sale of assets		0		0.2

Net cash used in investing activities	Net cash used in investing activities	(13.0)		(115.8)		Net cash used in investing activities	(59.3)		(173.4)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Payments on revolving credit facility	Payments on revolving credit facility	(75.0)		(227.0)		Payments on revolving credit facility	(210.0)		(630.0)
Borrowings on revolving credit facility	Borrowings on revolving credit facility	28.4		299.0		Borrowings on revolving credit facility	28.4		806.8
Payments on long-term debt	Payments on long-term debt	(4.6)		(2.4)		Payments on long-term debt	(14.3)		(12.4)
Purchases of treasury stock	Purchases of treasury stock	(3.9)		(11.3)		Purchases of treasury stock	(4.1)		(32.3)
Payments for debt issuance costs	Payments for debt issuance costs	(1.5)		0		Payments for debt issuance costs	(2.2)		(1.0)
Payments of dividends	Payments of dividends	(1.3)		(14.8)		Payments of dividends	(1.5)		(43.3)
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	3.0		1.3		Proceeds from issuance of treasury stock	14.1		1.6
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(54.9)		44.8		Net cash (used in) provided by financing activities	(189.6)		89.4
Net change in cash and cash equivalents	Net change in cash and cash equivalents	14.9		15.6		Net change in cash and cash equivalents	19.7		153.8
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	43.9		13.4		Cash and cash equivalents at beginning of period	43.9		13.4
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	58.8	$	29.0	Cash and cash equivalents at end of period	$	63.6	$	167.2

See accompanying Notes to ~~the~~ Consolidated Financial Statements (Unaudited)

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Footnote Index

BRINKER INTERNATIONAL, INC.

Notes to ~~the~~ Consolidated Financial Statements (Unaudited)

Footnote Index

Note #

Description

Page

Note 1

Basis of Presentation

Note 2

Effect of New Accounting Standards

Note 3

Revenue Recognition

Note 4

Other Gains and Charges

Income Taxes

Net Income Per Share

Segment Information

Fair Value Measurements

Leases

Debt

Accrued and Other Liabilities

1718

Note 12

Shareholders’ Deficit

1819

Note 13

Supplemental Cash Flow Information

Contingencies

Fiscal 2020 Chili’s Restaurant Acquisition

Subsequent Events

1. BASIS OF PRESENTATION

References to “Brinker,” the “Company,” “we,” “us,” and “our” in this Form 10-Q refer to Brinker International, Inc. and its subsidiaries and any predecessor companies of Brinker International, Inc.

Our Consolidated Financial Statements (Unaudited) as of ~~September 23, 2020~~March 24, 2021 and June 24, 2020, and for the thirteen and thirty-nine week periods ended ~~September 23,~~March 24, 2021 and March 25, 2020, ~~and September 25, 2019,~~ have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Fiscal Year

We have a ~~52/~~52 or 53 week fiscal year ending on the last Wednesday in June. We utilize a ~~13 week~~13-week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter contains 14 weeks. Fiscal year 2021 contains 53 weeks and will end on June 30, 2021. Fiscal year 2020, which ended on June 24, 2020, contained 52 weeks.

Use of Estimates

The preparation of the consolidated financial statements is in conformity with generally accepted accounting principles in the United States (“GAAP”) and requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, 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 in the reporting periods. Actual results could differ from those estimates.

The foreign currency translation adjustment included in Comprehensive income in the Consolidated Statements of Comprehensive Income (Unaudited) represents the unrealized impact of translating the financial statements of our Canadian restaurants from Canadian dollars to United States dollars. This amount is not included in Net income and would only be realized upon disposition of our Canadian restaurants. The related Accumulated other comprehensive loss is presented in the Consolidated Balance Sheets (Unaudited).

~~The~~ information furnished herein reflects all adjustments (consisting only of normal recurring accruals and adjustments) which are, in our opinion, necessary to fairly state the interim operating results, financial position and cash flows for the respective periods. However, these operating results are not necessarily indicative of the results expected for the full fiscal year. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been omitted pursuant to SEC rules and regulations. The Notes to ~~the~~ Consolidated Financial Statements (Unaudited) should be read in conjunction with the Notes to the Consolidated Financial Statements contained in our June 24, 2020 Form 10-K. We believe the disclosures are sufficient for interim financial reporting purposes. All amounts in the Notes to ~~the~~ Consolidated Financial Statements (Unaudited) are presented in millions unless otherwise specified.

Foreign Currency Translation

Risks and Uncertainties

In January 2020, the Secretary of Health and Human Services declared the novel strain of coronavirus (“COVID-19”) a public health emergency. Subsequently in March 2020, the World Health Organization declared COVID-19 a global pandemic that resulted in a significant reduction in sales at our restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments. In response to COVID-19, the Company temporarily closed all Company-owned restaurant dining and banquet rooms at the end of the third quarter of fiscal 2020 resulting in a

Table of Contents

Footnote Index

transition to an off-premise business model. ~~Beginning on April 27,~~In May 2020, we began to reopen certain dining room locations as permitted by state and local governments.

In March 2021, certain state and local governments started easing, and in some cases lifting, the dining room capacity restrictions. We are currently operating substantially all of our dining rooms in some capacity in accordance with state and local mandates in order to ensure the safety of our guests and team members. As of ~~September 23, 2020,~~March 24, 2021, substantially all of our restaurant dining rooms and patios were opened with limited seating capacity. The capacity limitations and personal safety

~~Table of Contents~~

~~Footnote~~ ~~Index~~

preferences ~~in the reopened dining rooms~~ have resulted in reduced traffic in the Company’s ~~restaurants in comparison to pre-pandemic levels. See Note 4 - Other Gains and Charges for details regarding the financial impact of the COVID-19 pandemic on our financial results.~~restaurants.

At this time, the ultimate impact of COVID-19 cannot be reasonably estimated due to the uncertainty about the extent and the duration of the spread of the virus. A lack of containment ~~or another wave~~ could lead to further capacity restrictions, restaurant closures, disruptions in our supply chain and restaurant staffing which could adversely impact our financial results.

2. EFFECT OF NEW ACCOUNTING STANDARDS

New Accounting Standards Implemented in Fiscal 2021

In the first quarter of fiscal 2021, we implemented the following new accounting standards:

•Measurement of Credit Losses on Financial Instruments, ASU No. 2016-13 - In June 2013, the FASB issued ASU 2016-13, creating ASC Topic 326 – Financial Instruments – Credit Losses. ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on financial assets measured at amortized cost basis (including, but not limited to loans), net investments in leases recognized as lessor and off-balance sheet credit exposures. ASU 2016-13 eliminates the probable initial recognition threshold under the current incurred loss methodology for recognizing credit losses. Instead, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The new guidance is effective for public entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, which required us to adopt these provisions in the first quarter of fiscal 2021. The update was applied on a prospective basis. The adoption of this guidance did not have a material impact on our Consolidated Financial Statements.

•Fair Value Measurement (Topic 820): Disclosure Framework, ASU No. 2018-13 - Changes to the Disclosure Requirements for Fair Value Measurement - In August 2018, the FASB issued ASU 2018-13, which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments under ASU 2018-13 add an incremental requirement, among others, for entities to disclose (1) the range and weighted average used to develop significant unobservable inputs and (2) how the weighted average was calculated for fair value measurements categorized within Level 3 of the fair value hierarchy. Entities may disclose other quantitative information in lieu of the weighted average if they determine that such information embodies a more reasonable and rational method of reflecting the distribution of significant unobservable inputs used to develop Level 3 fair value measurements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, which required us to adopt these provisions in the first quarter of fiscal 2021. The update was applied on a prospective basis. The adoption of this guidance did not have an impact on our Consolidated Financial Statements.

•Simplifying the Accounting for Income Taxes, ASU No. 2019-12 - In December 2019, the FASB issued ASU 2019-12, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The new guidance is effective for public entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, which will require us to adopt these provisions in the first quarter of fiscal 2022, and early adoption is permitted. We elected to early adopt this update in the first quarter of fiscal 2021.

The adoption of ~~this guidance~~these new accounting standards did not have a material impact on our Consolidated Financial Statements. There were no new accounting standards implemented in the third quarter of fiscal 2021.

New Accounting Standards That Will Be Implemented In Future Periods

~~Reference Rate Reform, ASU 2020-04 -~~ ~~In March 2020,~~We reviewed all recently issued accounting pronouncements and determined that they were either not applicable or are not expected to have a material impact on the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting. These updates are intended to simplify the market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective upon issuance to modifications made as early as the beginning of the interim period through December 31, 2022. We are currently assessing the impact that this guidance will have on our Consolidated Financial Statements.

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3. REVENUE RECOGNITION

Deferred ~~Development~~Franchise and ~~Franchise~~Development Fees

Our deferred ~~development~~franchise and ~~franchise~~development fees consist of the unrecognized fees received from franchisees. Recognition of these fees in subsequent periods is based on satisfaction of the contractual performance obligations of the active contracts with franchisees. We also expect to earn subsequent period royalties and advertising fees related to our franchise contracts; however, due to the variability and uncertainty of these future revenues based upon a sales-based measure, these future revenues are not yet estimable ~~due~~as the performance obligations remain unsatisfied.

Deferred franchise and development fees are classified within Other accrued liabilities for the current portion expected to be recognized within the ~~unsatisfied performance obligations.~~next 12 months, and Other liabilities for the long-term portion in the Consolidated Balance Sheets (Unaudited).

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The following table reflects the changes in deferred franchise and development fees between June 24, 2020 and March 24, 2021:


	Deferred Franchise and Development Fees

Balance as of June 24, 2020	$	12.7
Additions	~~0.1~~0.3
Amount recognized to Franchise and other revenues	~~(0.3)~~(1.3)
Other	0.1
Balance as of ~~September 23, 2020~~March 24, 2021	$	~~12.5~~11.8

Fiscal Year Franchise and Development Fees Revenue Recognition
Remainder of 2021 $ 0.9
2022 1.1
2023 1.0
2024 1.0
2025 1.0
Thereafter 7.5
$ 12.5
The following table illustrates franchise and development fees expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of March 24, 2021:


Fiscal Year	Franchise and Development Fees Revenue Recognition
Remainder of 2021	$	0.3
2022	1.0
2023	1.0
2024	1.0
2025	0.9
Thereafter	7.6
	$	11.8

Deferred Gift Card Revenues

Total deferred revenues related to our gift cards include the full value of unredeemed gift card balances less recognized breakage and the unamortized portion of third party fees. The following table reflects the changes in the Gift card liability between June 24, 2020 and March 24, 2021:


	Gift Card Liability

Balance as of June 24, 2020	$	109.9
Gift card sales	~~19.0~~88.6
Gift card redemptions recognized to Company sales	~~(19.9)~~(79.8)
Gift card breakage recognized to Franchise and other revenues	~~(2.2)~~(8.0)
Other	~~0.3~~0.2
Balance as of ~~September 23, 2020~~March 24, 2021	$	~~107.1~~110.9

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4. OTHER GAINS AND CHARGES

Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited) consist of the following:


		Thirteen Week Periods Ended				Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019				March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020
Loss from natural disasters, net of (insurance recoveries)							Loss from natural disasters, net of (insurance recoveries)	$	1.8	$	(0.9)	$	2.0	$	(0.6)
Remodel-related costs							Remodel-related costs	0.9		0.6		1.8		2.1
COVID-19 related charges							COVID-19 related charges	0.9		16.1		3.1		16.1
Restaurant closure charges	Restaurant closure charges	$	1.5	$	0.2		Restaurant closure charges	0.3		0.3		2.2		3.4
COVID-19 related charges		1.2		0
Remodel-related costs		0.2		0.7
Foreign currency transaction (gain) loss							Foreign currency transaction (gain) loss	0.1		2.3		(0.3)		2.2
Restaurant impairment charges							Restaurant impairment charges	0		0		2.5		4.6
Lease modification gain, net	Lease modification gain, net	(0.5)		(3.1)			Lease modification gain, net	0		0		(0.5)		(3.1)

Acquisition of franchise restaurants costs, net							Acquisition of franchise restaurants costs, net	0		1.1		0		2.6
Other	Other	1.4		1.3			Other	0.3		(0.2)		2.7		3.4
		$	3.8	$	(0.9)			$	4.3	$	19.3	$	13.5	$	30.7

Fiscal 2021

•Loss from natural disasters, net of (insurance recoveries) primarily consists of costs incurred related to Winter Storm Uri in February 2021.

•Remodel-related costs relate to fixed asset disposals associated with the ongoing Chili’s remodel initiative.

•COVID-19 related charges in the thirty-nine week period ended March 24, 2021 consists of following costs related to both Chili’s and Maggiano’s:

–employee assistance and related payroll taxes for certain team members,

–conversion of certain parking lots into dining areas, and

–initial purchases of restaurant and personal protective supplies such as face masks and hand sanitizers required to maintain open dining rooms.

•Restaurant closure charges in the thirty-nine week period ended March 24, 2021 primarily relates to closure costs and leases associated with certain closed Chili’s ~~restaurants closed~~restaurants.

•Foreign currency transaction (gain) loss resulted from the change in the ~~first~~value of our Mexican peso denominated note receivable received as consideration from the sale of our equity interest in our Mexico joint venture in the second quarter of fiscal ~~2021.~~2018.

•Restaurant impairment charges during the thirty-nine week period ended March 24, 2021 primarily related to the long-lived and operating lease assets of 10 underperforming Chili’s restaurants and 3 underperforming Maggiano’s restaurants that we continue to operate.

•Lease modification gain, net during the thirty-nine week period ended March 24, 2021 relates to lease terminations of certain Chili’s operating lease liabilities.

Fiscal 2020

•Loss from natural disasters, net of (insurance recoveries) during the thirteen and thirty-nine week periods ended March 25, 2020 primarily consists of insurance proceeds received related to a previously filed claim.

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•COVID-19 related charges consists of costs related to both Chili’s and ~~Maggiano’s~~ Maggiano’s:

–employee assistance ~~and related payroll taxes~~- $15.5 million of employee assistance payments for ~~certain~~the team members that experienced reduced shifts during this pandemic, who would have otherwise not received such payment under our normal compensation practices; and

–inventory spoilage - $0.6 million due to the unexpected decline in traffic and ~~restaurant supplies such as face masks~~dining room closures.

• Restaurant closure charges during the thirteen and ~~hand sanitizers required~~thirty-nine week periods ended March 25, 2020 primarily related to ~~continue to reopen dining rooms.~~leases on certain closed Chili’s restaurants.

•~~Remodel-related costs relates~~Restaurant impairment charges during the thirty-nine week period ended March 25, 2020 primarily related to ~~fixed asset write-offs associated with~~ the ~~ongoing~~long-lived and operating lease assets of 10 underperforming Chili’s ~~remodel initiative.~~restaurants.

•Lease modification gain, net ~~relates to~~during the ~~lease terminations~~thirty-nine week period ended March 25, 2020 included the first quarter of ~~certain Chili’s operating lease liabilities.~~

~~Fiscal~~fiscal 2020

•~~Lease modification~~ gain ~~net~~ related to the lease termination of a previously impaired Chili’s operating lease.

• Acquisition of franchise restaurants costs, net during the thirteen and thirty-nine week periods ended March 25, 2020 related to the 116 restaurants acquired from a franchisee. Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

5. INCOME TAXES

Thirteen Week Periods Ended
September 23,
2020 September 25,
2019
Effective income tax rate (4.9) % 11.3 %


	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020
Effective income tax rate	11.7	%	(13.2)	%	0.4	%	(0.8)	%

The federal statutory tax rate for ~~both~~the periods presented was 21.0%.

~~Fiscal 2021~~

Our effective income tax rate for the thirteen and thirty-nine week ~~period~~periods ended ~~September 23, 2020~~March 24, 2021 was lower than the federal statutory rate primarily due to the favorable impact from the FICA tip tax ~~credit and~~credit. The thirty-nine week period ended March 24, 2021 also included the favorable impact of excess tax ~~windfalls~~benefits associated with stock-based compensation.

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A reconciliation between the reported ~~provision~~Provision (benefit) for income taxes and the amount computed by applying the statutory ~~Federal~~federal income tax rate to ~~Provision (benefit) for~~Income before income taxes is as follows:


	~~Thirteen~~Thirty-Nine Week Period Ended
	~~September 23,~~March 24, ~~2020~~2021
Income tax expense at statutory rate - 21.0%	$	~~2.1~~11.9
FICA tip tax credit	~~(1.9)~~(12.2)
Stock-based compensation excess tax ~~windfall~~benefits	~~(1.1)~~(2.0)
State income taxes, net of federal benefit	~~0.6~~3.3

Other	~~(0.2)~~(0.8)
Provision (benefit) for income taxes - 0.4%	$	~~(0.5)~~0.2

~~Fiscal 2020~~

Our effective income tax rate for the thirteen and thirty-nine week ~~period~~periods ended ~~September~~March 25, ~~2019~~2020 was lower than the federal statutory rate due to reduced profitability related to the COVID-19 pandemic that resulted in the closure of all dining and banquet rooms by the end of the third quarter of fiscal 2020, and the favorable impact ~~from~~of the FICA tip tax credit. The Provision (benefit) for income taxes included a significant reduction for the thirteen week period ended March 25, 2020 necessary to align the year-to-date Provision (benefit) for income taxes to the year-to-date Income before income taxes.

6. NET INCOME PER SHARE

Basic net income per share is computed by dividing Net income by the Basic weighted average shares outstanding for the reporting period. Diluted net income per share reflects the potential dilution that could occur if securities or

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other contracts to issue common stock were exercised or converted into common stock. For the calculation of Diluted net income per share, the Basic weighted average shares outstanding is increased by the dilutive effect of stock options and restricted share awards. Stock options and restricted share awards with an anti-dilutive effect are not included in the Diluted net income per share calculation. Basic weighted average shares outstanding are reconciled to Diluted weighted average shares outstanding as follows:


		Thirteen Week Periods Ended		Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
			September 23, 2020		September 25, 2019		March 24, 2021	March 25, 2020	March 24, 2021	March 25, 2020
Basic weighted average shares outstanding	Basic weighted average shares outstanding		45.1		37.5	Basic weighted average shares outstanding	45.5	37.2	45.3	37.3
Dilutive stock options	Dilutive stock options		0.1		0.1	Dilutive stock options	0.5	0.1	0.3	0.1
Dilutive restricted shares	Dilutive restricted shares		0.5		0.5	Dilutive restricted shares	0.7	0.5	0.6	0.6
Total dilutive impact	Total dilutive impact		0.6		0.6	Total dilutive impact	1.2	0.6	0.9	0.7
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding		45.7		38.1	Diluted weighted average shares outstanding	46.7	37.8	46.2	38.0

Awards excluded due to anti-dilutive effect	Awards excluded due to anti-dilutive effect		1.6		1.4	Awards excluded due to anti-dilutive effect	0.0	1.4	0.7	1.3

7. SEGMENT INFORMATION

Our operating segments are Chili’s and Maggiano’s. The Chili’s segment includes the results of our Company-owned Chili’s restaurants, which are principally located in the United States, within the full-service casual dining segment of the industry. The Chili’s segment also has Company-owned restaurants in Canada, and franchised locations in the United States, 2827 countries and 2 United States territories. The Maggiano’s segment includes the results of our Company-owned Maggiano’s restaurants in the United States as well as the results from our domestic franchise business. The Other segment includes costs related to our restaurant support teams for the Chili’s and Maggiano’s brands, including operations, finance, franchise, marketing, human resources and culinary innovation. The Other segment also includes costs related to the common and shared infrastructure, including accounting, information technology, purchasing, guest relations, legal and restaurant development.

Company sales for each segment include revenues generated by the operation of Company-owned restaurants including gift card redemptions and virtual brand revenues. Franchise and other revenues include ~~Royalties and Franchise fees and other revenues. Franchise fees and other revenues include delivery~~royalties, delivery service income, gift card breakage, franchise advertising fees, digital entertainment revenues, ~~franchise and development fees,~~ Maggiano’s banquet service charge income, ~~gift card equalization, merchandise income,~~franchise and development fees, gift card discount costs from third-party gift card ~~sales.~~ sales and merchandise income.

We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our

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operating segments are predominantly located in the United States. There were no material transactions amongst our operating segments.

Our chief operating decision maker uses Operating income as the measure for assessing performance of our segments. Operating income includes revenues and expenses directly attributable to segment-level results of operations. Restaurant expenses during the periods presented primarily included restaurant rent, supplies, ~~utilities,~~ delivery fees, repairs and maintenance, utilities, property taxes, credit card processing fees and ~~advertising. T~~advertising~~he following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:~~.

Thirteen Week Period Ended September 23, 2020
Chili’s Maggiano’s Other Consolidated
Company sales $ 675.0 $ 53.2 $ 0 $ 728.2
Royalties 6.6 0.0 0 6.6
Franchise fees and other revenues 4.9 0.4 0 5.3
Franchise and other revenues 11.5 0.4 0 11.9
Total revenues 686.5 53.6 0 740.1
Food and beverage costs 180.8 12.7 0 193.5
Restaurant labor 228.2 19.8 0 248.0
Restaurant expenses 181.4 20.8 0.3 202.5
Depreciation and amortization 30.6 3.6 3.2 37.4
General and administrative 5.4 1.3 23.8 30.5
Other (gains) and charges 3.6 0.1 0.1 3.8
Total operating costs and expenses 630.0 58.3 27.4 715.7
Operating income (loss) 56.5 (4.7) (27.4) 24.4
Interest expenses 1.4 0 13.2 14.6
Other income, net (0.1) 0 (0.3) (0.4)
Income (loss) before income taxes $ 55.2 $ (4.7) $ (40.3) $ 10.2
Segment assets $ 1,937.1 $ 221.8 $ 176.4 $ 2,335.3
Segment goodwill 149.3 38.4 0 187.7
Payments for property and equipment 11.6 0.5 1.5 13.6

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Thirteen Week Period Ended September 25, 2019
Chili’s(1)
Maggiano’s Other Consolidated
Company sales $ 677.5 $ 86.4 $ 0 $ 763.9
Royalties 11.8 0.1 0 11.9
Franchise fees and other revenues 6.3 3.9 0 10.2
Franchise and other revenues 18.1 4.0 0 22.1
Total revenues 695.6 90.4 0 786.0
Food and beverage costs 182.4 21.4 0 203.8
Restaurant labor 233.1 35.4 0 268.5
Restaurant expenses 180.8 26.3 0.2 207.3
Depreciation and amortization 30.7 4.0 3.4 38.1
General and administrative 9.1 1.7 27.2 38.0
Other (gains) and charges (1.6) 0.1 0.6 (0.9)
Total operating costs and expenses 634.5 88.9 31.4 754.8
Operating income (loss) 61.1 1.5 (31.4) 31.2
Interest expenses 0.9 0 14.0 14.9
Other income, net (0.2) 0 (0.3) (0.5)
Income (loss) before income taxes $ 60.4 $ 1.5 $ (45.1) $ 16.8
Payments for property and equipment $ 16.1 $ 2.3 $ 2.1 $ 20.5
The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:


	Thirteen Week Period Ended March 24, 2021
	Chili’s		Maggiano’s		Other		Consolidated
Company sales	$	749.0	$	64.7	$	0	$	813.7
Royalties	7.7		0		0		7.7
Franchise fees and other revenues	6.3		0.7		0		7.0
Franchise and other revenues	14.0		0.7		0		14.7
Total revenues	763.0		65.4		0		828.4

Food and beverage costs	198.7		15.2		0		213.9
Restaurant labor	248.7		22.1		0		270.8
Restaurant expenses	194.2		21.7		0.2		216.1
Depreciation and amortization	31.0		3.4		3.0		37.4
General and administrative	7.0		1.3		25.4		33.7
Other (gains) and charges	3.1		0.3		0.9		4.3
Total operating costs and expenses	682.7		64.0		29.5		776.2
Operating income (loss)	80.3		1.4		(29.5)		52.2
Interest expenses	1.4		0		12.7		14.1
Other income, net	(0.1)		0		(0.2)		(0.3)
Income (loss) before income taxes	$	79.0	$	1.4	$	(42.0)	$	38.4


	Thirteen Week Period Ended March 25, 2020
	Chili’s		Maggiano’s		Other		Consolidated
Company sales	$	748.7	$	91.7	$	0	$	840.4
Royalties	9.0		0		0		9.0
Franchise fees and other revenues	6.7		3.9		0		10.6
Franchise and other revenues	15.7		3.9		0		19.6
Total revenues	764.4		95.6		0		860.0

Food and beverage costs	204.1		22.6		0		226.7
Restaurant labor	251.1		34.8		0		285.9
Restaurant expenses	193.2		26.9		0.1		220.2
Depreciation and amortization	36.5		3.8		3.2		43.5
General and administrative	5.9		1.1		16.3		23.3
Other (gains) and charges	14.9		2.4		2.0		19.3
Total operating costs and expenses	705.7		91.6		21.6		818.9
Operating income (loss)	58.7		4.0		(21.6)		41.1
Interest expenses	1.1		0		13.2		14.3
Other income, net	(0.1)		0		(0.3)		(0.4)
Income (loss) before income taxes	$	57.7	$	4.0	$	(34.5)	$	27.2

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	Thirty-Nine Week Period Ended March 24, 2021
	Chili’s		Maggiano’s		Other		Consolidated
Company sales	$	2,107.0	$	181.1	$	0	$	2,288.1
Royalties	21.9		0.1		0		22.0
Franchise fees and other revenues	17.0		2.1		0		19.1
Franchise and other revenues	38.9		2.2		0		41.1
Total revenues	2,145.9		183.3		0		2,329.2

Food and beverage costs	563.2		43.1		0		606.3
Restaurant labor	710.3		64.3		0		774.6
Restaurant expenses	564.6		64.6		0.7		629.9
Depreciation and amortization	92.4		10.4		9.2		112.0
General and administrative	17.8		3.9		72.5		94.2
Other (gains) and charges	11.1		1.2		1.2		13.5
Total operating costs and expenses	1,959.4		187.5		83.6		2,230.5
Operating income (loss)	186.5		(4.2)		(83.6)		98.7
Interest expenses	4.2		0.1		38.8		43.1
Other income, net	(0.4)		0		(0.8)		(1.2)
Income (loss) before income taxes	$	182.7	$	(4.3)	$	(121.6)	$	56.8

Segment assets	$	1,905.2	$	219.7	$	184.1	$	2,309.0
Segment goodwill	149.7		38.4		0		188.1
Payments for property and equipment	56.3		1.4		4.7		62.4


	Thirty-Nine Week Period Ended March 25, 2020
	Chili’s(1)		Maggiano’s		Other		Consolidated
Company sales	$	2,154.6	$	297.2	$	0	$	2,451.8
Royalties	30.7		0.1		0		30.8
Franchise fees and other revenues	17.8		14.9		0		32.7
Franchise and other revenues	48.5		15.0		0		63.5
Total revenues	2,203.1		312.2		0		2,515.3

Food and beverage costs	581.6		72.0		0		653.6
Restaurant labor	735.2		111.0		0		846.2
Restaurant expenses	568.2		83.6		0.4		652.2
Depreciation and amortization	99.3		11.8		9.8		120.9
General and administrative	23.5		4.3		68.1		95.9
Other (gains) and charges	23.9		2.5		4.3		30.7
Total operating costs and expenses	2,031.7		285.2		82.6		2,399.5
Operating income (loss)	171.4		27.0		(82.6)		115.8
Interest expenses	3.1		0		41.1		44.2
Other income, net	(0.4)		0		(1.0)		(1.4)
Income (loss) before income taxes	$	168.7	$	27.0	$	(122.7)	$	73.0

Payments for property and equipment	$	68.9	$	6.2	$	6.9	$	82.0

(1)Chili’s segment information for fiscal 2020 includes the results of operations related to the 116 restaurants purchased from a former franchisee subsequent to the September 5, 2019 acquisition date. Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

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8. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. Fair value ~~is grouped~~measurements are categorized in three levels based on the ~~level~~types of significant inputs used, ~~in measuring fair value,~~ as follows:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2			Observable inputs available at measurement date other than quote prices included in Level 1
Level 3			Unobservable inputs that cannot be corroborated by observable market data

Non-Financial Assets Measured on a Non-Recurring Basis

We review the carrying amounts of long-lived property and equipment, operating lease assets, reacquired franchise rights and transferable liquor licenses semi-annually or when events or circumstances indicate that the fair value may not substantially exceed the carrying amount. We record an impairment charge for the excess of the carrying amount over the fair value. All impairment charges were included in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited) for the periods presented.

Intangibles, net in the Consolidated Balance Sheets (Unaudited) includes both indefinite-lived intangible assets such as ~~the~~ transferable liquor licenses and definite-lived intangible assets ~~that include~~such as reacquired franchise rights and ~~other items such as~~ trademarks. Intangibles, net included accumulated amortization associated with definite-lived intangible assets at ~~September 23, 2020~~March 24, 2021 and June 24, 2020, of ~~$8.0~~$9.2 million and $7.5 million, respectively.

Definite Lived Assets Impairment

Definite lived assets include property, equipment, operating lease assets and reacquired franchise rights. During the ~~thirteen~~thirty-nine week period ended March 24, 2021, we impaired certain long-lived assets and operating lease assets primarily related to 10 underperforming Chili’s and 3 underperforming Maggiano’s restaurants. During the thirty-nine week period ended March 25, 2020, we impaired certain long-lived assets primarily related to 10 underperforming Chili’s restaurants. Additionally, we impaired certain finance and operating lease assets related to previously closed Chili’s restaurants.

We determined the fair value of these assets based on Level 3 fair value measurements. The table below presents the carrying values and related impairment expenses recorded on these impaired restaurants for the periods ~~ended September 23, 2020 and September 25, 2019, no indicators of impairment existed.~~presented.

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					Impairment Charges
	Pre-Impairment Carrying Value				Thirty-Nine Week Periods Ended
	March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020
Underperforming restaurants
Long-lived assets	$	2.2	$	4.5	$	2.2	$	4.5
Reacquired franchise rights assets	0.1		0		0.1		0
Operating lease assets	1.1		0		0.2		0
Finance lease assets	0		0.1		0		0.1
Total underperforming restaurants	$	3.4	$	4.6	$	2.5	$	4.6
Closed restaurants
Operating lease assets	$	0	$	6.4	$	0	$	1.8
Finance lease assets	0		5.8		0		1.4
Total closed restaurants	$	0	$	12.2	$	0	$	3.2

Indefinite Lived Assets Impairment

~~We determine the~~The fair ~~value~~values of transferable liquor licenses are based on prices in the open market for licenses in the same or similar jurisdictions, ~~that is considered~~and are categorized as Level 2. During the thirteen and thirty-nine week periods ended ~~September 23,~~March 24, 2021 and March 25, 2020, ~~and September 25, 2019,~~ no indicators of impairment were identified.

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Goodwill

We review the carrying amounts of goodwill annually or when events or circumstances indicate that the carrying amount may not be recoverable. We may elect to perform a qualitative assessment for our reporting units to determine whether it is more likely than not that the fair value of the reporting unit is greater than its carrying value. If a qualitative assessment is not performed, or if the result of the qualitative assessment indicates a potential impairment, then the ~~reporting unit’s~~ fair value of the reporting unit is compared to its carrying value. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the implied fair value of the goodwill.

Related to the qualitative assessment, changes in circumstances existing at the measurement date or at other times in the future, such as declines in our market capitalization, as well as in the market capitalization of other companies in the restaurant industry, declines in sales at our restaurants, and significant adverse changes in the operating environment for the restaurant industry could result in an impairment loss of all or a portion of our goodwill.

We performed a detailed quantitative assessment in the third quarter of fiscal 2020 of our goodwill balances associated with both reporting units. This assessment was performed in response to observed ~~indicators of impairment~~declines in operating cash flows and market capitalization that were primarily driven by the impact of the COVID-19 pandemic on our business. ~~These indicators were significant declines in operating cash flows and market capitalization.~~ Based on this assessment, we concluded that our goodwill and indefinite-lived intangible assets were not impaired at that time. We updated this assessment in the fourth quarter of fiscal 2020 and again concluded no impairment triggering event existed based on improved market capitalization and ~~improved~~ operating results compared to projections in the ~~detailed~~ quantitative assessment prepared in the third quarter of fiscal 2020.

Our operating results and operating cash flows for the thirteen and thirty-nine week periods ended March 24, 2021 have continued to outperform our initial quantitative ~~assessment in the first quarter of fiscal 2021.~~assessment. Our stock price and market capitalization have also increased to levels greater than before the COVID-19 pandemic began in the United States. ~~As a result, we have not~~We performed ~~a quantitative~~our annual goodwill impairment analysis in the ~~first~~second quarter of fiscal ~~2021; however,~~2021 using a qualitative approach based on these ~~qualitative~~ factors ~~Management has concluded~~and no ~~triggering event exists.~~ indicators of impairment were identified. During the thirteen and thirty-nine week periods ended March 25, 2020, no indicators of impairment were identified based on our assessments.

Our ability to operate dining and banquet rooms and generate off-premise sales at our restaurants is critical to avoiding a future triggering event as the impact of the COVID-19 pandemic continues. Management’s judgments about the impact of the pandemic could change as additional developments occur. We will continue to monitor and evaluate our results in future periods to determine if ~~more~~ a more detailed assessment is necessary.

Other Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying amounts because of the short maturity of these items.

Long-Term Debt

The carrying amount of debt outstanding related to the amended revolving credit facility approximates fair value as the interest rate on this instrument approximates current market rates (Level 2). The fair values of the 3.875% and 5.000% notes are based on quoted market prices and are considered Level 2 fair value measurements.

The 3.875% notes and 5.000% notes carrying amounts, which are net of unamortized debt issuance costs and discounts, and fair values are as ~~follows, refer to Note 10 - Debt for further details:~~follows:


		September 23, 2020				June 24, 2020					March 24, 2021				June 24, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
3.875% notes	3.875% notes	$	299.1	$	293.3	$	299.0	$	282.8	3.875% notes	$	299.2	$	303.4	$	299.0	$	282.8
5.000% notes	5.000% notes	346.9		357.4		346.7		330.8		5.000% notes	347.3		363.1		346.7		330.8

1416

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Footnote Index

~~Note Receivable~~

During fiscal 2018, we received an $18.0 million long-term note receivable as consideration related to the sale of our equity interest in the Chili’s joint venture in Mexico. We determined the fair value of this note based on an internally developed analysis relying on Level 3 inputs at inception. This analysis was based on a credit rating we assigned to the counterparty and comparable interest rates associated with similar debt instruments observed in the market. As a result of this analysis, we determined the fair value of this note was approximately $16.0 million and recorded this fair value as its initial carrying value. We believe the fair value continues to approximate the note receivable carrying value, which as of September 23, 2020 was $7.0 million. The current portion of the note represents cash payments to be received over the next 12 months and is included within Accounts receivable, net while the long-term portion of the note is included within Other assets in the Consolidated Balance Sheets (Unaudited).

9. LEASES

We typically lease our restaurant facilities through ground leases (where we lease land only, but construct the building and improvements) or retail leases (where we lease the land/retail space and building). In addition to our restaurant facilities, we also lease our corporate headquarters location and certain equipment.

Lease Amounts Included in the Consolidated Statements of Comprehensive Income (Unaudited)

The components of lease expenses included in the Consolidated Statements of Comprehensive Income (Unaudited) were as follows:

Thirteen Week Periods Ended
September 23,
2020 September 25,
2019
Operating lease cost $ 41.7 $ 37.3
Variable lease cost 14.0 13.3
Finance lease amortization 4.0 2.7
Finance lease interest 1.5 0.9
Short-term lease cost 0.1 0.2
Sublease income (1.0) (1.2)
Total lease costs, net $ 60.3 $ 53.2

~~Lease Maturity Analysis~~

~~As of September 23, 2020, the discounted future minimum lease payments on finance and operating leases, as well as sublease income, were as follows:~~

September 23, 2020
Fiscal Year Finance Leases Operating Leases Sublease Income
Remainder of 2021 $ 17.5 $ 135.8 $ 2.5
2022 22.4 169.2 3.2
2023 20.9 157.6 2.6
2024 11.4 146.6 1.9
2025 9.0 136.6 1.8
Thereafter 53.6 864.5 4.8
Total future lease payments(1)
134.8 1,610.3 $ 16.8
Less: Imputed interest 31.0 447.3
Present value of lease liability $ 103.8 $ 1,163.0

~~(1)~~Finance and Operating leases total future lease payments represent the contractual obligations due under the contract, including certain cancellable option periods where we are reasonably assured to exercise the

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~~Footnote~~ ~~Index~~

~~options. Included in the Total future lease payments as of September 23, 2020 was non-cancelable lease commitments of $114.0 million for finance leases, and $1,065.8 million for operating leases.~~


	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020
Operating lease cost	$	41.9	$	41.8	$	125.6	$	121.0
Variable lease cost	14.6		15.6		43.5		43.9
Finance lease amortization	4.2		8.0		12.4		13.7
Finance lease interest	1.4		1.2		4.3		3.2
Short-term lease cost	0.2		0.5		0.4		1.2
Sublease income	(1.0)		(1.2)		(3.2)		(3.5)
Total lease costs, net	$	61.3	$	65.9	$	183.0	$	179.5

10. DEBT

Long-term debt consists of the following:


		September 23, 2020		June 24, 2020			March 24, 2021		June 24, 2020
Revolving credit facility	Revolving credit facility	$	426.3	$	472.9	Revolving credit facility	$	291.3	$	472.9
5.000% notes	5.000% notes	350.0		350.0		5.000% notes	350.0		350.0
3.875% notes	3.875% notes	300.0		300.0		3.875% notes	300.0		300.0
Finance lease obligations	Finance lease obligations	103.8		102.1		Finance lease obligations	97.0		102.1
Total long-term debt		1,180.1		1,225.0
Total long-term debt and finance leases						Total long-term debt and finance leases	1,038.3		1,225.0
Less: unamortized debt issuance costs and discounts	Less: unamortized debt issuance costs and discounts	(4.1)		(4.3)		Less: unamortized debt issuance costs and discounts	(3.5)		(4.3)
Total long-term debt, less unamortized debt issuance costs and discounts	Total long-term debt, less unamortized debt issuance costs and discounts	1,176.0		1,220.7		Total long-term debt, less unamortized debt issuance costs and discounts	1,034.8		1,220.7
Less: current installments of long-term debt(1)	Less: current installments of long-term debt(1)	(17.7)		(12.2)		Less: current installments of long-term debt(1)	(17.8)		(12.2)
Long-term debt less current installments		$	1,158.3	$	1,208.5
Long-term debt and finance leases less current installments						Long-term debt and finance leases less current installments	$	1,017.0	$	1,208.5

(1)Current installments of long-term debt consist only of finance leases for the periods presented and are recorded within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited). Refer to Note 11 - Accrued and Other Liabilities for further details.

Revolving Credit Facility

In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020,~~March 24, 2021, net repayments of ~~$46.6~~$181.6 million were made on the $1.0 billion revolving credit facility. As of ~~September 23, 2020, $573.7~~March 24, 2021, $708.7 million of credit was available under the revolving credit facility.

Amended Revolving Credit Agreement

In the first quarter of fiscal 2021, we executed the seventh amendment to our revolving credit ~~facility. This amendment extended~~facility, extending the maturity date to December 12, ~~2022, and required~~2022. This amendment included a capacity reduction to $900.0 million from $1.0 billion which will occur on September 12, 2021. The issuance of certain debt or preferred equity interests will result in an immediate capacity reduction, an interest rate reduction of 0.250% on the spread and 0.100% reduction on the undrawn fee if the issuance exceeds $250.0 million pursuant to the terms of the agreement.

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Footnote Index

The revolving credit facility bears interest of LIBOR ~~through December 2021,~~ plus an applicable margin of 2.250% to 3.000% and an undrawn commitment fee of 0.350% to 0.500%, both based on a function of our debt-to-cash-flow ratio. ~~Upon LIBOR’s expiration in December 2021, our interest rate will be a function of a similar, publicly available, Eurodollar rate.~~ As of ~~September 23, 2020,~~March 24, 2021, our interest rate was 3.750% consisting of the LIBOR floor of 0.750% plus the applicable margin of 3.000%.

~~During~~In the ~~first quarter of fiscal~~thirty-nine week period ended March 24, 2021, we incurred ~~$1.5~~and capitalized $2.2 million of debt issuance costs, associated with the revolver amendment, which are included in Other assets in the Consolidated Balance Sheets (Unaudited).

~~5.000% Notes~~

In fiscal 2017, we completed the private offering of $350.0 million of our 5.000% senior notes due October 2024, our fiscal 2025 (the “2024 Notes”). We received proceeds of $350.0 million and utilized the proceeds to fund a $300.0 million accelerated share repurchase agreement and to repay $50.0 million on the amended $1.0 billion revolving credit facility. The notes require semi-annual interest payments which began on April 1, 2017.

The indenture for the 2024 Notes contains certain covenants, including, but not limited to, limitations and restrictions on the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to (i) create liens on Principal Property (as defined in the Indenture) and (ii) merge, consolidate or amalgamate with or into any

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~~Footnote~~ ~~Index~~

other person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of their property. These covenants are subject to a number of important conditions, qualifications, exceptions and limitations.

~~3.875% Notes~~

In fiscal 2013, we issued $300.0 million of 3.875% notes due in May 2023, our fiscal 2023. These “2023 Notes” require semi-annual interest payments which began in the second quarter of fiscal 2014.

Financial Covenants

Our debt agreements contain various financial covenants that, among other things, require the maintenance of certain leverage and fixed charge coverage ratios. As of ~~September 23, 2020,~~March 24, 2021, we were in compliance with our covenants pursuant to the amended revolving credit facility and under the terms of the indentures governing our ~~2023 Notes~~3.875% notes and ~~2024 Notes, we are in compliance with our covenants.~~5.000% notes. We expect to remain in compliance with our covenants during the remainder of fiscal 2021.

11. ACCRUED AND OTHER LIABILITIES

Other accrued liabilities consist of the following:


		September 23, 2020		June 24, 2020			March 24, 2021		June 24, 2020
Insurance						Insurance	$	22.6	$	20.7
Property tax	Property tax	$	27.0	$	22.9	Property tax	19.7		22.9
Insurance		21.3		20.7
Sales tax	Sales tax	18.0		13.3		Sales tax	19.5		13.3
Current installments of finance leases	Current installments of finance leases	17.7		12.2		Current installments of finance leases	17.8		12.2
Interest	Interest	14.9		7.5		Interest	14.3		7.5
Utilities and services	Utilities and services	8.4		8.3		Utilities and services	8.5		8.3
Cyber security incident	Cyber security incident	3.4		3.4		Cyber security incident	3.4		3.4

State income tax payable						State income tax payable	0.4		0
Other(1)	Other(1)	11.2		12.3		Other(1)	10.1		12.3
		$	121.9	$	100.6		$	116.3	$	100.6

(1)Other primarily consists of ~~accruals for~~rent-related expenses, banquet deposits for Maggiano’s events, ~~charitable donations, rent-related expenses,~~ deferred franchise and development fees, charitable donations and other various accruals.

Other liabilities consist of the following:


		September 23, 2020		June 24, 2020			March 24, 2021		June 24, 2020
Insurance						Insurance	$	34.6	$	33.7
Deferred payroll taxes(1)	Deferred payroll taxes(1)	$	34.2	$	12.9	Deferred payroll taxes(1)	27.2		12.9
Insurance		33.5		33.7
Deferred franchise fees	Deferred franchise fees	11.4		11.6		Deferred franchise fees	10.8		11.6
Unrecognized tax benefits	Unrecognized tax benefits	2.1		2.1		Unrecognized tax benefits	2.1		2.1
Other	Other	6.2		6.8		Other	6.4		6.8
		$	87.4	$	67.1		$	81.1	$	67.1

(1) Deferred payroll taxes ~~primarily consists~~consist of the second installment of the deferral of the employer portion of certain payroll related taxes as allowed under the CARES Act which ~~will be repaid in two equal installments~~is due on December 31, 2022. The first installment of $27.2 million, which is due on December 31, 2021, ~~and December 31, 2022.~~is recorded within Accrued payroll in the Consolidated Balance Sheets (Unaudited).

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12. SHAREHOLDERS’ DEFICIT

The changes in Total shareholders’ deficit during the ~~thirteen~~thirty-nine week periods ended ~~September 23,~~March 24, 2021 and March 25, 2020, ~~and September 25, 2019,~~ respectively, were as follows:


		Thirteen Week Period Ended September 23, 2020													Thirty-Nine Week Period Ended March 24, 2021
		Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total			Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at June 24, 2020	Balance at June 24, 2020	$	7.0	$	669.4	$	(397.5)	$	(751.8)	$	(6.2)	$	(479.1)	Balance at June 24, 2020	$	7.0	$	669.4	$	(397.5)	$	(751.8)	$	(6.2)	$	(479.1)
Net income	Net income	0		0		10.7		0		0		10.7		Net income	0		0		10.7		0		0		10.7
Other comprehensive income	Other comprehensive income	0		0		0		0		0.3		0.3		Other comprehensive income	0		0		0		0		0.3		0.3
Dividends	Dividends	0		0		0.0		0		0		0.0		Dividends	0		0		0.0		0		0		0.0
Stock-based compensation	Stock-based compensation	0		3.9		0		0		0		3.9		Stock-based compensation	0		3.9		0		0		0		3.9
Purchases of treasury stock	Purchases of treasury stock	0		(1.1)		0		(2.8)		0		(3.9)		Purchases of treasury stock	0		(1.1)		0		(2.8)		0		(3.9)
Issuances of common stock	Issuances of common stock	0		(9.0)		0		12.0		0		3.0		Issuances of common stock	0		(9.0)		0		12.0		0		3.0
Balance at September 23, 2020	Balance at September 23, 2020	$	7.0	$	663.2	$	(386.8)	$	(742.6)	$	(5.9)	$	(465.1)	Balance at September 23, 2020	$	7.0	$	663.2	$	(386.8)	$	(742.6)	$	(5.9)	$	(465.1)
Net income														Net income	0		0		12.0		0		0		12.0
Other comprehensive income														Other comprehensive income	0		0		0		0		0.5		0.5
Dividends														Dividends	0		0		0.0		0		0		0.0
Stock-based compensation														Stock-based compensation	0		3.0		0		0		0		3.0
Purchases of treasury stock														Purchases of treasury stock	0		0.0		0		0.0		0		0.0
Issuances of common stock														Issuances of common stock	0		1.2		0		4.3		0		5.5

Balance at December 23, 2020														Balance at December 23, 2020	$	7.0	$	667.4	$	(374.8)	$	(738.3)	$	(5.4)	$	(444.1)
Net income														Net income	0		0		33.9		0		0		33.9
Other comprehensive income														Other comprehensive income	0		0		0		0		0.3		0.3
Dividends														Dividends	0		0		0.0		0		0		0.0
Stock-based compensation														Stock-based compensation	0		4.4		0		0		0		4.4
Purchases of treasury stock														Purchases of treasury stock	0		(0.1)		0		(0.1)		0		(0.2)
Issuances of common stock														Issuances of common stock	0		5.7		0		9.4		0		15.1
Balance at March 24, 2021														Balance at March 24, 2021	$	7.0	$	677.4	$	(340.9)	$	(729.0)	$	(5.1)	$	(390.6)

Thirteen Week Period Ended September 25, 2019
Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Loss Total
Balance at June 26, 2019 $ 17.6 $ 522.0 $ 2,771.2 $ (4,083.4) $ (5.6) $ (778.2)
Effect of ASC 842 adoption — — 195.9 — — 195.9
Net income 0 0 14.9 0 0 14.9
Other comprehensive loss 0 0 0 0 (0.2) (0.2)
Dividends ($0.38 per share) 0 0 (14.6) 0 0 (14.6)
Stock-based compensation 0 7.1 0 0 0 7.1
Purchases of treasury stock 0 (0.3) 0 (11.0) 0 (11.3)
Issuances of common stock 0 (3.7) 0 5.0 0 1.3
Balance at September 25, 2019 $ 17.6 $ 525.1 $ 2,967.4 $ (4,089.4) $ (5.8) $ (585.1)

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Footnote Index


	Thirty-Nine Week Period Ended March 25, 2020
	Common Stock		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at June 26, 2019	$	17.6	$	522.0	$	2,771.2	$	(4,083.4)	$	(5.6)	$	(778.2)
Effect of ASC 842 adoption	—		—		195.9		—		—		195.9
Net income	0		0		14.9		0		0		14.9
Other comprehensive loss	0		0		0		0		(0.2)		(0.2)
Dividends ($0.38 per share)	0		0		(14.6)		0		0		(14.6)
Stock-based compensation	0		7.1		0		0		0		7.1
Purchases of treasury stock	0		(0.3)		0		(11.0)		0		(11.3)
Issuances of common stock	0		(3.7)		0		5.0		0		1.3
Balance at September 25, 2019	$	17.6	$	525.1	$	2,967.4	$	(4,089.4)	$	(5.8)	$	(585.1)
Net income	0		0		27.9		0		0		27.9
Other comprehensive income	0		0		0		0		0.1		0.1
Dividends ($0.38 per share)	0		0		(14.6)		0		0		(14.6)
Stock-based compensation	0		2.6		0		0		0		2.6
Purchases of treasury stock	0		0.0		0		0.0		0		0.0
Issuances of common stock	0		(0.4)		0		0.6		0		0.2
Retirement of treasury stock	(11.4)		0		(3,345.4)		3,356.8		0		0
Balance at December 25, 2019	$	6.2	$	527.3	$	(364.7)	$	(732.0)	$	(5.7)	$	(568.9)
Net income	0		0		30.8		0		0		30.8
Other comprehensive loss	0		0		0		0		(1.0)		(1.0)
Dividends ($0.38 per share)	0		0		(14.0)		0		0		(14.0)
Stock-based compensation	0		(0.7)		0		0		0		(0.7)
Purchases of treasury stock	0		0.0		0		(21.0)		0		(21.0)
Issuances of common stock	0		(0.5)		0		0.6		0		0.1
Balance at March 25, 2020	$	6.2	$	526.1	$	(347.9)	$	(752.4)	$	(6.7)	$	(574.7)

Dividends

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend ~~was suspended~~ in response to liquidity needs created by the COVID-19 pandemic. Before this suspension, ~~our Board of Directors approved quarterly~~we paid dividends of $0.38 per share ~~paid~~ quarterly. In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020,~~March 24, 2021, dividends paid were solely related to the previously accrued dividends for restricted share awards that vested in the period. Restricted share award dividends are accrued in Other accrued liabilities for the current portion to vest within 12 months, and Other liabilities for the portion that will vest after one year. ~~Before the suspension, i~~In the ~~thirteen~~thirty-nine week period ended ~~September~~March 25, ~~2019,~~2020, we paid dividends of ~~$14.8~~$43.3 million to common stock shareholders.

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Footnote Index

Stock-based Compensation

The following table presents the stock options and restricted share awards granted, and related weighted average exercise price and fair value per share amounts.


		Thirteen Week Periods Ended					Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019			March 24, 2021		March 25, 2020
Stock options	Stock options					Stock options
Stock options granted	Stock options granted	0		0.3		Stock options granted	0		0.3
Weighted average exercise price per share	Weighted average exercise price per share	$	0	$	38.51	Weighted average exercise price per share	$	0	$	38.51
Weighted average fair value per share	Weighted average fair value per share	$	0	$	6.83	Weighted average fair value per share	$	0	$	6.83
Restricted share awards	Restricted share awards					Restricted share awards
Restricted share awards granted	Restricted share awards granted	0.5		0.3		Restricted share awards granted	0.5		0.3
Weighted average fair value per share	Weighted average fair value per share	$	39.76	$	38.51	Weighted average fair value per share	$	40.49	$	38.68

Share Repurchases

In the fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic. Prior to the suspension, our share repurchase program was used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluated potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings, and planned investment and financing needs. Repurchased shares are reflected as an increase in Treasury stock within Shareholders’ deficit in the Consolidated Balance Sheets (Unaudited).

In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020,~~March 24, 2021, we repurchased 0.1 million shares from team members to satisfy tax withholding obligations on the vesting of restricted shares. Before the suspension of our repurchase program, in the ~~thirteen~~thirty-nine week period ended ~~September~~March 25, ~~2019,~~2020, we repurchased ~~0.3~~0.8 million shares of our common stock for ~~$11.3~~$32.3 million.

Effect of Adoption of ASC 842

In the first quarter of fiscal 2020, we adopted the lease accounting standard, ASC 842, and recorded a $195.9 million cumulative effect adjustment ~~increase~~ to Retained earnings (accumulated deficit) for the change in accounting principle.

Retirement of Treasury Stock

In the second quarter of fiscal 2020, the Board of Directors approved the retirement of 114 million shares of Treasury stock for a weighted average price per share of $29.45.

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Footnote Index

13. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes and interest is as follows:


		Thirteen Week Periods Ended					Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019			March 24, 2021		March 25, 2020
Income taxes, net of (refunds)	Income taxes, net of (refunds)	$	(2.1)	$	(11.8)	Income taxes, net of (refunds)	$	2.8	$	(4.7)
Interest, net of amounts capitalized	Interest, net of amounts capitalized	5.5		6.1		Interest, net of amounts capitalized	30.8		32.6

Non-cash operating, investing and financing activities are as follows:


		Thirteen Week Periods Ended					Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019			March 24, 2021		March 25, 2020
Operating lease additions(1)						Operating lease additions(1)	$	51.4	$	216.4
Accrued capital expenditures						Accrued capital expenditures	4.3		14.7
Retirement of fully depreciated assets	Retirement of fully depreciated assets	$	2.5	$	4.3	Retirement of fully depreciated assets	13.1		14.0
Dividends declared but not paid	Dividends declared but not paid	0		14.6		Dividends declared but not paid	0.0		14.8
Accrued capital expenditures		6.4		14.2

(1)Operating lease additions include new operating lease assets obtained in exchange for new operating lease liabilities. The thirty-nine week period ended March 25, 2020 primarily included operating lease additions associated with the 116 restaurants purchased from a former franchisee on September 5, 2019 acquisition date. Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

~~Table of Contents~~

~~Footnote~~ ~~Index~~

14. CONTINGENCIES

Lease Commitments

We have, in certain cases, divested brands or sold restaurants to franchisees and have not been released from lease guarantees for the related restaurants. As of ~~September 23, 2020~~March 24, 2021 and June 24, 2020, we have outstanding lease guarantees or are secondarily liable for ~~$37.7~~an estimated $33.8 million and $39.7 million, respectively. These amounts represent the ~~expected maximum~~known potential liability of future rent payments under the leases. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2021 through fiscal 2027. In the event of default under a lease by a franchisee or owner of a divested brand, the indemnity and default clauses in our agreements with such third parties and applicable laws govern our ability to pursue and recover amounts we may pay on behalf of such parties.

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of ~~September 23, 2020,~~March 24, 2021, we had $29.5 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 1 to 1213 months.

Cyber Security Incident

In fiscal 2018, we discovered malware at certain Chili’s restaurants that may have resulted in unauthorized access or acquisition of customer payment card data.

Cyber Security Related Charges

To limit our exposure to cyber security events, we maintain cyber liability insurance coverage. Our cyber liability insurance policy ~~contained~~contains a $2.0 million insurance retention that was fully accrued during fiscal 2018. Since the incident, through ~~September 23, 2020,~~March 24, 2021, we have incurred total cumulative costs of ~~$8.2~~$8.9 million related to the cyber security incident. This includes the $2.0 million retention recorded, ~~$2.2~~$2.6 million in costs that have been reimbursed by our insurance carriers, ~~$3.5~~$3.8 million of receivables for costs incurred that we believe are reimbursable and probable of recovery under our insurance coverage and $0.5 million of costs not reimbursable by our insurance ~~carriers.~~

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Footnote Index

carriers. We have settled claims from three payment card companies, and the settlement amounts are included in these costs. We do not expect material claims from payment card companies in the costs described above. We may incur legal and professional services expenses in future periods. In the event of future litigation, we will record an estimate for any additional losses at the time when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.future.

Cyber Security Litigation

The Company was named as a defendant in a putative class action lawsuit in the United States District Court for the Middle District of Florida styled In re: Brinker Data Incident Litigation, Case No. 18-cv-00686-TJC-MCR (the “Litigation”) relating to the cyber security incident described above. In the Litigation, plaintiffs assert various claims stemming from the cyber security incident at the Company’s Chili’s restaurants involving customer payment card information and seek monetary damages in excess of $5.0 million, injunctive and declaratory relief, and attorney’s fees and costs.

Mediation was held on November 18, 2020 but was unsuccessful. On ~~July 27, 2020,~~April 14, 2021, the ~~Court granted our second motion to dismiss as to all of Plaintiffs’ claims for injunctive relief on Article III standing grounds, dismissing Plaintiffs’ declaratory judgment~~district court issued an order granting in part and ~~Florida Deceptive and Unfair Trade Practices Act (FDUTPA) claims outright and dismissing~~deferring in part the injunctive relief portions of their UCL claims. The Court further ordered Brinker to file an answer to Plaintiffs’ Third Amended Complaint by August 23, 2020, and ordered the parties to mediate the case by November 20, 2020, prior to the class certification hearing in January 2021. Plaintiffs filed theirplaintiffs’ motion for class ~~certification on August 31, 2020, and Brinker’s deadline to file its opposition to Plaintiffs’ motion is October 30, 2020. Mediation is scheduled for November 18, 2020.~~certification.

We believe we have defenses and intend to continue defending the Litigation. As such, as of ~~September 23, 2020,~~March 24, 2021, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded

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~~Footnote~~ ~~Index~~

a liability related to the Litigation. We will continue to evaluate this matter based on new information as it becomes available.

Legal Proceedings

Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis. Accordingly, we review the adequacy of accruals and disclosures pertaining to litigated matters each quarter in consultation with legal counsel and we assess the probability and range of possible losses associated with contingencies for potential accrual in the Consolidated Financial Statements.

We are engaged in various legal proceedings and have certain unresolved claims pending. Liabilities have been established based on our best estimates of our potential liability in certain of these matters. Based upon consultation with legal counsel, management is of the opinion that there are 0 matters pending or threatened which are expected to have a material adverse effect, individually or in the aggregate, on the consolidated financial condition or results of operations.

15. FISCAL 2020 CHILI’S RESTAURANT ACQUISITION

In the first quarter of fiscal 2020, on September 5, 2019, we completed the acquisition of certain assets and liabilities related to 116 previously franchised Chili’s restaurants located in the Midwest United States. Pro-forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited).

Total cash consideration of $96.0 million, including post-closing adjustments, was funded with borrowings from our existing credit facility. We accounted for this acquisition as a business combination. The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the date of acquisition. The assets and liabilities of these restaurants ~~are~~were recorded at their fair values.

~~A preliminary net~~Net acquisition-related ~~gain~~charges of ~~$0.5~~$1.1 million ~~was~~and $2.6 million were recorded during the thirteen and thirty-nine week ~~period~~periods ended ~~September~~March 25, ~~2019~~2020, respectively, to Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited) ~~that~~. In the thirteen week period ended March 25, 2020, the net charges consisted of ~~$2.6~~$1.1 million for professional services, transaction and transition related costs. In the thirty-nine week period ended March 25, 2020, the net charges consisted of ~~franchise deferred revenues balance that were fully recognized at the date of the acquisition, partially offset by $1.5~~$4.1 million offor professional services, transaction and transition related costs ~~associated with the purchase,~~ and ~~$0.6~~$1.1 million of related franchise straight-line rent balances, net of market leasehold improvement adjustments that were fully recognized at the date of the acquisition. These charges were partially offset by $2.6 million of franchise deferred revenue balances that were fully recognized at the date of the acquisition.

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The final purchase price accounting was completed in the third quarter of fiscal 2020, and the final amounts recorded for the fair value of acquired assets and liabilities at the acquisition date were as follows:


	Fair Value September 5, 2019
Current assets(1)	$	7.3
Property and equipment	60.3
Operating lease assets	163.5
Reacquired franchise rights(2)	6.9
Goodwill(3)	22.4
Total assets acquired	260.4
Current liabilities(4)	9.1
Operating lease liabilities, less current portion	158.3
Total liabilities assumed	167.4
Net assets acquired(5)	$	93.0

(1)Current assets included petty cash, inventory, and restaurant supplies.

(2)Reacquired franchise rights have a weighted average amortization period of approximately 8 years.

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(3)Goodwill is expected to be deductible for tax purposes. The portion of the purchase price attributable to goodwill represents the benefits expected as a result of the acquisition, including sales and unit growth opportunities, and the benefit of the assembled workforce of the acquired restaurants.

(4)Current liabilities included the current portion of operating lease liabilities, gift card liability and accrued property tax.

(5)Net assets acquired at fair value are equal to the total purchase price of $99.0 million, less $3.2 million of closing adjustments and $2.8 million allocated to the prepayment of leases entered into ~~between us and~~with the franchisee.

16. SUBSEQUENT EVENTS

~~Revolver Activity~~

Subsequent to the ~~first~~end of the third quarter of fiscal 2021, $20.0 million of ~~net~~ payments were made on the revolving credit facility.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~GENERAL~~General

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations, and our current operating environment. For an understanding of the significant factors that influenced our performance during the thirteen and thirty-nine week periods ended ~~September 23,~~March 24, 2021 and March 25, 2020, ~~and September 25, 2019,~~ the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to ~~the~~ Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

~~OVERVIEW~~Overview

We are principally engaged in the ownership, operation, development, and franchising of the Chili’s® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy® (“Maggiano’s”) restaurant brands. At ~~September 23, 2020,~~March 24, 2021, we owned, operated or franchised ~~1,660~~1,657 restaurants, consisting of ~~1,116~~1,120 Company-owned restaurants and ~~544~~537 franchised restaurants, located in the United States, 2827 countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units. Our Chili’s and Maggiano’s locations also support our virtual brand ~~offering, It’s Just Wings~~™offerings through our ~~partnership~~partnerships with ~~DoorDash.~~DoorDash and Google Food Ordering.

~~COVID-19 Pandemic~~

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Impact of COVID-19 Pandemic

The COVID-19 global pandemic caused a significant decrease in guest traffic and sales ~~during the third and fourth quarters of fiscal 2020, continuing into the first quarter of fiscal 2021. At the end of the third quarter of~~since March 2020. In fiscal 2020, we temporarily closed all Company-owned restaurant dining and banquet rooms ~~as we~~and transitioned to an off-premise business model by leveraging our carryout and ~~temporarily delayed our expansion plans. During the fourth quarter of fiscal~~delivery capabilities. We began opening dining rooms again in May 2020 ~~beginning on April 27, 2020, we began to reopen certain~~and have maintained dining room ~~locations as permitted by~~capacities in accordance with state and local ~~governments.~~government mandates since then. At the end of the ~~first~~third quarter of fiscal 2021, ~~September 23, 2020,~~ substantially all of our Company-owned restaurant dining and banquet rooms or patios were open in ~~a limited~~some capacity.

~~As dining rooms~~To enhance the safety of our team members and guests, we have ~~reopened, we have~~implemented mandatory table distancing ~~as an added safety measure for~~in our ~~guests. In addition,~~dining rooms, and we ~~have~~ increased our already strict sanitation ~~requirements, are conducting~~requirements. We conduct daily health and temperature checks for all employees before they begin their shift and ~~are requiring personal protective equipment~~require face coverings to be worn by all restaurant employees at all times. In March 2021, certain state and local governments began lifting the mask mandates, however, we will continue to follow our enhanced safety measures to ensure the safety of our guests and team members. Our priority ~~has been protecting~~is to protect the health and safety of team members and guests while continuing to serve our communities.

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~~As a result of COVID-19, we have experienced a negative impact on our revenues and traffic. At this time, the~~The ultimate impact of the COVID-19 pandemic in both the short ~~term~~ and long term is ~~difficult to estimate~~not currently estimable due to the uncertainty ~~about~~surrounding the duration of the pandemic, the ~~discovery~~availability and acceptance of ~~any effective treatments, cures or~~preventative vaccines, the emergence and ~~the related~~impact of new COVID-19 variants, and changing government restrictions. Additional impacts to the business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which COVID-19 may impact our business, including the capacity of our dining rooms, what operational restrictions may be imposed, and our ability to fully staff reopened dining rooms. As such, we have taken a number of proactive measures to adapt our business to lower demand levels during the ~~COVID-19~~ pandemic, including measures to significantly reduce costs, ~~partnering with our lenders to provide additional liquidity, issuing additional common stock~~capital expenditures, and ~~negotiating rent concessions with landlords.~~maintain liquidity. We will continue to closely monitor and adapt to the evolving situation.

Operations Strategy

We are committed to strategies and a Company culture that we believe ~~are centered on a~~will improve guest ~~experience. This includes bringing guests back safely, growing long-term~~traffic, grow sales and profit, ~~engaging~~engage team members and ~~working~~work to return our business to pre-pandemic levels. Our strategies and culture are intended to differentiate our brands from the competition and to focus on the guest experience. We are effectively and efficiently ~~manage~~managing our restaurants ~~and~~to establish a lasting presence for our brands in key markets around the world.

Our primary strategy remains to make our guests feel special through great food and quality service so that they return to our restaurants. Our guest survey scores on food quality and service reached an all-time high last fiscal year and ~~continued to improve during the pandemic~~remain consistent with pre-pandemic levels as we ~~continued~~continue to provide great food and service. ~~Our~~We believe our enhanced safety training and systems have also created a safer environment for our team members and guests.

Guest Engagement Through Technology - We ~~have invested~~continue to invest in our technology and off-premise options as more guests are opting for to-go and delivery. Our to-go menu is available through our Chili’s mobile app, on our Chili’s and Maggiano’s brand websites, Google Food Ordering, and through our exclusive delivery partner DoorDash, or by calling the restaurant. Since fiscal 2018, our off-premise business has grown by ~~177%~~275%. ~~Chili’s exclusive~~Our partnership with DoorDash ishas been instrumental in connecting with our guests and providing convenience, especially during the ~~COVID-19~~ pandemic. DoorDash orders are sent directly into our point of sale system, which has ~~created~~facilitated a streamlined integration to our kitchens. We believe that guests will continue to prefer ~~more~~ convenience and off-premise options after the pandemic concerns dissipate. We plan to continue investing in our technology systems to support our carryout and delivery capabilities.

In dining rooms, we use tabletop devices to engage our guests at the table. In fiscal 2020, we rolled out a new tabletop device ~~to continue~~at Chili’s to enhance this experience. These devices ~~provide~~allow guests to pay at the table, reordering, digital entertainment, guest feedback and ~~support~~interaction with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty database includes more than 8 million ~~loyal~~ members ~~who have interacted with Chili’s in the previous six months. We~~and allows us to customize offerings for ~~our~~these guests based on their purchase ~~behavior, and we~~behavior. We plan to continue ~~to shift more of~~focusing our ~~overall~~ marketing spend toon these customized

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channels and promotions. We believe this strategy gives us a sustained competitive advantage over independent restaurants and the majority of our competitors.

Chili’s - Chili’s ~~continues to outpace the casual dining industry and grow market share. Part of our~~ strategy is to differentiate ~~Chili’s~~ from our competitors with a flexible platform of value offerings at both lunch and dinner ~~as well as connecting~~and to connect with our guests through our My Chili’s Rewards loyalty program. ~~Our Cheers to Patron® Margarita of the Month and new offerings on our 3 for $10 meal platform were particularly successful in bringing guests back to Chili’s during fiscal 2020.~~ We are committed to offering consistent, quality products at a price point that is compelling to our guests. Our “3 for $10” platform allows guests to combine a starter, a non-alcoholic drink and an entrée for just $10.00 as part of the every-day base menu. Additionally, we have continued our Margarita of the Month promotion that features a premium-liquor margarita every month at an every-day value price of $5.00. Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise.

Chili’s off-premise dining options, including our virtual brand It’s Just Wings, are also a critical part of our ~~strategy going forward.~~strategy. In the third quarter of fiscal 2021, Chili’s off-premise sales, including both to-go and delivery, iswere approximately ~~48%~~45% of Company sales, with approximately ~~61%~~59% coming from to-go and ~~39%~~41% from ~~delivery during the first quarter of fiscal 2021.~~delivery. We regularly evaluate our processes and menu at Chili’s to identify opportunities where we can improve our service quality and

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food. We continue to focus on our core equities and improving guest satisfaction with our food and service by improving execution of our operations standards.

Maggiano’s -At Maggiano’s, we believe our focus on operating fundamentals and technology ~~will~~ provide the foundation for future efficiencies and growth. For example, Maggiano’s ~~also has an~~ exclusive delivery partnership with ~~DoorDash. Our exclusive partnership~~DoorDash creates a more affordable rate structure, making third party delivery more sustainable and efficient for the brand to operate. ~~Our~~In addition to the DoorDash platform, our guests have the ability to order delivery directly through the Maggiano’s ~~website,~~website. During the pandemic, Maggiano’s has leveraged off-premise dining options, including our virtual brand It’s Just Wings, to sustain revenues and to partially mitigate a decline in ~~addition to~~its banquet business caused by restrictions on large social gatherings. Maggiano’s historically hosts a significant portion of its banquets in the ~~DoorDash platforms.~~holiday season, which occurred during our second and third quarters of fiscal 2021.

Virtual Opportunities - It’s Just Wings is a virtual brand offering launched on June 23, 2020 ~~and~~that is available ~~only~~ through DoorDash ~~delivery.~~and Google Food Ordering. This platform allows us to leverage our existing infrastructure, while adding minimal complexity in the restaurants. It’s Just Wings is a no-frills offering that consists of chicken wings available in 11 different sauces and rubs, curly fries, ranch dressing and fried Oreos for a value price. We will continue to identify opportunities to drive restaurant growth by utilizing our existing restaurant infrastructure, DoorDash partnership and ~~DoorDash partnership.~~Google Food Ordering.

Franchise Partnerships - Our ~~global~~ franchisees continue to grow ~~the Chili’s brand~~our brands around the world, opening ~~four~~ten restaurants and entering into ~~one~~two new development agreement infor the ~~first quarter of fiscal~~thirty-nine week period ended March 24, 2021. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners. We are also supporting our franchise partners with opportunities to expand sales through ~~the It’s Just Wings~~our virtual ~~brand.~~brand offerings.

Company Development -The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended ~~September 23,~~March 24, 2021 and March 25, 2020, ~~and September 25, 2019,~~ respectively, total full year projected openings in fiscal 2021, and the total restaurants open at each period end:

Openings During the Full Year Projected Openings
Thirteen Week Periods Ended Total Open Restaurants at
September 23, 2020 September 25, 2019 Fiscal 2021 September 23, 2020 September 25, 2019
Company-owned restaurants
Chili’s domestic 3 1 8 1,059 1,061
Chili’s international — — — 5 5
Maggiano’s domestic — — — 52 52
Total Company-owned 3 1 8 1,116 1,118
Franchise restaurants
Chili’s domestic 1 1 3 172 180
Chili’s international 3 11 6-9 371 373
Maggiano’s domestic — — 1 1 1
Total franchise 4 12 10-13 544 554
Total restaurants
Chili’s domestic 4 2 11 1,231 1,241
Chili’s international 3 11 6-9 376 378
Maggiano’s domestic — — 1 53 53
Total 7 13 18-21 1,660 1,672

Included in the Total Restaurants Open at September 23, 2020 are locations that were temporarily closed due to the COVID-19 pandemic which included: four Company-owned Chili’s restaurants, seven domestic Chili’s franchise locations, and 27 Chili’s international franchise locations. Additionally, during the first quarter26

Table of ~~fiscal 2021, we resumed construction of new restaurants and opened three Chili’s domestic locations.~~Contents


	Openings During the			Openings During the		Full Year Projected Openings
	Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended				Total Open Restaurants at
	March 24, 2021	March 25, 2020		March 24, 2021	March 25, 2020	Fiscal 2021	March 24, 2021	March 25, 2020
Company-owned restaurants
Chili’s domestic	2	1		6	6	8	1,063	1,060
Chili’s international	—	—		—	—	—	5	5
Maggiano’s domestic	—	—		—	—	—	52	52
Total Company-owned	2	1		6	6	8	1,120	1,117
Franchise restaurants
Chili’s domestic	2	—		3	2	3	172	178
Chili’s international	2	7		6	23	7	363	379
Maggiano’s domestic	—	—		1	—	1	2	1
Total franchise	4	7		10	25	11	537	558
Total restaurants
Chili’s domestic	4	1		9	8	11	1,235	1,238
Chili’s international	2	7		6	23	7	368	384
Maggiano’s domestic	—	—		1	—	1	54	53
Total	6	8		16	31	19	1,657	1,675

Relocations are not included in the table above. ~~During~~In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020~~March 24, 2021, we ~~have~~ relocated ~~one Company-owned restaurant, and we plan to relocate one~~two Chili’s domestic Company-owned ~~restaurant during~~restaurants, with no additional relocations planned for the remainder of fiscal 2021.

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At ~~September 23, 2020,~~March 24, 2021, we own property for 42 of the ~~1,116~~1,120 Company-owned restaurants. The net book values associated with these restaurants included land of $33.1 million and buildings of ~~$13.0~~$11.6 million.

~~RESULTS OF OPERATIONS~~

The following table sets forth selected operating data as a percentage of Total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying Consolidated Statements of Comprehensive Income (Unaudited):

Thirteen Week Periods Ended
September 23,
2020 September 25,
2019
Revenues
Company sales(1)
98.4 % 97.2 %
Franchise and other revenues(1)
1.6 % 2.8 %
Total revenues(1)
100.0 % 100.0 %
Operating costs and expenses
Food and beverage costs(2)
26.6 % 26.7 %
Restaurant labor(2)
34.0 % 35.2 %
Restaurant expenses(2)
27.8 % 27.1 %
Depreciation and amortization(1)
5.1 % 4.8 %
General and administrative(1)
4.1 % 4.8 %
Other (gains) and charges(1)
0.5 % (0.1) %
Total operating costs and expenses(1)
96.7 % 96.0 %
Operating income(1)
3.3 % 4.0 %
Interest expenses(1)
2.0 % 1.9 %
Other (income), net(1)
(0.1) % 0.0 %
Income before income taxes(1)
1.4 % 2.1 %
Provision (benefit) for income taxes(1)
0.0 % 0.2 %
Net income(1)
1.4 % 1.9 %

~~(1)As a percentage of Total revenues~~

~~(2)As a percentage of Company sales~~

Revenues

Thirteen and Thirty-Nine Week ~~Period~~Periods Ended ~~September 23, 2020~~March 24, 2021 compared to ~~September~~March 25, ~~2019~~2020

Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends:

•Company sales ~~include~~include revenues generated by the operation of Company-owned restaurants including ~~sales made with~~ gift card ~~redemptions.~~redemptions and virtual brand revenues.

•Franchise and other revenues include Royalties, ~~and Franchise fees and other revenues. Franchise fees and other revenues include~~ delivery service income, gift card breakage, franchise advertising fees, digital entertainment revenues, ~~franchise and development fees,~~ Maggiano’s banquet service charge income, ~~gift card equalization, merchandise income,~~franchise and development fees, gift card discount costs from third-party gift card ~~sales.~~sales and merchandise income.

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The following is a summary of the change in Total revenues:


		Total Revenues							Total Revenues
		Chili’s		Maggiano’s		Total Revenues			Chili’s		Maggiano’s		Total Revenues
Thirteen Week Period Ended September 25, 2019		$	695.6	$	90.4	$	786.0
Thirteen Week Period Ended March 25, 2020								Thirteen Week Period Ended March 25, 2020	$	764.4	$	95.6	$	860.0
Change from:	Change from:							Change from:
Comparable restaurant sales(1)	Comparable restaurant sales(1)	(46.9)		(33.2)		(80.1)		Comparable restaurant sales(1)	0.0		(27.0)		(27.0)
Restaurant closures(2)								Restaurant closures(2)	(4.6)		—		(4.6)
Restaurant openings	Restaurant openings	4.1		—		4.1		Restaurant openings	4.4		—		4.4
Restaurant relocations	Restaurant relocations	0.4		—		0.4		Restaurant relocations	0.5		—		0.5
Restaurant closings(2)		(9.8)		—		(9.8)
Restaurant acquisitions(3)		49.7		—		49.7

Company sales	Company sales	(2.5)		(33.2)		(35.7)		Company sales	0.3		(27.0)		(26.7)
Royalties(4)	Royalties(4)	(5.2)		(0.1)		(5.3)		Royalties(4)	(1.3)		—		(1.3)
Franchise fees and other revenues	Franchise fees and other revenues	(1.4)		(3.5)		(4.9)		Franchise fees and other revenues	(0.4)		(3.2)		(3.6)
Franchise and other revenues	Franchise and other revenues	(6.6)		(3.6)		(10.2)		Franchise and other revenues	(1.7)		(3.2)		(4.9)
Thirteen Week Period Ended September 23, 2020		$	686.5	$	53.6	$	740.1
Thirteen Week Period Ended March 24, 2021								Thirteen Week Period Ended March 24, 2021	$	763.0	$	65.4	$	828.4


	Total Revenues
	Chili’s		Maggiano’s		Total Revenues
Thirty-Nine Week Period Ended March 25, 2020	$	2,203.1	$	312.2	$	2,515.3
Change from:
Comparable restaurant sales(1)	(91.9)		(116.1)		(208)
Restaurant closures(2)	(21.1)		—		(21.1)
Restaurant acquisitions(3)	49.7		—		49.7
Restaurant openings	13.9		—		13.9
Restaurant relocations	1.8		—		1.8

Company sales	(47.6)		(116.1)		(163.7)
Royalties(4)	(8.8)		—		(8.8)
Franchise fees and other revenues	(0.8)		(12.8)		(13.6)
Franchise and other revenues	(9.6)		(12.8)		(22.4)
Thirty-Nine Week Period Ended March 24, 2021	$	2,145.9	$	183.3	$	2,329.2

(1)Comparable restaurant sales ~~decreased due to~~were negatively impacted by lower dining room guest traffic resulting from temporary dining room closures, capacity limitations and our guests’ personal safety preferences, ~~partially~~ offset by increased off-premise sales.

(2)Restaurant ~~closings~~closures include the impact of permanently closed locations and temporary ~~COVID-19~~ closures ~~that have extended past~~longer than 14 consecutive days.

(3)We acquired 116 Chili’s restaurants from a franchisee effective September 5, 2019. This amount represents the change in Company sales attributed to ~~owning~~ these restaurants over the ~~entire~~ thirteen week period ended September 23, 2020. Beginning in the second quarter of fiscal 2021, the change in Company sales attributed to these restaurants is included in Comparable restaurant sales.

(4)Lower royalties in the thirteen and thirty-nine week ~~period~~periods ended ~~September 23, 2020~~March 24, 2021 are primarily due to ~~the adverse impact of~~lower sales by our franchisees due to the COVID-19 pandemic. Our franchisees generated sales of approximately ~~$164.0~~$190.8 million and $543.7 million for the thirteen and thirty-nine week ~~period~~periods ended ~~September 23, 2020~~March 24, 2021, respectively, compared to ~~$298.3~~$218.0 million and $742.6 million in sales for the thirteen and thirty-nine week ~~period~~periods ended ~~September~~March 25, ~~2019.~~2020, respectively.

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The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and thirty-nine week ~~period~~periods ended ~~September 23, 2020~~March 24, 2021 compared to ~~September~~March 25, ~~2019:~~2020:


		Percentage Change in the Thirteen Week Period Ended September 23, 2020 versus September 25, 2019											Percentage Change in the Thirteen Week Period Ended March 24, 2021 versus March 25, 2020
		Comparable Restaurant Sales(1)(2)		Price Impact		Mix-Shift(3)		Traffic		Restaurant Capacity(4)			Comparable Restaurant Sales(1)(2)		Price Impact		Mix-Shift Impact(3)		Traffic Impact		Restaurant Capacity(4)
Company-owned	Company-owned	(10.9)	%	0.4	%	(6.3)	%	(5.0)	%	7.8	%	Company-owned	(3.3)	%	0.6	%	(6.2)	%	2.3	%	0.0	%
Chili’s	Chili’s	(7.2)	%	0.2	%	(4.2)	%	(3.2)	%	8.2	%	Chili’s	0.0	%	0.5	%	(4.5)	%	4.0	%	0.0	%
Maggiano’s	Maggiano’s	(38.6)	%	3.0	%	(12.7)	%	(28.9)	%	0.0	%	Maggiano’s	(29.6)	%	1.2	%	(9.2)	%	(21.6)	%	0.0	%
Chili’s Franchise(5)	Chili’s Franchise(5)	(11.5)	%									Chili’s Franchise(5)	0.2	%
U.S.	U.S.	(5.6)	%									U.S.	5.2	%
International	International	(21.9)	%									International	(8.8)	%
Chili’s Domestic(6)	Chili’s Domestic(6)	(7.0)	%									Chili’s Domestic(6)	0.6	%
System-wide(7)	System-wide(7)	(11.0)	%									System-wide(7)	(2.8)	%


	Percentage Change in the Thirty-Nine Week Period Ended March 24, 2021 versus March 25, 2020
	Comparable Restaurant Sales(1)(2)		Price Impact		Mix-Shift Impact(3)		Traffic Impact		Restaurant Capacity(4)
Company-owned	(8.7)	%	0.4	%	(6.7)	%	(2.4)	%	2.5	%
Chili’s	(4.4)	%	0.3	%	(4.5)	%	(0.2)	%	2.6	%
Maggiano’s	(39.2)	%	1.4	%	(10.5)	%	(30.1)	%	0.0	%
Chili’s Franchise(5)	(6.9)	%
U.S.	(1.7)	%
International	(15.9)	%
Chili’s Domestic(6)	(4.0)	%
System-wide(7)	(8.5)	%

(1)Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 months except acquired restaurants which are included after 12 months of ownership. Restaurants temporarily closed 14 days or more are excluded from comparable restaurant sales. Percentage amounts are calculated based on the comparable periods year-over-year.

(2)Comparable Restaurant Sales for Chili’s and Maggiano’s include the results of It’s Just Wings, a virtual brand launched nationally in June 2020.

~~Table of Contents~~

(3)Mix-Shift is calculated as the year-over-year percentage change in Company sales resulting from the change in menu items ordered by guests.

(4)Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year. ~~We believe the~~The COVID-19 related restaurant closures are temporary and therefore no adjustment has been made to capacity.

(5)Chili’s franchise sales generated by franchisees are not included in revenues in the Consolidated Statements of Comprehensive Income (Unaudited); however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe ~~including~~presenting Chili’s franchise comparable restaurant sales provides investors relevant information regarding total brand ~~performance that is relevant to current operations.~~performance.

(6)Chili’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s restaurants in the United States.

(7)System-wide Comparable Restaurant Sales are derived from sales generated by Company-owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchise-operated Chili’s restaurants.

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Costs and Expenses

Thirteen Week ~~Periods~~Period Ended ~~September 23, 2020~~March 24, 2021 compared to ~~September~~March 25, ~~2019~~2020

The following is a summary of the ~~change~~changes in ~~costs~~Costs and ~~expenses:~~Expenses:


		Thirteen Week Periods Ended								(Favorable) Unfavorable Variance					Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
		September 23, 2020				September 25, 2019									March 24, 2021				March 25, 2020
		Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales			Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	Food and beverage costs	$	193.5	26.6	%	$	203.8	26.7	%	$	(10.3)	(0.1)	%	Food and beverage costs	$	213.9	26.3	%	$	226.7	27.0	%	$	12.8	0.7	%
Restaurant labor	Restaurant labor	248.0		34.0	%	268.5		35.2	%	(20.5)		(1.2)	%	Restaurant labor	270.8		33.3	%	285.9		34.0	%	15.1		0.7	%
Restaurant expenses	Restaurant expenses	202.5		27.8	%	207.3		27.1	%	(4.8)		0.7	%	Restaurant expenses	216.1		26.5	%	220.2		26.2	%	4.1		(0.3)	%
Depreciation and amortization	Depreciation and amortization	37.4				38.1				(0.7)				Depreciation and amortization	37.4				43.5				6.1
General and administrative	General and administrative	30.5				38.0				(7.5)				General and administrative	33.7				23.3				(10.4)
Other (gains) and charges	Other (gains) and charges	3.8				(0.9)				4.7				Other (gains) and charges	4.3				19.3				15.0
Interest expenses	Interest expenses	14.6				14.9				(0.3)				Interest expenses	14.1				14.3				0.2
Other income, net	Other income, net	(0.4)				(0.5)				0.1				Other income, net	(0.3)				(0.4)				(0.1)

As a percentage of Company sales:

•Food and beverage costs decreased 0.7%, ~~as a percentage of Company sales, decreased 0.1% consisting of 0.2%~~including 0.6% of favorable menu item mix, ~~and 0.2%~~0.3% of favorable commodity pricing primarily related to beef and produce and 0.1% of increased menu pricing, partially offset by 0.3% of unfavorable commodity pricing primarily related to dairy, poultry and ~~beef.~~other.

•Restaurant labor decreased 0.7%, ~~as a percentage of Company sales, decreased 1.2% consisting of 1.5%~~including 1.3% of favorable hourly labor expenses due to reduced staffing requirements ~~1.0% of lower manager compensation,~~and labor shortages and 0.3% of lower other ~~net restaurant~~ labor expenses, partially offset by ~~1.6%~~0.6% of higher manager bonus expenses due to improved operational performance metrics and 0.3% of sales deleverage.

•Restaurant expenses increased 0.3%, ~~as a percentage of~~ ~~Company sales, increased 0.7% consisting of 3.4%~~including 3.3% of higher expenses ~~primarily~~ related to delivery fees and supplies ~~in connection with~~driven by the growth in off-premise sales and ~~2.2%~~0.5% of sales deleverage, partially offset by ~~2.1%~~2.2% of lower advertising expenses, ~~1.3%~~0.4% of lower repairs and maintenance expenses, 0.3% of lower ~~utilities~~miscellaneous restaurant supplies expenses, ~~0.3%~~0.2% of lower credit card fees and ~~0.9%~~0.4% of lower other ~~net~~ restaurant expenses.

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Depreciation and amortization decreased ~~$0.7~~$6.1 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended ~~September~~March 25, ~~2019~~2020	$	~~38.1~~43.5
Change from:
Retirements and fully depreciated restaurant assets	~~(6.4)~~
~~Additions for existing and new restaurant assets(1)~~	~~2.1~~
~~Acquisition of Chili’s restaurants(2)~~	~~2.1~~ (5.3)
Finance leases	~~0.8~~(3.8)
Additions for new and existing restaurant assets	1.9
Acquisition of franchise restaurants	0.5
Corporate assets	0.4
Other	~~0.3~~0.2
Thirteen Week Period Ended ~~September 23, 2020~~March 24, 2021	$	37.4

~~(1)Additions for existing and new restaurant assets increased primarily related to capital purchases.~~

~~(2)Acquisition~~Table of ~~Chili’s restaurants represents the depreciation and amortization of the assets and finance leases of the 116 Chili’s restaurants acquired in the first quarter of fiscal 2020.~~Contents

General and administrative ~~expenses decreased $7.5~~ expenses increased $10.4 million as f~~ollows:~~follows:


	General and Administrative
Thirteen Week Period Ended ~~September~~March 25, ~~2019~~2020	$	~~38.0~~23.3
Change from:
~~Stock-based~~Performance-based compensation(1)	~~(3.2)~~6.9
Stock-based compensation(2)	5.0
Defined contribution plan employer expenses	(1.0)
Payroll-related expenses	(1.0)
Travel and entertainment expenses	(0.4)
Professional fees	(0.2)
Other	1.1
Thirteen Week Period Ended March 24, 2021	$	33.7

(1)Performance-based compensation increased due to improved business performance metrics in fiscal 2021, and due to a prior year expense reduction to reflect a decline in the expected payout for fiscal 2020 caused by the negative impact of the COVID-19 pandemic.

(2)Stock-based compensation increased primarily due to the prior year expense reduction to reflect a decline in the expected achievement for grants vesting at the end of fiscal 2020. The expected achievement for those awards was negatively impacted by the COVID-19 pandemic. Additionally, stock-based compensation increased during the third quarter of 2021 to reflect a higher expected achievement for grants vesting at the end of fiscal 2021.

Other (gains) and charges consisted of the following (for further details, refer to Note 4 - Other Gains and Charges):


	Thirteen Week Periods Ended
	March 24, 2021		March 25, 2020
Loss from natural disasters, net of (insurance recoveries)	$	1.8	$	(0.9)
Remodel-related costs	0.9		0.6
COVID-19 related charges	0.9		16.1
Restaurant closure charges	0.3		0.3
Foreign currency transaction (gain) loss	0.1		2.3

Acquisition of franchise restaurants costs, net	—		1.1

Other	0.3		(0.2)
	$	4.3	$	19.3

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Thirty-Nine Week Period Ended March 24, 2021 compared to March 25, 2020

The following is a summary of the changes in Costs and Expenses:


	Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
	March 24, 2021				March 25, 2020
	Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	$	606.3	26.5	%	$	653.6	26.7	%	$	47.3	0.2	%
Restaurant labor	774.6		33.9	%	846.2		34.5	%	71.6		0.6	%
Restaurant expenses	629.9		27.5	%	652.2		26.6	%	22.3		(0.9)	%
Depreciation and amortization	112.0				120.9				8.9
General and administrative	94.2				95.9				1.7
Other (gains) and charges	13.5				30.7				17.2
Interest expenses	43.1				44.2				1.1
Other income, net	(1.2)				(1.4)				(0.2)

As a percentage of Company sales:

•Food and beverage costs decreased 0.2%, including 0.2% of favorable menu item mix and 0.1% of increased menu pricing, partially offset by 0.1% of unfavorable commodity pricing related to dairy.

•Restaurant labor decreased 0.6%, including 1.3% favorable hourly labor expenses and 0.4% of favorable manager salaries expenses, both due to reduced staffing requirements and 0.1% of lower other labor expenses, partially offset by 1.0% of sales deleverage and 0.2% of higher manager bonus expenses due to improved operational performance metrics.

•Restaurant expenses increased 0.9%, including 3.3% of higher expenses related to delivery fees and supplies in connection with the growth in off-premise sales and 1.6% of sales deleverage, partially offset by 2.2% of lower advertising expenses, 0.9% of lower repairs and maintenance expenses, 0.3% of lower credit card fees, 0.2% of lower utilities expenses and 0.4% of lower other restaurant expenses.

Depreciation and amortization decreased $8.9 million as follows:


	Depreciation and Amortization
Thirty-Nine Week Period Ended March 25, 2020	$	120.9
Change from:
Retirements and fully depreciated restaurant assets	(17.5)
Finance leases	(1.9)
Additions for existing and new restaurant assets	6.1
Acquisition of Chili’s restaurants(1)	2.8
Corporate assets	1.2
Other	0.4
Thirty-Nine Week Period Ended March 24, 2021	$	112.0

(1)Acquisition of Chili’s restaurants represents the change in depreciation and amortization of the assets and finance leases of the 116 Chili’s restaurants acquired on September 5, 2019. The increase resulted primarily from the timing of the acquisition.

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General and administrative expenses increased $1.7 million as follows:


	General and Administrative
Thirty-Nine Week Period Ended March 25, 2020	$	95.9
Change from:
Performance-based compensation(1)	9.1
Stock-based compensation(2)	2.2
Defined contribution plan employer expenses~~(2)~~(3)	~~(2.6)~~
~~Professional fees~~	~~(1.3)~~(6.0)
Payroll-related expenses	~~(1.1)~~(3.1)
Travel and entertainment expenses	~~(0.8)~~(1.8)
~~Performance-based compensation~~Professional fees	~~1.8~~ (1.7)
Other	~~(0.3)~~(0.4)
~~Thirteen~~Thirty-Nine Week Period Ended ~~September 23, 2020~~March 24, 2021	$	~~30.5~~94.2

(1)Performance-based compensation increased due to improved business performance metrics in fiscal 2021 and due to a prior year expense reduction to reflect a decline in the expected payout for fiscal 2020 caused by the negative impact of the COVID-19 pandemic.

(2)Stock-based compensation ~~decreased~~increased primarily due to the prior year expense reduction to reflect a decline in the expected achievement for grants vesting at the end of fiscal 2020. The expected achievement for those awards was negatively impacted by the COVID-19 pandemic. Additionally, stock-based compensation increased during the third quarter of 2021 to reflect a higher expected achievement for grants vesting at the end of fiscal 2021. These increases were partially offset by a decrease primarily due to the acceleration of stock-based compensation expenses in the first quarter of fiscal 2020 for retirement eligible executives. Prior to fiscal 2021, retirement eligibility resulted in the compensation being recognized in full upon grant as there was no substantive vesting period. In fiscal 2021, the retirement eligible executives received only 20% of their equity as awards with no substantive vesting period. Their remaining 80% of equity granted in fiscal 2021 will be amortized evenly over the three year vesting period.

~~(2)~~(3)Defined contribution plan employer expenses decreased due to the temporary suspension of employer matching contributions inrelated to the Company’s 401(k) plan from May 2020 through December 2020. Employer matching contributions were reinstated beginning January 1, 2021.

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Other (gains) and charges consisted of the following (for further details, refer to Note 4 - Other Gains and Charges):


		Thirteen Week Periods Ended					Thirty-Nine Week Periods Ended
		September 23, 2020		September 25, 2019			March 24, 2021		March 25, 2020
COVID-19 related charges						COVID-19 related charges	$	3.1	$	16.1
Restaurant impairment charges						Restaurant impairment charges	2.5		4.6
Restaurant closure charges	Restaurant closure charges	$	1.5	$	0.2	Restaurant closure charges	2.2		3.4
COVID-19 related charges		1.2		—
Loss from natural disasters, net of (insurance recoveries)						Loss from natural disasters, net of (insurance recoveries)	2.0		(0.6)
Remodel-related costs	Remodel-related costs	0.2		0.7		Remodel-related costs	1.8		2.1
Lease modification gain, net	Lease modification gain, net	(0.5)		(3.1)		Lease modification gain, net	(0.5)		(3.1)

Foreign currency transaction (gain) loss						Foreign currency transaction (gain) loss	(0.3)		2.2
Acquisition of franchise restaurants costs, net						Acquisition of franchise restaurants costs, net	—		2.6
Other	Other	1.4		1.3		Other	2.7		3.4
		$	3.8	$	(0.9)		$	13.5	$	30.7

Interest expenses decreased ~~$0.3~~$1.1 million ~~consisting of~~due to lower average borrowing balances on our revolving credit facility, ~~in the thirteen week period ended September 23, 2020,~~ partially offset by higher interest rates on our revolving credit facility in 2021 and higher interest expenses ~~related~~for the Chili’s tabletop device finance lease which rolled out to restaurants beginning in the ~~real estate finance leases acquired from~~second quarter of fiscal 2020 and completed in the ~~acquisition~~fourth quarter of ~~116 Chili’s restaurants on September 5, 2019.~~fiscal 2020.

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Segment Results

~~At the end of the first~~The third quarter of fiscal 2021 ~~substantially all~~results for the thirteen and thirty-nine week periods include the continued impact from the COVID-19 pandemic. Dining room restrictions and our Company-owned restaurant dining rooms or patios were open in some capacity. Capacity restrictions related to the ongoing COVID-19 pandemic vary by location due to state and local mandates. These capacity restrictions andguests’ personal safety preferences have resulted in ~~lower overall guest traffic and many guests have shifted~~a shift to our off-premise dining ~~options. This shift~~options, which has changed ~~the~~our staffing ~~requirements in the restaurants and other expenses~~requirements. Expenses associated with off-premise ~~which~~and other operational expenses are noted below.

Chili’s Segment

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage
September 23,
2020 September 25,
2019
Company sales $ 675.0 $ 677.5 $ (2.5) (0.4) %
Royalties 6.6 11.8 (5.2) (44.1) %
Franchise fees and other revenues 4.9 6.3 (1.4) (22.2) %
Franchise and other revenues 11.5 18.1 (6.6) (36.5) %
Total revenues 686.5 695.6 (9.1) (1.3) %
Food and beverage costs 180.8 182.4 1.6 0.9 %
Restaurant labor 228.2 233.1 4.9 2.1 %
Restaurant expenses 181.4 180.8 (0.6) (0.3) %
Depreciation and amortization 30.6 30.7 0.1 0.3 %
General and administrative 5.4 9.1 3.7 40.7 %
Other (gains) and charges 3.6 (1.6) (5.2) 325.0 %
Total operating costs and expenses 630.0 634.5 4.5 0.7 %
Operating income (loss) $ 56.5 $ 61.1 $ (4.6) (7.5) %
Operating income as a percentage of Total revenues 8.2 % 8.8 % (0.6) % (6.8) %

Thirteen Week Period Ended ~~September 23, 2020~~March 24, 2021 compared to ~~September~~March 25, ~~2019~~2020


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	March 24, 2021		March 25, 2020
Company sales	$	749.0	$	748.7	$	0.3	0.0	%
Royalties	7.7		9.0		(1.3)		(14.4)	%
Franchise fees and other revenues	6.3		6.7		(0.4)		(6.0)	%
Franchise and other revenues	14.0		15.7		(1.7)		(10.8)	%
Total revenues	$	763.0	$	764.4	$	(1.4)	(0.2)	%

Chili’s Total revenues decreased by ~~1.3%~~0.2% primarily due to lower dining room guest traffic and lower royalties, partially offset by increased off-premise sales including It’s Just Wings. Refer to “Revenues” section above for further details about Chili’s revenues changes.

The following is a summary of the changes in Chili’s operating costs and expenses:


	Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
	March 24, 2021				March 25, 2020
	Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	$	198.7	26.6	%	$	204.1	27.3	%	$	5.4	0.7	%
Restaurant labor	248.7		33.2	%	251.1		33.5	%	2.4		0.3	%
Restaurant expenses	194.2		25.9	%	193.2		25.8	%	(1.0)		(0.1)	%
Depreciation and amortization	31.0				36.5				5.5
General and administrative	7.0				5.9				(1.1)
Other (gains) and charges	3.1				14.9				11.8

As a percentage of Company sales:

•Chili’s Food and beverage costs decreased 0.7%, including 0.5% of favorable menu item mix, 0.4% of favorable commodity pricing related to beef and produce and 0.1% of increased menu pricing, partially offset by 0.3% of unfavorable commodity pricing primarily related to dairy and poultry.

•Chili’s Restaurant labor decreased 0.3%, including 0.8% of favorable hourly labor expenses due to reduced staffing requirements and labor shortages and 0.1% of lower other labor expenses, partially offset by 0.6% of higher manager bonus expenses due to improved operational performance metrics.

•Chili’s Restaurant expenses increased 0.1%, including 3.4% of higher expenses related to delivery fees and supplies driven by the growth in off-premise sales, partially offset by 2.3% of lower advertising expenses, 0.4% of lower miscellaneous restaurant supplies, 0.3% of lower repairs and maintenance expenses and 0.3% of lower other restaurant expenses.

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Chili’s Depreciation and amortization decreased $5.5 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended March 25, 2020	$	36.5
Change from:
Retirements and fully depreciated restaurant assets	(4.3)
Finance leases	(3.7)
Additions for new and existing restaurant assets	1.9
Acquisition of franchise restaurants	0.5
Other	0.1
Thirteen Week Period Ended March 24, 2021	$	31.0

Chili’s General and administrative increased $1.1 million as follows:


	General and Administrative
Thirteen Week Period Ended March 25, 2020	$	5.9
Change from:
Performance-based compensation	2.0
Stock-based compensation	0.9
Defined contribution plan employer expenses	(0.7)
Payroll-related expenses	(0.7)
Other	(0.4)
Thirteen Week Period Ended March 24, 2021	$	7.0

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 4 - Other Gains and Charges):


	Thirteen Week Periods Ended
	March 24, 2021		March 25, 2020
Loss from natural disasters, net of (insurance recoveries)	$	1.1	$	(0.9)
Remodel-related costs	0.9		0.6
COVID-19 related charges	0.8		13.8
Restaurant closure charges	0.3		0.3
Acquisition of franchise restaurants-related costs	—		1.1


	$	3.1	$	14.9

Thirty-Nine Week Period Ended March 24, 2021 compared to March 25, 2020


	Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	March 24, 2021		March 25, 2020
Company sales	$	2,107.0	$	2,154.6	$	(47.6)	(2.2)	%
Royalties	21.9		30.7		(8.8)		(28.7)	%
Franchise fees and other revenues	17.0		17.8		(0.8)		(4.5)	%
Franchise and other revenues	38.9		48.5		(9.6)		(19.8)	%
Total revenues	$	2,145.9	$	2,203.1	$	(57.2)	(2.6)	%

Chili’s Total revenues decreased 2.6% primarily due lower dining room guest traffic and lower royalties, partially offset by increased off-premise sales including It’s Just Wings and the acquisition of 116 Chili’s restaurants ~~in the first quarter of fiscal 2020~~ on September 5, 2019. Refer to “Revenues” section above for further details about Chili’s revenues changes.

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~~Company restaurant expenses for~~The following is a summary of the changes in Chili’s asoperating costs and expenses:


	Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
	March 24, 2021				March 25, 2020
	Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	$	563.2	26.7	%	$	581.6	27.0	%	$	18.4	0.3	%
Restaurant labor	710.3		33.7	%	735.2		34.1	%	24.9		0.4	%
Restaurant expenses	564.6		26.8	%	568.2		26.4	%	3.6		(0.4)	%
Depreciation and amortization	92.4				99.3				6.9
General and administrative	17.8				23.5				5.7
Other (gains) and charges	11.1				23.9				12.8

As a percentage of Company ~~sales,~~sales:

•Chili’s Food and beverage costs decreased ~~0.5% consisting~~0.3%, including 0.3% of ~~2.3%~~favorable menu item mix and 0.1% of lower advertising expenses, 1.5% of lower manager and hourly labor as a result of reduced staffing during the first quarter of fiscal 2021, and 1.4% of lower repairs and maintenance expenses. These decreases wereincreased menu pricing, partially offset by ~~2.4%~~0.1% of unfavorable commodity pricing primarily related to dairy.

•Chili’s Restaurant labor decreased 0.4%, including 1.0% of favorable hourly labor and manager expenses due to reduced staffing requirements, partially offset by 0.5% of sales deleverage and ~~2.3%~~0.1% of higher other labor expenses.

•Chili’s Restaurant expenses ~~primarily~~increased 0.4%, including 3.4% of higher expenses related to delivery fees and supplies ~~in connection with~~driven by the growth in off-premise ~~sales.~~sales and 0.9% of sales deleverage, partially offset by 2.4% of lower advertising expenses, 0.7% of lower repairs and maintenance expenses, 0.2% of lower credit card fees and 0.6% of lower other restaurant expenses.

Chili’s Depreciation and amortization decreased $6.9 million as follows:


	Depreciation and Amortization
Thirty-Nine Week Period Ended March 25, 2020	$	99.3
Change from:
Retirements and fully depreciated restaurant assets	(14.1)
Finance leases	(1.8)
Additions for existing and new restaurant assets	5.8
Acquisition of Chili’s restaurants(1)	2.8
Other	0.4
Thirty-Nine Week Period Ended March 24, 2021	$	92.4

(1)Acquisition of Chili’s ~~decreased $0.1 million consisting of $5.2 million related to fully depreciated assets and retirements, partially offset by $2.1 million of additional~~restaurants represents the change in depreciation and amortization ~~expenses related to~~of the assets and finance leases of the 116 Chili’s restaurants acquired inon September 5, 2019. The increase resulting from the ~~first quarter~~timing of fiscal 2020, $1.9 million in existing and new restaurant additions primarily related to routine capital purchases, $0.9 million in additional amortization expenses related to finance leases, and $0.2 million in other depreciation and amortization expenses increases.the acquisition.

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Chili’s General and administrative ~~for Chili’s~~ decreased ~~$3.7~~$5.7 million ~~consisting primarily of a decrease in defined~~as follows:


	General and Administrative
Thirty-Nine Week Period Ended March 25, 2020	$	23.5
Change from:
Defined contribution plan employer expenses(1)	(4.7)
Payroll-related expenses	(1.7)
Travel and entertainment expenses	(0.8)
Professional fees	(0.4)
Performance-based compensation(2)	2.4
Stock-based compensation	0.1
Other	(0.6)
Thirty-Nine Week Period Ended March 24, 2021	$	17.8

(1)Defined contribution plan employer expenses ~~stock-based~~decreased due to the temporary suspension of employer matching contributions related to the Company’s 401(k) plan from May 2020 through December 2020. Employer matching contributions were reinstated beginning January 1, 2021.

(2)Performance-based compensation ~~payroll-related expenses~~increased due to improved business performance metrics in fiscal 2021 and ~~professional fees, partially offset~~due to a prior year expense reduction to reflect a decline in the expected payout for fiscal 2020 caused by ~~an increase in performance-based compensation.~~the negative impact of the COVID-19 pandemic.

Chili’s Other (gains) and charges ~~for Chili’s in~~consisted of the ~~thirteen week period ended September 23, 2020 consisted primarily~~following (for further details, refer to Note 4 - Other Gains and Charges):


	Thirty-Nine Week Periods Ended
	March 24, 2021		March 25, 2020
COVID-19 related charges	$	2.9	$	13.8
Restaurant impairment charges	2.1		4.6
Restaurant closure charges	2.1		3.4
Remodel-related costs	1.8		2.1
Loss from natural disasters, net of (insurance recoveries)	1.3		(0.6)
Lease modification gain, net	(0.5)		(3.1)
Acquisition of franchise restaurants-related costs	—		2.6
Other	1.4		1.1
	$	11.1	$	23.9

Table of $1.5 million of restaurant closure charges and $1.1 million of employee assistance payments and other COVID-19 related expenses. Other (gains) and charges in the thirteen week period ended September 25, 2019 consisted primarily of $3.1 million of lease modification (gain) and $0.5 million of net gain related to the 116 Chili’s restaurants acquired in the first quarter of fiscal 2020, partially offset by $0.7 million of Chili’s remodel-related costs.Contents

Maggiano’s Segment

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage
September 23,
2020 September 25,
2019
Company sales $ 53.2 $ 86.4 $ (33.2) (38.4) %
Royalties — 0.1 (0.1) (100.0) %
Franchise fees and other revenues 0.4 3.9 (3.5) (89.7) %
Franchise and other revenues 0.4 4.0 (3.6) (90.0) %
Total revenues 53.6 90.4 (36.8) (40.7) %
Food and beverage costs 12.7 21.4 8.7 40.7 %
Restaurant labor 19.8 35.4 15.6 44.1 %
Restaurant expenses 20.8 26.3 5.5 20.9 %
Depreciation and amortization 3.6 4.0 0.4 10.0 %
General and administrative 1.3 1.7 0.4 23.5 %
Other (gains) and charges 0.1 0.1 — — %
Total operating costs and expenses 58.3 88.9 30.6 34.4 %
Operating income (loss) $ (4.7) $ 1.5 $ (6.2) (413.3) %
Operating income as a percentage of Total revenues (8.8) % 1.7 % (10.5) % (617.6) %

Thirteen Week Period Ended ~~September 23, 2020~~March 24, 2021 compared to ~~September~~March 25, ~~2019~~2020


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as a percentage
	March 24, 2021		March 25, 2020
Company sales	$	64.7	$	91.7	$	(27.0)	(29.4)	%
Royalties	0.0		0.0		0.0		100.0	%
Franchise fees and other revenues	0.7		3.9		(3.2)		(82.1)	%
Franchise and other revenues	0.7		3.9		(3.2)		(82.1)	%
Total revenues	$	65.4	$	95.6	$	(30.2)	(31.6)	%

Maggiano’s Total revenues decreased ~~40.7%~~31.6% primarily due to lower dining room guest traffic including lower banquet ~~volume,~~volumes driven by the COVID-19 pandemic, partially offset by increased off-premise ~~sales including It’s Just Wings.~~sales. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

~~Company restaurant expenses for~~The following is a summary of the changes in Maggiano’s asoperating costs and expenses:


	Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
	March 24, 2021				March 25, 2020
	Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	$	15.2	23.5	%	$	22.6	24.6	%	$	7.4	1.1	%
Restaurant labor	22.1		34.2	%	34.8		37.9	%	12.7		3.7	%
Restaurant expenses	21.7		33.5	%	26.9		29.4	%	5.2		(4.1)	%
Depreciation and amortization	3.4				3.8				0.4
General and administrative	1.3				1.1				(0.2)
Other (gains) and charges	0.3				2.4				2.1

As a percentage of Company sales:

•Maggiano’s Food and beverage costs decreased 1.1%, including 2.4% of favorable menu item mix related to steak, produce and other items from menu changes, partially offset by 1.3% of unfavorable menu item mix related to poultry and non-alcoholic beverages.

•Maggiano’s Restaurant labor decreased 3.7%, including 7.1% of favorable hourly labor expenses and 1.1% of favorable manager expenses both due to reduced staffing requirements and 0.4% of lower other labor expenses, partially offset by 3.8% of sales deleverage, 0.7% of higher manager bonus expenses and 0.4% of higher employee health insurance expenses.

•Maggiano’s Restaurant expenses increased ~~4.0% primarily consisting of 15.6%~~4.1%, including 6.9% of sales deleverage and ~~2.5%~~2.0% of higher expenses ~~primarily~~ related to delivery fees and supplies ~~in connection with~~driven by the growth in off-premise sales. ~~These increases were partially offset by 9.4%~~Partial offsets include 1.5% of lower ~~manager~~repairs and maintenance expenses, 0.8% of lower variable rent expenses, 0.5% of lower banquet expenses, 0.5% of lower credit card fees, 0.5% of lower utilities, 0.4% of lower advertising expenses and 0.6% of lower other restaurant expenses.

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Thirty-Nine Week Period Ended March 24, 2021 compared to March 25, 2020


	Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance		Variance as a percentage
	March 24, 2021		March 25, 2020
Company sales	$	181.1	$	297.2	$	(116.1)	(39.1)	%
Royalties	0.1		0.1		0.0		—	%
Franchise fees and other revenues	2.1		14.9		(12.8)		(85.9)	%
Franchise and other revenues	2.2		15.0		(12.8)		(85.3)	%
Total revenues	$	183.3	$	312.2	$	(128.9)	(41.3)	%

Maggiano’s Total revenues decreased 41.3% primarily driven by reduced dining and banquet room traffic due to the COVID-19 pandemic, partially offset by increased off-premise sales. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

The following is a summary of the changes in Maggiano’s operating costs and expenses:


	Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
	March 24, 2021				March 25, 2020
	Dollars		% of Company Sales		Dollars		% of Company Sales		Dollars		% of Company Sales
Food and beverage costs	$	43.1	23.8	%	$	72.0	24.2	%	$	28.9	0.4	%
Restaurant labor	64.3		35.5	%	111.0		37.4	%	46.7		1.9	%
Restaurant expenses	64.6		35.7	%	83.6		28.1	%	19.0		(7.6)	%
Depreciation and amortization	10.4				11.8				1.4
General and administrative	3.9				4.3				0.4
Other (gains) and charges	1.2				2.5				1.3

As a percentage of Company sales:

•Maggiano’s Food and beverage costs decreased 0.4%, including 1.9% of favorable menu item mix from menu changes and 0.1% of increased menu pricing, partially offset by 1.4% of unfavorable menu item mix related to poultry and non-alcoholic beverages and 0.2% of unfavorable commodity pricing.

•Maggiano’s Restaurant labor decreased 1.9%, including 6.2% of favorable hourly labor ~~as a result~~expenses and 1.1% of favorable manager expenses both due to reduced staffing ~~during~~requirements, partially offset by 5.0% of sales deleverage and 0.4% of higher employee health insurance expenses.

•Maggiano’s Restaurant expenses increased 7.6%, including 10.0% of sales deleverage and 2.0% of higher expenses related to delivery fees and supplies driven by the ~~first quarter of fiscal 2021, 1.7%~~growth in off-premise sales, partially offset by 1.6% of lower repairs and maintenance expenses, ~~0.7%~~0.6% of lower credit card fees, 0.6% of lower ~~utilities~~advertising expenses, ~~0.6%~~0.5% lower banquet expenses, 0.4% of lower ~~advertising,~~utilities, 0.2% of lower variable rent expenses and 0.5% of ~~favorable menu item mix, and 0.4% of favorable menu pricing.~~lower other restaurant expenses.

Income Taxes

Thirteen Week Periods Ended
September 23,
2020 September 25,
2019 Change
Effective income tax rate (4.9) % 11.3 % (16.2) %


	Thirteen Week Periods Ended						Thirty-Nine Week Periods Ended
	March 24, 2021		March 25, 2020		Change		March 24, 2021		March 25, 2020		Change
Effective income tax rate	11.7	%	(13.2)	%	24.9	%	0.4	%	(0.8)	%	1.2	%

The federal statutory tax rate was 21.0% for ~~both~~the thirteen and thirty-nine week periods ended ~~September 23, 2020~~March 24, 2021 and ~~September~~March 25, ~~2019.~~2020.

The effective income tax rate in the thirteen and thirty-nine week ~~period~~periods ended ~~September 23, 2020 decreased~~March 24, 2021 increased compared to the thirteen and thirty-nine week ~~period~~periods ended ~~September~~March 25, ~~2019~~2020 primarily due to leverage of the FICA

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tip tax credit, partially offset by the favorable impact ~~from the FICA tax credit and~~of excess tax ~~windfalls~~benefits associated with stock-based ~~compensation in the first quarter of fiscal 2021.~~compensation.

Liquidity and Capital Resources

COVID-19 Impact on Liquidity

~~Typically, cash~~Cash flows generated from operating activities are our principal source of liquidity, which we use to finance capital expenditures, such as remodels, maintaining existing restaurants and constructing new restaurants, to pay dividends and to repurchase shares of our common ~~stock.~~stock when authorized. Our strategic decision to enhance our off-premise business has enabled us to conveniently serve a significantly higher volume of off-premise guests during this pandemic compared to other industry competitors.

Due to the uncertainty in the economy and to preserve liquidity, we ~~have taken~~took proactive precautionary measures to raise additional capital, reduce costs and pause non-critical projects that do not significantly impact our current operations. These measures during fiscal 2021 included:

•Amended our revolving credit facility during the first quarter of fiscal 2021 to extend the maturity and provide additional flexibility during this time;

•Reduced capital expenditures, although we have begun to strategically resume the Chili’s remodel program and construction of certain new restaurants;

•Reduced marketing, general and administrative and restaurant expenses;

•Continued the suspension of ~~both~~ the quarterly cash dividend and the share repurchase program; and

•Amended the fiscal 2018 and fiscal 2019 U.S. Consolidated Income tax returns in order to claim the increased depreciation deductions for Brinker’s qualified improvement property in accordance with the CARES Act which resulted in an anticipated refund of $4.6 million.

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Cash Flows

Cash Flows from Operating Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance
September 23,
2020 September 25,
2019
Net cash provided by operating activities $ 82.8 $ 86.6 $ (3.8)


	Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
	March 24, 2021		March 25, 2020
Net cash provided by operating activities	$	268.6	$	237.8	$	30.8

Net cash provided by operating activities ~~decreased~~increased primarily due to ~~lower sales in~~ the ~~first quarter~~deferral of ~~fiscal 2021~~payroll tax payments as ~~a result of~~allowed under the ~~COVID-19 pandemic,~~CARES Act and higher accounts payable due to the timing of ~~income tax refunds (net of payments), and the timing of~~other operational receipts and payments, partially offset by ~~additional deferred payroll taxes as a result of the CARES Act and a~~ lower ~~profit sharing payment~~net income in the ~~current fiscal year.~~thirty-nine week period ended March 24, 2021.

Cash Flows from Investing Activities


		Thirteen Week Periods Ended				Favorable (Unfavorable) Variance			Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
		September 23, 2020		September 25, 2019					March 24, 2021		March 25, 2020
Cash flows from investing activities	Cash flows from investing activities							Cash flows from investing activities
Payments for property and equipment	Payments for property and equipment	$	(13.6)	$	(20.5)	$	6.9	Payments for property and equipment	$	(62.4)	$	(82.0)	$	19.6
Payments for franchise restaurant acquisitions		—		(96.2)		96.2
Proceeds from sale of assets	Proceeds from sale of assets	—		0.2		(0.2)		Proceeds from sale of assets	1.6		1.0		0.6
Proceeds from note receivable	Proceeds from note receivable	0.6		0.7		(0.1)		Proceeds from note receivable	1.5		2.2		(0.7)
Payments for franchise restaurant acquisitions								Payments for franchise restaurant acquisitions	—		(94.6)		94.6

Net cash used in investing activities	Net cash used in investing activities	$	(13.0)	$	(115.8)	$	102.8	Net cash used in investing activities	$	(59.3)	$	(173.4)	$	114.1

Net cash used in investing activities decreased primarily due to ~~$96.2~~$94.6 million of cash consideration and related transactional charges paid for the purchase of 116 Chili’s restaurants from a franchisee in the prior year.

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Additionally, capital expenditures decreased in fiscal 2021 primarily due to a ~~reduction~~decline in ~~spend for routine capital purchases in order to prioritize debt repayment,~~the pace of the Chili’s remodel initiative, the timing of spend on new restaurants, and a ~~decline~~reduction in ~~the pace of the Chili’s remodel initiative.~~spend for routine capital purchases.

Cash Flows from Financing Activities


		Thirteen Week Periods Ended				Favorable (Unfavorable) Variance			Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
		September 23, 2020		September 25, 2019					March 24, 2021		March 25, 2020
Cash flows from financing activities	Cash flows from financing activities							Cash flows from financing activities
Payments on revolving credit facility								Payments on revolving credit facility	$	(210.0)	$	(630.0)	$	420.0
Borrowings on revolving credit facility	Borrowings on revolving credit facility	$	28.4	$	299.0	$	(270.6)	Borrowings on revolving credit facility	28.4		806.8		(778.4)
Payments on revolving credit facility		(75.0)		(227.0)		152.0
Payments on long-term debt								Payments on long-term debt	(14.3)		(12.4)		(1.9)
Purchases of treasury stock	Purchases of treasury stock	(3.9)		(11.3)		7.4		Purchases of treasury stock	(4.1)		(32.3)		28.2
Payments for debt issuance costs								Payments for debt issuance costs	(2.2)		(1.0)		(1.2)
Payments of dividends	Payments of dividends	(1.3)		(14.8)		13.5		Payments of dividends	(1.5)		(43.3)		41.8
Payments on long-term debt		(4.6)		(2.4)		(2.2)
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	3.0		1.3		1.7		Proceeds from issuance of treasury stock	14.1		1.6		12.5
Payments for debt issuance costs		(1.5)		—		(1.5)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	$	(54.9)	$	44.8	$	(99.7)	Net cash (used in) provided by financing activities	$	(189.6)	$	89.4	$	(279.0)

Net cash used in financing activities increased primarily due to ~~$46.6~~$181.6 million of net repayment activity in fiscal 2021 compared to ~~$72.0~~$176.8 million of net borrowing activity in fiscal 2020 on the revolving credit facility, partially offset by the impact of suspending the ~~payment of dividends~~dividend payments and share ~~repurchases.~~repurchases, and by an increase in proceeds from stock option exercises.

Revolving Credit Facility

Net repayments of ~~$46.6~~$181.6 million were made during the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020~~March 24, 2021 on the $1.0 billion revolving credit ~~facility primarily from cash from operations.~~facility. As of ~~September 23, 2020, $573.7~~March 24, 2021, $708.7 million of credit was available under the revolving credit facility.

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In the first quarter of fiscal 2021, we executed the seventh amendment to the revolving credit facility. This amendment extended the maturity date to December 12, 2022, and contained a required commitment reduction to $900.0 million on September 12, 2021 from the previous $1.0 billion commitment. Refer to Note 10 - Debt for more information. Additionally, subsequent to the end of the ~~first~~third quarter of fiscal 2021, $20.0 million ~~additional~~of net payments were made on the revolving credit ~~facility as of the date that this Quarterly Report on Form 10-Q was filed.~~facility.

As of ~~September 23, 2020,~~March 24, 2021, we were in compliance with our covenants pursuant to the amended revolving credit facility and under the terms of the indentures governing our ~~2023 Notes~~3.875% notes and ~~2024 Notes, we are in compliance with our covenants.~~5.000% notes. Refer to Note 10 - Debt for further information about our notes and revolving credit facility.

Share Repurchase Program

In the fourth quarter of fiscal 2020, our share repurchase program was ~~primarily~~ suspended in response to the liquidity needs created by the COVID-19 pandemic. Prior to the suspension, our share repurchase program was used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020,~~March 24, 2021, we repurchased 0.1 million shares ~~solely~~ related to shares repurchased to satisfy team member tax withholding obligations on the vesting of restricted shares. Before the suspension of our share repurchase program, in the ~~thirteen~~thirty-nine week period ended ~~September~~March 25, ~~2019,~~2020, we repurchased ~~0.3~~0.8 million shares of our common stock for ~~$11.3~~$32.3 million.

Dividend Program

In the fourth quarter of fiscal 2020, our quarterly cash dividend was suspended in response to the liquidity needs created by the COVID-19 pandemic. ~~Before this suspension, our Board of Directors approved quarterly dividends of $0.38 per share paid quarterly.~~ In the ~~thirteen~~thirty-nine week period ended ~~September 23, 2020,~~March 24, 2021, dividends paid ~~solely~~ related to the previously accrued dividends for restricted share awards that vested in the period. Restricted share award dividends are accrued in Other accrued liabilities for the current portion to vest within 12 months, and Other liabilities for the portion that will vest after one year. ~~Before~~In the ~~suspension, in the thirteen~~thirty-nine week period ended ~~September~~March 25, ~~2019,~~2020, we paid dividends of ~~$14.8~~$43.3 million to common stock shareholders.

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Cash Flow Outlook

We believe that our various sources of capital, including future cash flow from operating activities and availability under our existing credit facility are adequate to finance operations as well as the repayment of current debt obligations within the next year. We continue to serve customers at substantially all of our locations through our dining rooms and off-premise ~~offerings and limited capacity dining rooms.~~offerings. We will continue to monitor the situation and ~~intend to resume~~have resumed normal business operations ~~on a case by case basis when permitted under applicable government regulations~~in accordance with state and ~~when we believe we are able to do so safely.~~local mandates.

We are not aware of any other event or trend that would potentially materially affect our liquidity. In the event such a trend develops, we believe that there are sufficient funds available under our credit facility and from our internal cash generating capabilities to adequately manage our ongoing business.

~~OFF-BALANCE SHEET ARRANGEMENTS~~Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which the Company has: (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us. We have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 14 - Contingencies, in the ~~Consolidated Financial Statements (Unaudited), and have entered into certain pre-commencement leases as disclosed in Note 9 - Leases included in the~~ Notes to ~~the~~ Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report. Other than these items, we do not have any off-balance sheet arrangements.

~~RECENT ACCOUNTING PRONOUNCEMENTS~~Recent Accounting Pronouncements

The impact of recent accounting pronouncements can be found at Note 2 - Effect of New Accounting Standards in the Notes to ~~the~~ Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our quantitative and qualitative market risks set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended June 24, 2020.

ITEM 4. CONTROLS AND PROCEDURES

~~Evaluation of Disclosure Controls and Procedures~~EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective.

~~Internal Control Over Financial Reporting~~INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the thirteen week period ended ~~September 23, 2020~~March 24, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

Information and statements contained in this Form 10-Q, in our other filings with the SEC or in our written and verbal communications that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are generally accompanied by words like “believes,” “anticipates,” “estimates,” “predicts,” “expects,” “plans,” “intends,” “projects,” “continues” and other similar expressions that convey uncertainty about future events or outcomes. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which could cause actual results to differ materially from our historical results or from those projected

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in forward-looking statements. These risks and uncertainties are, in many instances, beyond our control. We wish to caution you against placing undue reliance on forward-looking statements because of these risks and uncertainties. Except as required by law, we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The forward-looking statements contained in this Form 10-Q report are subject to the risks and uncertainties described in Part I, Item IA “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 24, 2020, and below in Part II, Item 1A “Risk Factors” in this report on Form 10-Q, as well as the risks and uncertainties that generally apply to all businesses. We further caution that it is not possible to identify all risks and uncertainties, and you should not consider the identified factors as a complete list of all risks and uncertainties. Among the factors that could cause actual results to differ materially are: disruptions from COVID-19 pandemic, the impact of competition, changes in consumer preferences, consumer perception of food safety, reduced disposable income, unfavorable publicity, increased minimum wages, governmental regulations, the Company’s ability to meet its business strategy plan, third party delivery risks, loss of key management personnel, failure to hire and retain high-quality restaurant management, the impact of social media, failure to protect the security of data of our guests and team members, product availability, regional business and economic conditions, litigation, franchisee success, changes in interest rates due to phase out of LIBOR, downgrades in our credit ratings, inflation, changes in the retail industry, technology failures, failure to protect our intellectual property, outsourcing, impairment of goodwill or assets, failure to maintain effective internal control over financial reporting, actions of activist shareholders, adverse weather conditions, terrorist acts, health epidemics or pandemics (such as COVID-19), tax reform, changes in financial and credit markets, weather, inadequate insurance coverage and limitations imposed by our credit agreements.

It is possible that there could be a material adverse impact on our revenues, results of operations and cash flows in connection with COVID-19. The situation is ~~rapidly changing and~~still evolving as the United States is in the process of distributing vaccines beginning in December 2020 in an effort to reduce the spread of the virus. However, lack of successful distribution and/or effectiveness of the vaccines over a large population size could have adverse effects on the situation. Therefore, additional impacts to the business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding

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COVID-19 will change, including the duration or re-emergence of restrictions and dining room closure requirements, staffing levels for reopened dining rooms and customer re-engagement with our brands.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings is incorporated by reference from Note 14 - Contingencies to the Notes to ~~the~~ Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report.

ITEM 1A. RISK FACTORS

In addition to the other information in this Form 10-Q report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 24, 2020, which could materially affect our business, financial condition or results of operations. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business, financial condition or results of operations. Therefore, the risks identified are not intended to be a complete discussion of all potential risks or uncertainties.

During the thirteen week period ended ~~September 23, 2020,~~March 24, 2021, there have been no ~~other~~ material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 24, 2020.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the fourth quarter of fiscal 2020, our share repurchase program was suspended due to the ~~impact from~~impacts of the COVID-19 pandemic. During the thirteen week period ended ~~September 23, 2020,~~March 24, 2021, we repurchased shares solely to satisfy team member tax withholding obligations on the vesting of restricted shares as follows (in millions, except per share amounts, unless otherwise noted):

Total Number of Shares Purchased(1)
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program
Approximate Dollar Value that May Yet be Purchased Under the Program(2)
June 25, 2020 through July 29, 2020 — $ — — $ 166.8
July 30, 2020 through August 26, 2020 0.0 37.09 — 166.8
August 27, 2020 through September 23, 2020 0.1 43.91 — 166.8
Total 0.1 41.53 —


	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value that May Yet be Purchased Under the Program(2)
December 24, 2020 through January 27, 2021	0.0	$	51.17	—	$	166.8
January 28, 2021 through February 24, 2021	0.0	59.94		—	166.8
February 25, 2021 through March 24, 2021	—	—		—	166.8
Total	0.0	52.37		—

(1)These amounts include shares purchased as part of our publicly announced programs and shares owned and tendered by team members to satisfy tax withholding obligations on the vesting of restricted share awards, which are not deducted from shares available to be purchased under publicly announced programs. Unless otherwise indicated, shares owned and tendered by team members to satisfy tax withholding obligations were purchased at the average of the high and low prices of the Company’s shares on the date of vesting. During the thirteen week period ended ~~September 23, 2020,~~March 24, 2021, ~~96 thousand~~3,660 shares were tendered by team members at an average price of ~~$41.53.~~$52.37.

(2)The final amount shown is as of ~~September 23, 2020.~~March 24, 2021.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit						Description
3.1						Certificate of Incorporation of Registrant, as amended(1)
3.2						Bylaws of Registrant(2)
~~10(a)~~						Registrant’s Terms of F21 Restricted Stock Unit Award*
~~10(b)~~						~~Registrant’s Performance Share Plan(3)~~
~~10(c)~~						~~Seventh Amendment to Credit Agreement dated July 23, 2020(4)~~
~~10(d)~~						BLT Change in Control Agreement*
3 1 ~~(a)~~31(a)						Certification by Wyman T. Roberts, President and Chief Executive Officer of the Registrant and President of Chili’s Grill & Bar, pursuant to 17 CFR 240.13a – 14(a) or 17 CFR 240.15d – 14(a)*
31(b)						Certification by Joseph G. Taylor, 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)*
32(a)						Certification by Wyman T. Roberts, President and Chief Executive Officer of the Registrant and President of Chili’s Grill & Bar, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32(b)						Certification by Joseph G. Taylor, 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*
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Schema Document
101.CAL						XBRL Calculation Linkbase Document
101.DEF						XBRL Definition Linkbase Document
101.LAB						XBRL Label Linkbase Document
101.PRE						XBRL Presentation Linkbase
104						The cover page from the Registrant's Quarterly Report on Form 10-Q for the thirteen week period ended ~~September 23, 2020~~March 24, 2021 is formatted in Inline XBRL.

* Filed herewith.

(1)Filed as an exhibit to Annual Report on Form 10-K for fiscal year ended June 28, 1995 and incorporated herein by reference.

(2)Filed as an exhibit to Annual Report on Form 10-K for fiscal year ended June 27, 2018 and incorporated herein by reference.

~~(3)Filed as an exhibit to Form 8-K, with date of report of August 20, 2020 and incorporated herein by reference.~~

~~(4)Filed as an exhibit to Form 8-K, with date of report of July 23, 2020 and incorporated herein by reference.~~

~~Table of Contents~~

SIGNATURES

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.


	BRINKER INTERNATIONAL, INC., a Delaware corporation

Date: ~~October~~April 28, ~~2020~~2021	By:	/S/ WYMAN T. ROBERTS
		Wyman T. Roberts,
		President and Chief Executive Officer
		of Brinker International, Inc.
		and President of Chili’s Grill & Bar
		(Principal Executive Officer)

Date: ~~October~~April 28, ~~2020~~2021	By:	/S/ JOSEPH G. TAYLOR
		Joseph G. Taylor,
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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