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 March ~~24, 2021~~30, 2022

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 April ~~23, 2021: 45,750,918~~29, 2022: 43,841,092 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 March ~~24, 2021~~30, 2022 and March ~~25, 2020~~24, 2021			3
Consolidated Balance Sheets - March 2 430 , 202 12 (Unaudited) and June ~~24, 2020~~30, 2021			4
Consolidated Statements of Cash Flows (Unaudited) - ~~Thirty-Nine~~T hirty -N i ne Week Periods Ended March ~~24, 2021~~30 , 202 2 and March ~~25, 2020~~24 , 202 1			5
Notes to Consolidated Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			42
PART II. OTHER INFORMATION			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 5. Other Information			44
Item 6. Exhibits			45
SIGNATURES			45

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				Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021		March 30, 2022		March 24, 2021
Revenues	Revenues									Revenues
Company sales	Company sales	$	813.7	$	840.4	$	2,288.1	$	2,451.8	Company sales	$	960.6	$	813.7	$	2,724.7	$	2,288.1
Franchise and other revenues	Franchise and other revenues	14.7		19.6		41.1		63.5		Franchise and other revenues	19.8		14.7		57.9		41.1
Total revenues	Total revenues	828.4		860.0		2,329.2		2,515.3		Total revenues	980.4		828.4		2,782.6		2,329.2
Operating costs and expenses	Operating costs and expenses									Operating costs and expenses
Food and beverage costs	Food and beverage costs	213.9		226.7		606.3		653.6		Food and beverage costs	270.3		213.9		757.4		606.3
Restaurant labor	Restaurant labor	270.8		285.9		774.6		846.2		Restaurant labor	329.1		270.8		949.4		774.6
Restaurant expenses	Restaurant expenses	216.1		220.2		629.9		652.2		Restaurant expenses	244.1		216.1		712.1		629.9
Depreciation and amortization	Depreciation and amortization	37.4		43.5		112.0		120.9		Depreciation and amortization	42.2		37.4		123.1		112.0
General and administrative	General and administrative	33.7		23.3		94.2		95.9		General and administrative	39.2		33.7		108.8		94.2
Other (gains) and charges	Other (gains) and charges	4.3		19.3		13.5		30.7		Other (gains) and charges	6.1		4.3		17.0		13.5
Total operating costs and expenses	Total operating costs and expenses	776.2		818.9		2,230.5		2,399.5		Total operating costs and expenses	931.0		776.2		2,667.8		2,230.5
Operating income	Operating income	52.2		41.1		98.7		115.8		Operating income	49.4		52.2		114.8		98.7
Interest expenses	Interest expenses	14.1		14.3		43.1		44.2		Interest expenses	11.1		14.1		34.8		43.1
Other income, net	Other income, net	(0.3)		(0.4)		(1.2)		(1.4)		Other income, net	(0.4)		(0.3)		(1.2)		(1.2)
Income before income taxes	Income before income taxes	38.4		27.2		56.8		73.0		Income before income taxes	38.7		38.4		81.2		56.8
Provision (benefit) for income taxes		4.5		(3.6)		0.2		(0.6)
Provision for income taxes										Provision for income taxes	2.1		4.5		3.8		0.2
Net income	Net income	$	33.9	$	30.8	$	56.6	$	73.6	Net income	$	36.6	$	33.9	$	77.4	$	56.6

Basic net income per share	Basic net income per share	$	0.74	$	0.83	$	1.25	$	1.97	Basic net income per share	$	0.82	$	0.74	$	1.71	$	1.25

Diluted net income per share	Diluted net income per share	$	0.73	$	0.81	$	1.22	$	1.94	Diluted net income per share	$	0.81	$	0.73	$	1.68	$	1.22

Basic weighted average shares outstanding	Basic weighted average shares outstanding	45.5		37.2		45.3		37.3		Basic weighted average shares outstanding	44.4		45.5		45.2		45.3

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	46.7		37.8		46.2		38.0		Diluted weighted average shares outstanding	45.1		46.7		46.0		46.2

Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)
Foreign currency translation adjustment	Foreign currency translation adjustment	$	0.3	$	(1.0)	$	1.1	$	(1.1)	Foreign currency translation adjustment	$	0.4	$	0.3	$	(0.1)	$	1.1
Other comprehensive income (loss)	Other comprehensive income (loss)	0.3		(1.0)		1.1		(1.1)		Other comprehensive income (loss)	0.4		0.3		(0.1)		1.1
Comprehensive income	Comprehensive income	$	34.2	$	29.8	$	57.7	$	72.5	Comprehensive income	$	37.0	$	34.2	$	77.3	$	57.7

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

BRINKER INTERNATIONAL, INC.

Consolidated Balance Sheets

(In millions, except per share amounts)


		Unaudited					Unaudited
		March 24, 2021		June 24, 2020			March 30, 2022		June 30, 2021
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	63.6	$	43.9	Cash and cash equivalents	$	12.9	$	23.9
Accounts receivable, net	Accounts receivable, net	66.6		52.3		Accounts receivable, net	60.0		65.2
Inventories	Inventories	27.1		27.3		Inventories	33.6		28.9
Restaurant supplies	Restaurant supplies	52.0		51.6		Restaurant supplies	55.5		52.6
Prepaid expenses	Prepaid expenses	11.6		13.9		Prepaid expenses	20.4		13.6
Income taxes receivable, net	Income taxes receivable, net	31.5		35.4		Income taxes receivable, net	5.6		23.0
Total current assets	Total current assets	252.4		224.4		Total current assets	188.0		207.2
Property and equipment, at cost	Property and equipment, at cost					Property and equipment, at cost
Land	Land	33.1		34.2		Land	43.4		33.1
Buildings and leasehold improvements	Buildings and leasehold improvements	1,556.8		1,534.4		Buildings and leasehold improvements	1,621.8		1,595.2
Furniture and equipment	Furniture and equipment	804.7		785.7		Furniture and equipment	795.7		818.1
Construction-in-progress	Construction-in-progress	14.5		24.4		Construction-in-progress	23.0		14.9
		2,409.1		2,378.7			2,483.9		2,461.3
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,657.5)		(1,573.4)		Less accumulated depreciation and amortization	(1,665.5)		(1,686.5)
Net property and equipment	Net property and equipment	751.6		805.3		Net property and equipment	818.4		774.8
Other assets	Other assets					Other assets
Operating lease assets	Operating lease assets	1,025.8		1,054.6		Operating lease assets	1,152.9		1,007.4
Goodwill	Goodwill	188.1		187.6		Goodwill	195.1		188.2
Deferred income taxes, net	Deferred income taxes, net	47.5		38.2		Deferred income taxes, net	54.4		50.9
Intangibles, net	Intangibles, net	21.5		23.0		Intangibles, net	28.5		21.1
Other	Other	22.1		22.9		Other	21.5		25.3
Total other assets	Total other assets	1,305.0		1,326.3		Total other assets	1,452.4		1,292.9
Total assets	Total assets	$	2,309.0	$	2,356.0	Total assets	$	2,458.8	$	2,274.9
LIABILITIES AND SHAREHOLDERS’ DEFICIT	LIABILITIES AND SHAREHOLDERS’ DEFICIT					LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	121.4	$	104.9	Accounts payable	$	131.4	$	127.7
Gift card liability	Gift card liability	110.9		109.9		Gift card liability	104.8		106.4
Accrued payroll	Accrued payroll	112.0		65.2		Accrued payroll	108.2		122.4
Operating lease liabilities	Operating lease liabilities	117.2		117.3		Operating lease liabilities	113.5		97.7
Other accrued liabilities	Other accrued liabilities	116.3		100.6		Other accrued liabilities	125.2		117.4

Total current liabilities	Total current liabilities	577.8		497.9		Total current liabilities	583.1		571.6
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	1,017.0		1,208.5		Long-term debt and finance leases, less current installments	987.9		917.9
Long-term operating lease liabilities, less current portion	Long-term operating lease liabilities, less current portion	1,023.7		1,061.6		Long-term operating lease liabilities, less current portion	1,143.3		1,006.7
Other liabilities	Other liabilities	81.1		67.1		Other liabilities	55.7		82.0
Commitments and contingencies (Note 14)	Commitments and contingencies (Note 14)	0		0		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 45.7 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
Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued; and 43.8 million shares outstanding at March 30, 2022, and 45.9 million shares outstanding at June 30, 2021)						Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued; and 43.8 million shares outstanding at March 30, 2022, and 45.9 million shares outstanding at June 30, 2021)	7.0		7.0
Additional paid-in capital	Additional paid-in capital	677.4		669.4		Additional paid-in capital	687.8		685.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5.1)		(6.2)		Accumulated other comprehensive loss	(4.8)		(4.7)
Accumulated deficit	Accumulated deficit	(340.9)		(397.5)		Accumulated deficit	(188.7)		(266.1)
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)
Treasury stock, at cost (26.5 million shares at March 30, 2022, and 24.4 million shares at June 30, 2021)						Treasury stock, at cost (26.5 million shares at March 30, 2022, and 24.4 million shares at June 30, 2021)	(812.5)		(724.9)
Total shareholders’ deficit	Total shareholders’ deficit	(390.6)		(479.1)		Total shareholders’ deficit	(311.2)		(303.3)
Total liabilities and shareholders’ deficit	Total liabilities and shareholders’ deficit	$	2,309.0	$	2,356.0	Total liabilities and shareholders’ deficit	$	2,458.8	$	2,274.9

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Thirty-Nine Week Periods Ended					Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	56.6	$	73.6	Net income	$	77.4	$	56.6
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	112.0		120.9		Depreciation and amortization	123.1		112.0
Stock-based compensation	Stock-based compensation	11.3		9.0		Stock-based compensation	15.2		11.3
Restructure and impairment charges	Restructure and impairment charges	6.5		24.8		Restructure and impairment charges	8.7		6.5
Net loss on disposal of assets	Net loss on disposal of assets	1.1		1.1		Net loss on disposal of assets	2.3		1.1
Other	Other	2.7		1.7		Other	2.6		2.7
Changes in assets and liabilities:
Changes in assets and liabilities, net of the impact of acquisitions:						Changes in assets and liabilities, net of the impact of acquisitions:
Accounts receivable, net	Accounts receivable, net	(1.3)		12.8		Accounts receivable, net	8.0		(1.3)
Inventories	Inventories	(0.4)		(1.2)		Inventories	(3.4)		(0.4)
Restaurant supplies	Restaurant supplies	(0.4)		(0.3)		Restaurant supplies	(1.1)		(0.4)
Prepaid expenses	Prepaid expenses	2.3		10.8		Prepaid expenses	(6.9)		2.3
Operating lease assets, net of liabilities	Operating lease assets, net of liabilities	(9.1)		(6.3)		Operating lease assets, net of liabilities	5.2		(9.1)
Deferred income taxes, net	Deferred income taxes, net	(9.3)		4.2		Deferred income taxes, net	(3.5)		(9.3)
Other assets	Other assets	(0.2)		(0.4)		Other assets	0.2		(0.2)
Accounts payable	Accounts payable	19.0		(1.7)		Accounts payable	4.9		19.0
Gift card liability	Gift card liability	1.0		5.1		Gift card liability	(2.6)		1.0
Accrued payroll	Accrued payroll	46.7		(26.6)		Accrued payroll	(14.3)		46.7
Other accrued liabilities	Other accrued liabilities	10.5		11.1		Other accrued liabilities	3.5		10.5
Current income taxes	Current income taxes	6.4		(0.2)		Current income taxes	19.6		6.4
Other liabilities	Other liabilities	13.2		(0.6)		Other liabilities	(27.3)		13.2
Net cash provided by operating activities	Net cash provided by operating activities	268.6		237.8		Net cash provided by operating activities	211.6		268.6
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	(62.4)		(82.0)		Payments for property and equipment	(109.0)		(62.4)
Payments for franchise restaurant acquisitions						Payments for franchise restaurant acquisitions	(106.0)		—
Proceeds from sale leaseback transactions, net of related expenses						Proceeds from sale leaseback transactions, net of related expenses	20.5		—
Proceeds from note receivable						Proceeds from note receivable	1.0		1.5
Proceeds from sale of assets	Proceeds from sale of assets	1.6		1.0		Proceeds from sale of assets	0.1		1.6
Proceeds from note receivable		1.5		2.2
Payments for franchise restaurant acquisitions		0		(94.6)

Net cash used in investing activities	Net cash used in investing activities	(59.3)		(173.4)		Net cash used in investing activities	(193.4)		(59.3)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Borrowings on revolving credit facility						Borrowings on revolving credit facility	595.5		28.4
Payments on revolving credit facility	Payments on revolving credit facility	(210.0)		(630.0)		Payments on revolving credit facility	(502.5)		(210.0)
Borrowings on revolving credit facility		28.4		806.8
Purchases of treasury stock						Purchases of treasury stock	(100.8)		(4.1)
Payments on long-term debt	Payments on long-term debt	(14.3)		(12.4)		Payments on long-term debt	(17.6)		(14.3)
Purchases of treasury stock		(4.1)		(32.3)
Payments for debt issuance costs	Payments for debt issuance costs	(2.2)		(1.0)		Payments for debt issuance costs	(3.1)		(2.2)
Payments of dividends	Payments of dividends	(1.5)		(43.3)		Payments of dividends	(1.1)		(1.5)
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	14.1		1.6		Proceeds from issuance of treasury stock	0.4		14.1
Net cash (used in) provided by financing activities		(189.6)		89.4
Net cash used in financing activities						Net cash used in financing activities	(29.2)		(189.6)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	19.7		153.8		Net change in cash and cash equivalents	(11.0)		19.7
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	23.9		43.9
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	63.6	$	167.2	Cash and cash equivalents at end of period	$	12.9	$	63.6

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

Footnote Index

BRINKER INTERNATIONAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

Footnote Index

Note #

Description

Page

Note 1

Basis of Presentation

Note 2

~~Effect of New Accounting Standards~~Chili’s Restaurant Acquisitions

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

1820

Note 12

Shareholders’ Deficit

1921

Note 13

Supplemental Cash Flow Information

2223

Note 14

Contingencies

~~Note 15~~

~~Fiscal 2020 Chili’s Restaurant Acquisition~~

~~Note 16~~

~~Subsequent Events~~

Table of Contents

Footnote Index

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 March ~~24, 2021~~30, 2022 and June ~~24, 2020,~~30, 2021, and for the thirteen and thirty-nine week periods ended March ~~24, 2021~~30, 2022 and March ~~25, 2020,~~24, 2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Fiscal Year

We have a 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~~2022 contains 5352 weeks and will end on June ~~30, 2021.~~29, 2022. Fiscal year ~~2020, which~~2021 ended on June ~~24, 2020,~~30, 2021 and contained 5253 weeks.

Use of Estimates

The preparation of the ~~consolidated financial statements~~Consolidated Financial Statements (Unaudited) 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,~~Consolidated Financial Statements (Unaudited), and the reported amounts of revenues and costs and expenses in the reporting periods. Actual results could differ from those estimates.

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 Consolidated Financial Statements (Unaudited) should be read in conjunction with the Notes to ~~the~~ Consolidated Financial Statements contained in our June ~~24, 2020~~30, 2021 Form 10-K. We believe the disclosures are sufficient for interim financial reporting purposes. All amounts in the Notes to Consolidated Financial Statements (Unaudited) are presented in millions unless otherwise specified.

Foreign Currency Translation

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).

~~Risks and Uncertainties~~Impact of COVID-19 Pandemic

In ~~January~~March 2020, ~~the Secretary of Health and Human Services declared the~~a novel strain of coronavirus (“COVID-19”) ~~a public health emergency. Subsequently in March 2020, the World Health Organization~~was declared ~~COVID-19~~ a global pandemic ~~that resulted in~~and a ~~significant reduction in sales at our restaurants due to~~National Public Health Emergency. The spread of COVID-19 has prompted changes in consumer behavior asand social distancing ~~practices,~~preferences as well as dining room closures and ~~other~~dining room capacity restrictions ~~were~~ mandated or encouraged by federal, state and local governments. ~~In response to COVID-19,~~The number of open dining rooms and the ~~Company temporarily closed all Company-owned restaurant~~ dining ~~and banquet rooms at~~room capacity restrictions have fluctuated over the ~~end~~course of the ~~third quarter of~~pandemic based on state and local mandates, and has resulted in significant adverse impacts to our guest traffic and sales primarily in fiscal ~~2020 resulting in a~~2021.

Table of Contents

Footnote Index

~~transition~~We have been carefully assessing the effect of COVID-19 on our business as conditions continue to ~~an off-premise business model. In May 2020,~~evolve throughout the communities 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 March 24, 2021, substantially all of our restaurant dining rooms and patios were opened with limited seating capacity. The capacity limitations and personal safety preferences have resulted in reduced traffic in the Company’s restaurants.

serve. 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~~virus and could lead to further reduced sales, capacity restrictions, restaurant closures, ~~disruptions~~delays in our supply chain ~~and restaurant staffing~~or impair our ability to staff accordingly which could adversely impact our financial results.

~~2. EFFECT OF NEW ACCOUNTING STANDARDS~~

New Accounting Standards Implemented in Fiscal ~~2021~~2022

~~In the first quarter of~~We reviewed all accounting pronouncements that became effective for our fiscal ~~2021, we implemented the following new accounting standards:~~

•~~Measurement of Credit Losses on Financial Instruments, ASU No. 2016-13~~

•~~Fair Value Measurement (Topic 820): Disclosure Framework, ASU No. 2018-13~~

•~~Simplifying the Accounting for Income Taxes, ASU No. 2019-12~~

~~The adoption of these new accounting standards~~2022 and determined that either they were not applicable or they did not have a material impact on ~~our~~the 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~~

Statements (Unaudited). We also reviewed all recently issued accounting pronouncements to be adopted in future periods and determined that they ~~were either not applicable or~~ are not expected to have a material impact on the Consolidated Financial ~~Statements.~~Statements (Unaudited).

2. CHILI’S RESTAURANT ACQUISITIONS

During the first three quarters of fiscal 2022, we completed three acquisitions of certain assets and liabilities related to previously franchised Chili’s locations, as follows:

•Mid-Atlantic Region Acquisition - On September 2, 2021, we acquired 23 previously franchised Chili’s restaurants located in the Mid-Atlantic region of the United States for a total purchase price of $47.7 million, including post-closing adjustments. The acquisition was funded with borrowings from our existing credit facility and proceeds from a sale leaseback transaction completed simultaneously with the acquisition (refer to Note 9 - Leases for further details on the sale leaseback transaction).

•Great Lakes Region Acquisition - On October 31, 2021, we acquired 37 previously franchised Chili’s restaurants located in the Great Lakes and Northeast region of the United States for a total purchase price of $56.0 million, excluding post-closing adjustments, funded with borrowings from our existing credit facility.

•Northwest Region Acquisition - On February 1, 2022, we acquired 6 previously franchised Chili’s restaurants located in the Northwest region of the United States for a total purchase price of $1.3 million, excluding post-closing adjustments, funded with borrowings from our existing credit facility.

Pro-forma financial information for these acquisitions are not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited). We accounted for each of these acquisitions as a business combination.

The assets and liabilities of the Mid-Atlantic Region Acquisition restaurants were recorded at their fair values. The assets and liabilities of the Great Lakes Region Acquisition and Northwest Region Acquisition restaurants were recorded based on preliminary estimates of their fair values and are subject to revision. The final purchase price allocations are expected to be completed during the fourth quarter of fiscal 2022. The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the acquisition dates.

The fair values of tangible and intangible assets acquired were primarily based on significant inputs not observable in an active market, including estimates of replacement costs, future cash flows and discount rates. These inputs

Table of Contents

Footnote Index

represent Level 3 fair value measurements as defined under GAAP. The amounts recorded for the fair value of acquired assets and liabilities at the acquisition dates are as follows:


	Mid-Atlantic Region		Great Lakes Region (Preliminary)

Current assets	$	1.4	$	2.1

Property and equipment	46.2		43.9
Operating lease assets(2)	23.6		45.1
Reacquired franchise rights(1)	4.7		4.6
Goodwill(3)	—		6.9

Current liabilities	(1.4)		(0.3)

Finance lease liabilities, less current portion	(3.7)		—
Operating lease liabilities, less current portion(2)	(23.1)		(45.2)

Net assets acquired(4)	$	47.7	$	57.1

(1)Reacquired franchise rights related to the Mid-Atlantic Region acquisition and Great Lakes Region acquisition both have weighted average amortization periods of approximately 15 years.

(2)Refer to Note 9 - Leases for further details.

(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)Net assets acquired at fair value related to the Mid-Atlantic Region acquisition are equal to the total purchase price of $48.0 million, less $0.3 million of closing adjustments. Net assets acquired at fair value related to the Great Lakes Region acquisition are equal to the total purchase price of $56.0 million, plus $1.1 million of closing adjustments.

3. REVENUE RECOGNITION

Deferred Franchise and Development Fees

Our deferred franchise and 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~~our 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 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 next 12 months, and Other liabilities for the long-term portion in the Consolidated Balance Sheets (Unaudited).

Table of Contents

Footnote Index

The following table reflects the changes in deferred franchise and development fees between June ~~24, 2020~~30, 2021 and March ~~24, 2021:~~30, 2022:

Deferred Franchise and Development Fees

Balance as of June ~~24, 2020~~30, 2021

~~12.7~~11.4

Additions

~~0.3~~ 0.8

Amount recognized for Chili's restaurant acquisitions(1)

(0.8)

Amount recognized to Franchise and other revenues

(1.3)

~~Other~~

~~0.1~~

Balance as of March ~~24, 2021~~30, 2022

~~11.8~~10.1

(1) The remaining deferred franchise and development fee balances associated with the 66 acquired Chili’s restaurants were recognized as of the acquisition dates in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited). Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

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:~~30, 2022:


Fiscal Year	Fiscal Year	Franchise and Development Fees Revenue Recognition		Fiscal Year	Franchise and Development Fees Revenue Recognition
Remainder of 2021		$	0.3
2022		1.0
Remainder of 2022				Remainder of 2022	$	0.2
2023	2023	1.0		2023	0.9
2024	2024	1.0		2024	0.8
2025	2025	0.9		2025	0.8
2026				2026	0.8
Thereafter	Thereafter	7.6		Thereafter	6.6
		$	11.8		$	10.1

Deferred Gift Card Revenues

~~Total deferred~~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~~30, 2021 and March ~~24, 2021:~~30, 2022:


	Gift Card Liability

Balance as of June ~~24, 2020~~30, 2021	$	~~109.9~~106.4
Gift card sales	~~88.6~~107.2
Gift card redemptions recognized to Company sales	~~(79.8)~~(93.0)
Gift card breakage recognized to Franchise and other revenues	~~(8.0)~~(16.5)
Other	~~0.2~~0.7
Balance as of March ~~24, 2021~~30, 2022	$	~~110.9~~104.8

910

Table of Contents

Footnote Index

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				Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021		March 30, 2022		March 24, 2021
Loss from natural disasters, net of (insurance recoveries)		$	1.8	$	(0.9)	$	2.0	$	(0.6)
Restaurant closure charges										Restaurant closure charges	$	1.2	$	0.3	$	1.7	$	2.2
Remodel-related costs	Remodel-related costs	0.9		0.6		1.8		2.1		Remodel-related costs	0.9		0.9		4.0		1.8
COVID-19 related charges	COVID-19 related charges	0.9		16.1		3.1		16.1		COVID-19 related charges	0.7		0.9		0.2		3.1
Restaurant closure charges		0.3		0.3		2.2		3.4
Foreign currency transaction (gain) loss		0.1		2.3		(0.3)		2.2
Acquisition-related costs, net										Acquisition-related costs, net	0.6		—		1.5		—
Enterprise system implementation costs										Enterprise system implementation costs	0.5		—		1.4		—
Loss from natural disasters, net of (insurance recoveries)										Loss from natural disasters, net of (insurance recoveries)	—		1.8		0.8		2.0
Lease contingencies										Lease contingencies	—		—		2.9		—
Restaurant impairment charges	Restaurant impairment charges	0		0		2.5		4.6		Restaurant impairment charges	—		—		—		2.5
Lease modification gain, net		0		0		(0.5)		(3.1)
Acquisition of franchise restaurants costs, net		0		1.1		0		2.6
Other	Other	0.3		(0.2)		2.7		3.4		Other	2.2		0.4		4.5		1.9
		$	4.3	$	19.3	$	13.5	$	30.7		$	6.1	$	4.3	$	17.0	$	13.5

Fiscal 2022

•Restaurant closure charges related to closure costs and leases associated with certain closed Chili’s restaurants.

•Remodel-related costs related to existing fixed asset write-offs associated with ongoing Chili’s and Maggiano’s remodel projects.

•COVID-19 related charges primarily consisted of charges for employee assistance and related payroll taxes for certain team members partially offset by an employee retention credit as allowed under the CARES Act in the second quarter and credits received as part of the 2021 New Mexico Senate Bill 1 in the first quarter.

•Acquisition-related costs, net primarily related to the 66 restaurants acquired from franchisees during the first three quarters. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

•Enterprise system implementation costs primarily consisted of consulting and subscription fees related to the ongoing enterprise system implementation.

•Lease contingencies were recorded for potential lease defaults on certain lease guarantees and subleases. Refer to Note 14 - Contingencies for additional information about our secondarily liable lease guarantees.

Fiscal 2021

•~~Loss from natural disasters, net of (insurance recoveries) primarily consists of costs incurred~~Restaurant closure charges in the thirty-nine week period related to ~~Winter Storm Uri in February 2021.~~closure costs and leases associated with certain closed Chili’s restaurants.

•Remodel-related costs ~~relate~~related 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~~consisted of the 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.~~Table of Contents

Footnote Index

•~~Foreign currency transaction (gain) loss resulted~~Loss from ~~the change~~natural disasters, net of (insurance recoveries) primarily consisted of costs incurred related to Winter Storm Uri in ~~the 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 2018.~~February 2021.

•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.

~~Table of Contents~~

~~Footnote Index~~

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

–employee assistance - $15.5 million of employee assistance payments for 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 dining room closures.~~

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

•~~Restaurant impairment charges during the thirty-nine week period ended March 25, 2020 primarily related to the long-lived and operating lease assets of 10 underperforming Chili’s~~ restaurants.

•Lease modification gain, net during the thirty-nine week period ended March 25, 2020 included the first quarter of fiscal 2020 gain 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 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) %


	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	March 30, 2022		March 24, 2021		March 30, 2022		March 24, 2021
Effective income tax rate	5.4	%	11.7	%	4.7	%	0.4	%

The federal statutory tax rate for the periods presented was 21.0%. Our effective income tax rate for the thirteen and thirty-nine week periods ended March 24, 2021 was lower than the federal statutory rate primarily due to the favorable impact from the FICA tip tax credit. The thirty-nine week period ended March 24, 2021 also included the favorable impact of excess tax benefits associated with stock-based compensation.

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


	Thirty-Nine Week Period Ended
	March ~~24,~~30, ~~2021~~2022
Income tax expense at statutory rate - 21.0%	$	~~11.9~~17.1
FICA tip tax credit	~~(12.2)~~(16.4)
Stock-based compensation excess tax benefits	~~(2.0)~~(0.7)
State income taxes, net of federal benefit	~~3.3~~5.0

Other	~~(0.8)~~(1.2)
Provision ~~(benefit)~~ for income taxes - ~~0.4%~~4.7%	$	~~0.2~~3.8

Our effective income tax rate for the thirteen and thirty-nine week periods ended March 25, 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 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

~~Table of Contents~~

~~Footnote Index~~

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		Thirty-Nine Week Periods Ended			Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
		March 24, 2021	March 25, 2020	March 24, 2021	March 25, 2020		March 30, 2022	March 24, 2021	March 30, 2022	March 24, 2021
Basic weighted average shares outstanding	Basic weighted average shares outstanding	45.5	37.2	45.3	37.3	Basic weighted average shares outstanding	44.4	45.5	45.2	45.3
Dilutive stock options	Dilutive stock options	0.5	0.1	0.3	0.1	Dilutive stock options	0.1	0.5	0.2	0.3
Dilutive restricted shares	Dilutive restricted shares	0.7	0.5	0.6	0.6	Dilutive restricted shares	0.6	0.7	0.6	0.6
Total dilutive impact	Total dilutive impact	1.2	0.6	0.9	0.7	Total dilutive impact	0.7	1.2	0.8	0.9
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	46.7	37.8	46.2	38.0	Diluted weighted average shares outstanding	45.1	46.7	46.0	46.2

Awards excluded due to anti-dilutive effect	Awards excluded due to anti-dilutive effect	0.0	1.4	0.7	1.3	Awards excluded due to anti-dilutive effect	1.1	0.0	0.7	0.7

Table of Contents

Footnote Index

7. SEGMENT INFORMATION

Our operating segments are Chili’s and Maggiano’s. The Chili’s segment includes the results of our ~~Company-owned~~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, 2728 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 ~~inclu~~deinclude revenues generated by the operation of Company-owned restaurants including gift card redemptions and revenues from our virtual ~~brand revenues.~~brands. Franchise and other revenues for each operating segment include royalties, d~~elivery service income,~~ gift card breakage, ~~franchise advertising fees, digital entertainment revenues,~~delivery income, Maggiano’s banquet service charge income, digital entertainment revenue, franchise advertising fees, franchise and development fees, gift card equalization and gift card discount costs from third-party gift card ~~sales and merchandise income~~.sales.

We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our 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, property and equipment maintenance, delivery fees, ~~repairs and maintenance,~~ utilities, ~~property taxes,~~ credit card processing fees, property taxes, supervision expenses, and ~~advertising~~.worker’s comp and general liability insurance.

1213

Table of Contents

Footnote Index

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:


		Thirteen Week Period Ended March 24, 2021									Thirteen Week Period Ended March 30, 2022
		Chili’s		Maggiano’s		Other		Consolidated			Chili’s(1)		Maggiano’s		Other		Consolidated
Company sales	Company sales	$	749.0	$	64.7	$	0	$	813.7	Company sales	$	863.3	$	97.3	$	—	$	960.6
Royalties	Royalties	7.7		0		0		7.7		Royalties	7.8		0.1		—		7.9
Franchise fees and other revenues	Franchise fees and other revenues	6.3		0.7		0		7.0		Franchise fees and other revenues	8.5		3.4		—		11.9
Franchise and other revenues	Franchise and other revenues	14.0		0.7		0		14.7		Franchise and other revenues	16.3		3.5		—		19.8
Total revenues	Total revenues	763.0		65.4		0		828.4		Total revenues	879.6		100.8		—		980.4

Food and beverage costs	Food and beverage costs	198.7		15.2		0		213.9		Food and beverage costs	245.6		24.7		—		270.3
Restaurant labor	Restaurant labor	248.7		22.1		0		270.8		Restaurant labor	295.0		34.1		—		329.1
Restaurant expenses	Restaurant expenses	194.2		21.7		0.2		216.1		Restaurant expenses	215.2		28.7		0.2		244.1
Depreciation and amortization	Depreciation and amortization	31.0		3.4		3.0		37.4		Depreciation and amortization	35.9		3.4		2.9		42.2
General and administrative	General and administrative	7.0		1.3		25.4		33.7		General and administrative	9.5		2.3		27.4		39.2
Other (gains) and charges	Other (gains) and charges	3.1		0.3		0.9		4.3		Other (gains) and charges	5.2		0.0		0.9		6.1
Total operating costs and expenses	Total operating costs and expenses	682.7		64.0		29.5		776.2		Total operating costs and expenses	806.4		93.2		31.4		931.0
Operating income (loss)	Operating income (loss)	80.3		1.4		(29.5)		52.2		Operating income (loss)	73.2		7.6		(31.4)		49.4
Interest expenses	Interest expenses	1.4		0		12.7		14.1		Interest expenses	1.2		0.1		9.8		11.1
Other income, net	Other income, net	(0.1)		0		(0.2)		(0.3)		Other income, net	—		—		(0.4)		(0.4)
Income (loss) before income taxes	Income (loss) before income taxes	$	79.0	$	1.4	$	(42.0)	$	38.4	Income (loss) before income taxes	$	72.0	$	7.5	$	(40.8)	$	38.7


		Thirteen Week Period Ended March 25, 2020									Thirteen Week Period Ended March 24, 2021
		Chili’s		Maggiano’s		Other		Consolidated			Chili’s		Maggiano’s		Other		Consolidated
Company sales	Company sales	$	748.7	$	91.7	$	0	$	840.4	Company sales	$	749.0	$	64.7	$	—	$	813.7
Royalties	Royalties	9.0		0		0		9.0		Royalties	7.7		—		—		7.7
Franchise fees and other revenues	Franchise fees and other revenues	6.7		3.9		0		10.6		Franchise fees and other revenues	6.3		0.7		—		7.0
Franchise and other revenues	Franchise and other revenues	15.7		3.9		0		19.6		Franchise and other revenues	14.0		0.7		—		14.7
Total revenues	Total revenues	764.4		95.6		0		860.0		Total revenues	763.0		65.4		—		828.4

Food and beverage costs	Food and beverage costs	204.1		22.6		0		226.7		Food and beverage costs	198.7		15.2		—		213.9
Restaurant labor	Restaurant labor	251.1		34.8		0		285.9		Restaurant labor	248.7		22.1		—		270.8
Restaurant expenses	Restaurant expenses	193.2		26.9		0.1		220.2		Restaurant expenses	194.2		21.7		0.2		216.1
Depreciation and amortization	Depreciation and amortization	36.5		3.8		3.2		43.5		Depreciation and amortization	31.0		3.4		3.0		37.4
General and administrative	General and administrative	5.9		1.1		16.3		23.3		General and administrative	7.0		1.3		25.4		33.7
Other (gains) and charges	Other (gains) and charges	14.9		2.4		2.0		19.3		Other (gains) and charges	3.1		0.3		0.9		4.3
Total operating costs and expenses	Total operating costs and expenses	705.7		91.6		21.6		818.9		Total operating costs and expenses	682.7		64.0		29.5		776.2
Operating income (loss)	Operating income (loss)	58.7		4.0		(21.6)		41.1		Operating income (loss)	80.3		1.4		(29.5)		52.2
Interest expenses	Interest expenses	1.1		0		13.2		14.3		Interest expenses	1.4		—		12.7		14.1
Other income, net	Other income, net	(0.1)		0		(0.3)		(0.4)		Other income, net	(0.1)		—		(0.2)		(0.3)
Income (loss) before income taxes	Income (loss) before income taxes	$	57.7	$	4.0	$	(34.5)	$	27.2	Income (loss) before income taxes	$	79.0	$	1.4	$	(42.0)	$	38.4

1314

Table of Contents

Footnote Index


		Thirty-Nine Week Period Ended March 24, 2021									Thirty-Nine Week Period Ended March 30, 2022
		Chili’s		Maggiano’s		Other		Consolidated			Chili’s(1)		Maggiano’s		Other		Consolidated
Company sales	Company sales	$	2,107.0	$	181.1	$	0	$	2,288.1	Company sales	$	2,428.5	$	296.2	$	—	$	2,724.7
Royalties	Royalties	21.9		0.1		0		22.0		Royalties	25.4		0.3		—		25.7
Franchise fees and other revenues	Franchise fees and other revenues	17.0		2.1		0		19.1		Franchise fees and other revenues	21.5		10.7		—		32.2
Franchise and other revenues	Franchise and other revenues	38.9		2.2		0		41.1		Franchise and other revenues	46.9		11.0		—		57.9
Total revenues	Total revenues	2,145.9		183.3		0		2,329.2		Total revenues	2,475.4		307.2		—		2,782.6

Food and beverage costs	Food and beverage costs	563.2		43.1		0		606.3		Food and beverage costs	683.8		73.6		—		757.4
Restaurant labor	Restaurant labor	710.3		64.3		0		774.6		Restaurant labor	846.1		103.3		—		949.4
Restaurant expenses	Restaurant expenses	564.6		64.6		0.7		629.9		Restaurant expenses	624.8		86.8		0.5		712.1
Depreciation and amortization	Depreciation and amortization	92.4		10.4		9.2		112.0		Depreciation and amortization	104.3		10.2		8.6		123.1
General and administrative	General and administrative	17.8		3.9		72.5		94.2		General and administrative	24.7		6.2		77.9		108.8
Other (gains) and charges	Other (gains) and charges	11.1		1.2		1.2		13.5		Other (gains) and charges	10.2		0.2		6.6		17.0
Total operating costs and expenses	Total operating costs and expenses	1,959.4		187.5		83.6		2,230.5		Total operating costs and expenses	2,293.9		280.3		93.6		2,667.8
Operating income (loss)	Operating income (loss)	186.5		(4.2)		(83.6)		98.7		Operating income (loss)	181.5		26.9		(93.6)		114.8
Interest expenses	Interest expenses	4.2		0.1		38.8		43.1		Interest expenses	4.0		0.3		30.5		34.8
Other income, net	Other income, net	(0.4)		0		(0.8)		(1.2)		Other income, net	(0.3)		—		(0.9)		(1.2)
Income (loss) before income taxes	Income (loss) before income taxes	$	182.7	$	(4.3)	$	(121.6)	$	56.8	Income (loss) before income taxes	$	177.8	$	26.6	$	(123.2)	$	81.2

Segment assets	Segment assets	$	1,905.2	$	219.7	$	184.1	$	2,309.0	Segment assets	$	2,120.7	$	227.6	$	110.5	$	2,458.8
Segment goodwill	Segment goodwill	149.7		38.4		0		188.1		Segment goodwill	156.7		38.4		—		195.1
Payments for property and equipment	Payments for property and equipment	56.3		1.4		4.7		62.4		Payments for property and equipment	96.7		6.8		5.5		109.0

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.


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

Food and beverage costs	563.2		43.1		—		606.3
Restaurant labor	710.3		64.3		—		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)		—		(0.8)		(1.2)
Income (loss) before income taxes	$	182.7	$	(4.3)	$	(121.6)	$	56.8

Payments for property and equipment	$	56.3	$	1.4	$	4.7	$	62.4

1415

Table of Contents

Footnote Index

(1)Chili’s segment information for fiscal 2022 includes the results of operations and the fair values of assets related to the 66 restaurants purchased from three former franchisees subsequent to the acquisition dates. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

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 measurements are categorized in three levels based on the types of significant inputs used, 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 including finance lease assets, operating lease assets, reacquired franchise rights and transferable liquor licenses ~~semi-annually~~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 transferable liquor licenses and definite-lived intangible assets such as reacquired franchise rights and trademarks. Intangibles, net included accumulated amortization associated with definite-lived intangible assets at March ~~24, 2021~~30, 2022 and June ~~24, 2020,~~30, 2021, of ~~$9.2~~$11.8 million and ~~$7.5~~$9.6 million, respectively.

Definite Lived Assets Impairment

Definite lived assets include property and equipment, including finance lease assets, operating lease assets and reacquired franchise rights. During the thirteen and thirty-nine week ~~period~~periods 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~~30, 2022, no indicators 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 presented.~~

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
were identified.

Indefinite Lived Assets Impairment

The fair values of transferable liquor licenses are based on prices in the open market for licenses in the same or similar jurisdictions, and are categorized as Level 2. During the thirteen and thirty-nine week periods ended March ~~24, 2021~~30, 2022 and March ~~25, 2020,~~24, 2021, no indicators of impairment were identified.

~~Table of Contents~~

~~Footnote Index~~

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 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 declines in operating cash flows and market capitalization that were primarily driven by the impact of the COVID-19 pandemic on our business. 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 operating results compared to projections in the 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. Our stock price and market capitalization have also increased to levels greater than before the COVID-19 pandemic began in the United States. We performed our annual goodwill impairment analysis in the second quarter of fiscal ~~2021~~2022 using a qualitative approach based on these factors and no indicators of impairment were identified. During the thirteen and thirty-nine week periods ended March ~~25, 2020,~~30, 2022, management concluded that no ~~indicators~~triggering event occurred.

Table of ~~impairment were identified based on our assessments.~~Contents

Footnote Index

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 a more detailed assessment is necessary.

Chili’s Restaurant Acquisitions

In the first three quarters of fiscal 2022, we completed the acquisition of 66 Chili’s restaurants from three former franchisees. The preliminary fair value of assets acquired and liabilities assumed for these restaurants utilized Level 3 inputs. The fair values of intangible assets acquired were primarily based on significant inputs not observable in an active market, including estimates of replacement costs, future cash flows, and discount rates. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

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~~our 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 carrying amounts and fair values of 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:


		March 24, 2021				June 24, 2020					March 30, 2022				June 30, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
3.875% notes	3.875% notes	$	299.2	$	303.4	$	299.0	$	282.8	3.875% notes	$	299.6	$	301.2	$	299.3	$	309.0
5.000% notes	5.000% notes	347.3		363.1		346.7		330.8		5.000% notes	348.0		352.5		347.5		369.3

~~Table of Contents~~

~~Footnote Index~~

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				Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021		March 30, 2022		March 24, 2021
Operating lease cost	Operating lease cost	$	41.9	$	41.8	$	125.6	$	121.0	Operating lease cost	$	44.1	$	41.9	$	128.7	$	125.6
Variable lease cost	Variable lease cost	14.6		15.6		43.5		43.9		Variable lease cost	13.9		14.6		44.1		43.5
Finance lease amortization	Finance lease amortization	4.2		8.0		12.4		13.7		Finance lease amortization	5.9		4.2		17.6		12.4
Finance lease interest	Finance lease interest	1.4		1.2		4.3		3.2		Finance lease interest	1.3		1.4		4.3		4.3
Short-term lease cost	Short-term lease cost	0.2		0.5		0.4		1.2		Short-term lease cost	0.1		0.2		0.4		0.4
Sublease income	Sublease income	(1.0)		(1.2)		(3.2)		(3.5)		Sublease income	(0.9)		(1.0)		(3.3)		(3.2)
Total lease costs, net	Total lease costs, net	$	61.3	$	65.9	$	183.0	$	179.5	Total lease costs, net	$	64.4	$	61.3	$	191.8	$	183.0

Table of Contents

Footnote Index

Pre-Commencement Leases

As of the end of the third quarter of fiscal 2022, we have 18 pre-commencement leases for new Chili’s locations with undiscounted fixed payments of $25.5 million over the initial term. These leases are expected to commence in the next 12 months and are expected to have an economic lease term of 20 years. These leases will commence when the landlords make the property available to us for new restaurant construction. We will assess the reasonably certain lease term at the lease commencement date.

Significant Changes in Leases during the Period

In the first quarter of fiscal 2022, as part of the Chili’s Mid-Atlantic Region Acquisition, we assumed 11 new real estate operating leases. At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $23.1 million, Operating lease liabilities of $0.6 million, and Long-term operating lease liabilities, less current portion of $22.7 million. The leases were recorded net of prepaid rent at the date of acquisition.

In the second quarter of fiscal 2022, as part of the Chili’s Great Lakes Region Acquisition, we assumed 26 new real estate operating leases. At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $46.6 million, Operating lease liabilities of $1.6 million, and Long-term operating lease liabilities, less current portion of $45.8 million. The leases were recorded net of purchase price accounting adjustments and prepaid rent at the date of acquisition.

In the third quarter of fiscal 2022, as part of the Chili’s Northwest Region Acquisition, we assumed 3 new real estate operating leases. At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $5.5 million, Operating lease liabilities of $0.1 million, and Long-term operating lease liabilities, less current portion of $5.4 million. The leases were recorded net of prepaid rent at the date of acquisition. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

In the third quarter of fiscal 2022, we completed lease modifications related to 25 real estate leases that were previously classified as finance leases. As a result of the modifications, the lease terms are for 20 years and the leases were reassessed as operating leases. At March 30, 2022, the balances associated with these leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $48.3 million, Operating lease liabilities of $1.0 million, and Long-term operating lease liabilities, less current portion of $47.6 million. Also, as a result of these modifications, the finance lease asset and lease liability balances decreased in the Consolidated Balance Sheets (Unaudited) including decreases to Buildings and leasehold improvements of $17.4 million, Other accrued liabilities of $2.8 million and Long-term debt and finance leases, less current installments of $15.0 million.

Restaurant Properties Sale Leaseback Transaction

In the first quarter of fiscal 2022, simultaneous with the Mid-Atlantic Region Acquisition, we completed sale leaseback transactions on 6 of the acquired restaurants. The properties were sold at their acquisition cost resulting in proceeds of $20.5 million with no gain or loss.

The initial terms of all leases we entered into as part of the sale leaseback transactions are for 15 years, plus renewal options at our discretion. All of the leases were determined to be operating leases. Rent expenses associated with these operating leases are recognized on a straight-line basis over the lease terms under ASC 842. At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $17.9 million, Operating lease liabilities of $0.4 million, and Long-term operating lease liabilities, less current portion of $17.6 million.

Table of Contents

Footnote Index

10. DEBT

Long-term debt consists of the following:


		March 24, 2021		June 24, 2020			March 30, 2022		June 30, 2021
Revolving credit facility	Revolving credit facility	$	291.3	$	472.9	Revolving credit facility	$	264.3	$	171.3
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	97.0		102.1		Finance lease obligations	97.1		121.3
Total long-term debt and finance leases	Total long-term debt and finance leases	1,038.3		1,225.0		Total long-term debt and finance leases	1,011.4		942.6
Less: unamortized debt issuance costs and discounts	Less: unamortized debt issuance costs and discounts	(3.5)		(4.3)		Less: unamortized debt issuance costs and discounts	(2.4)		(3.2)
Total long-term debt, less unamortized debt issuance costs and discounts	Total long-term debt, less unamortized debt issuance costs and discounts	1,034.8		1,220.7		Total long-term debt, less unamortized debt issuance costs and discounts	1,009.0		939.4
Less: current installments of long-term debt(1)		(17.8)		(12.2)
Long-term debt and finance leases less current installments		$	1,017.0	$	1,208.5
Less: current installments of long-term debt and finance leases(1)						Less: current installments of long-term debt and finance leases(1)	(21.1)		(21.5)
Long-term debt and finance leases, less current installments						Long-term debt and finance leases, less current installments	$	987.9	$	917.9

(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

On August 18, 2021, we revised our existing $1.0 billion revolving credit facility to an $800.0 million revolving credit facility to extend the maturity date and provide additional flexibility. In the thirty-nine week period ended March ~~24, 2021,~~30, 2022, net ~~repayments~~borrowings of ~~$181.6~~$93.0 million were ~~made~~drawn on the ~~$1.0 billion~~ revolving credit facility. As of March ~~24, 2021, $708.7~~30, 2022, $535.7 million of credit was available under the new revolving credit facility.

~~Amended Revolving Credit Agreement~~

~~In the first quarter of fiscal 2021, we executed the seventh amendment to our~~The $800.0 million revolving credit facility ~~extending the maturity date to December 12, 2022. This amendment included a capacity reduction to $900.0 million from $1.0 billion which will occur~~matures 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~~August 18, 2026 and ~~0.100% reduction on the undrawn fee if the issuance exceeds $250.0 million pursuant to the terms of the agreement.~~

~~Table of Contents~~

~~Footnote Index~~

~~The revolving credit facility~~ bears interest of LIBOR plus an applicable margin of ~~2.250%~~1.500% to ~~3.000%~~2.250% and an undrawn commitment fee of ~~0.350%~~0.250% to ~~0.500%~~0.350%, both based on a function of our debt-to-cash-flow ratio. As of March ~~24, 2021,~~30, 2022, our interest rate was ~~3.750%~~2.250% consisting of ~~the~~ LIBOR ~~floor~~ of ~~0.750%~~0.500% plus the applicable margin of ~~3.000%~~1.750%.

In the thirty-nine week period ended March ~~24, 2021,~~30, 2022, we incurred and capitalized ~~$2.2~~$3.1 million of debt issuance costs associated with the new revolver, ~~amendment,~~ which are included in Other assets in the Consolidated Balance Sheets (Unaudited).

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 March ~~24, 2021,~~30, 2022, we were in compliance with our covenants pursuant to the ~~amended~~$800.0 million revolving credit facility and under the terms of the indentures governing our 3.875% notes and 5.000% notes. We expect to remain in compliance with our covenants during the remainder of fiscal ~~2021.~~2022.

Table of Contents

Footnote Index

11. ACCRUED AND OTHER LIABILITIES

Other accrued liabilities consist of the following:


		March 24, 2021		June 24, 2020			March 30, 2022		June 30, 2021
Insurance	Insurance	$	22.6	$	20.7	Insurance	$	21.7	$	21.7
Current installments of long-term debt and finance leases						Current installments of long-term debt and finance leases	21.1		21.5
Property tax	Property tax	19.7		22.9		Property tax	19.0		22.4
Sales tax	Sales tax	19.5		13.3		Sales tax	18.8		23.2
Current installments of finance leases		17.8		12.2
Interest	Interest	14.3		7.5		Interest	13.6		6.9
Utilities and services	Utilities and services	8.5		8.3		Utilities and services	9.3		8.4
Cyber security incident		3.4		3.4
State income tax payable		0.4		0

Other(1)	Other(1)	10.1		12.3		Other(1)	21.7		13.3
		$	116.3	$	100.6		$	125.2	$	117.4

(1)Other primarily consists of ~~rent-related expenses, banquet~~guest deposits for Maggiano’s ~~events,~~banquets, state income taxes payable, contingent lease liabilities related to our lease guarantees, rent-related accruals, deferred franchise and development fees, charitable donations and other various accruals. Refer to Note 14 - Contingencies for additional information about our lease guarantees.

Other liabilities consist of the following:


		March 24, 2021		June 24, 2020			March 30, 2022		June 30, 2021
Insurance	Insurance	$	34.6	$	33.7	Insurance	$	38.6	$	35.0
Deferred franchise and development fees						Deferred franchise and development fees	9.1		10.4
Unrecognized tax benefits						Unrecognized tax benefits	2.7		3.5
Deferred payroll taxes(1)	Deferred payroll taxes(1)	27.2		12.9		Deferred payroll taxes(1)	—		27.2
Deferred franchise fees		10.8		11.6
Unrecognized tax benefits		2.1		2.1
Other	Other	6.4		6.8		Other	5.3		5.9
		$	81.1	$	67.1		$	55.7	$	82.0

(1)Deferred payroll taxes ~~consist of the second installment of the deferral~~consisted of the employer portion of certain payroll related taxes that were deferred as allowed under the CARES ~~Act which is due on December 31, 2022.~~Act. The first installment, ~~of $27.2 million, which is~~ due on December 31, 2021, was paid during the second quarter of fiscal 2022. The second installment, due on December 31, 2022, is ~~recorded~~classified within Accrued payroll in the Consolidated Balance Sheets (Unaudited).

1820

Table of Contents

Footnote Index

12. SHAREHOLDERS’ DEFICIT

The changes in Total shareholders’ deficit during the thirty-nine week periods ended March ~~24, 2021~~30, 2022 and March ~~25, 2020,~~24, 2021, respectively, were as follows:


		Thirty-Nine Week Period Ended March 24, 2021													Thirty-Nine Week Period Ended March 30, 2022
		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		$	7.0	$	669.4	$	(397.5)	$	(751.8)	$	(6.2)	$	(479.1)
Balances at June 30, 2021														Balances at June 30, 2021	$	7.0	$	685.4	$	(266.1)	$	(724.9)	$	(4.7)	$	(303.3)
Net income														Net income	—		—		13.2		—		—		13.2
Other comprehensive loss														Other comprehensive loss	—		—		—		—		(0.4)		(0.4)
Dividends														Dividends	—		—		0.0		—		—		0.0
Stock-based compensation														Stock-based compensation	—		4.3		—		—		—		4.3
Purchases of treasury stock														Purchases of treasury stock	—		(2.0)		—		(37.6)		—		(39.6)
Issuances of treasury stock														Issuances of treasury stock	—		(8.3)		—		8.6		—		0.3
Balances at September 29, 2021														Balances at September 29, 2021	$	7.0	$	679.4	$	(252.9)	$	(753.9)	$	(5.1)	$	(325.5)
Net income														Net income	—		—		27.6		—		—		27.6
Other comprehensive loss														Other comprehensive loss	—		—		—		—		(0.1)		(0.1)
Dividends														Dividends	—		—		0.0		—		—		0.0
Stock-based compensation														Stock-based compensation	—		5.6		—		—		—		5.6
Purchases of treasury stock														Purchases of treasury stock	—		0.0		—		(35.1)		—		(35.1)
Issuances of treasury stock														Issuances of treasury stock	—		(1.3)		—		1.4		—		0.1

Balances at December 29, 2021														Balances at December 29, 2021	$	7.0	$	683.7	$	(225.3)	$	(787.6)	$	(5.2)	$	(327.4)
Net income	Net income	0		0		10.7		0		0		10.7		Net income	—		—		36.6		—		—		36.6
Other comprehensive income	Other comprehensive income	0		0		0		0		0.3		0.3		Other comprehensive income	—		—		—		—		0.4		0.4
Dividends	Dividends	0		0		0.0		0		0		0.0		Dividends	—		—		—		—		—		—
Stock-based compensation	Stock-based compensation	0		3.9		0		0		0		3.9		Stock-based compensation	—		5.3		—		—		—		5.3
Purchases of treasury stock	Purchases of treasury stock	0		(1.1)		0		(2.8)		0		(3.9)		Purchases of treasury stock	—		—		—		(26.1)		—		(26.1)
Issuances of common stock		0		(9.0)		0		12.0		0		3.0
Balance at September 23, 2020		$	7.0	$	663.2	$	(386.8)	$	(742.6)	$	(5.9)	$	(465.1)
Net income		0		0		12.0		0		0		12.0
Other comprehensive income		0		0		0		0		0.5		0.5
Dividends		0		0		0.0		0		0		0.0
Stock-based compensation		0		3.0		0		0		0		3.0
Purchases of treasury stock		0		0.0		0		0.0		0		0.0
Issuances of common stock		0		1.2		0		4.3		0		5.5

Balance at December 23, 2020		$	7.0	$	667.4	$	(374.8)	$	(738.3)	$	(5.4)	$	(444.1)
Net income		0		0		33.9		0		0		33.9
Other comprehensive income		0		0		0		0		0.3		0.3
Dividends		0		0		0.0		0		0		0.0
Stock-based compensation		0		4.4		0		0		0		4.4
Purchases of treasury stock		0		(0.1)		0		(0.1)		0		(0.2)
Issuances of common stock		0		5.7		0		9.4		0		15.1
Balance at March 24, 2021		$	7.0	$	677.4	$	(340.9)	$	(729.0)	$	(5.1)	$	(390.6)
Issuances of treasury stock														Issuances of treasury stock	—		(1.2)		—		1.2		—		—
Balances at March 30, 2022														Balances at March 30, 2022	$	7.0	$	687.8	$	(188.7)	$	(812.5)	$	(4.8)	$	(311.2)

1921

Table of Contents

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)


	Thirty-Nine Week Period Ended March 24, 2021
	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at June 24, 2020	$	7.0	$	669.4	$	(397.5)	$	(751.8)	$	(6.2)	$	(479.1)

Net income	—		—		10.7		—		—		10.7
Other comprehensive income	—		—		—		—		0.3		0.3
Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	—		3.9		—		—		—		3.9
Purchases of treasury stock	—		(1.1)		—		(2.8)		—		(3.9)
Issuances of treasury stock	—		(9.0)		—		12.0		—		3.0
Balances at September 23, 2020	$	7.0	$	663.2	$	(386.8)	$	(742.6)	$	(5.9)	$	(465.1)
Net income	—		—		12.0		—		—		12.0
Other comprehensive income	—		—		—		—		0.5		0.5
Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	—		3.0		—		—		—		3.0
Purchases of treasury stock	—		0.0		—		0.0		—		0.0
Issuances of treasury stock	—		1.2		—		4.3		—		5.5

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

Share Repurchases

Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate 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 fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic. In August 2021, our Board of Directors reinstated the share repurchase program, allowing for a total available repurchase authority of $300.0 million. In the thirty-nine week period ended March 30, 2022, we repurchased 2.4 million shares of our common stock for $100.8 million, including 2.3 million shares purchased as part of our share repurchase program and 0.1 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares. As of March 30, 2022, approximately $204.0 million was available under our share repurchase authorizations.

Table of Contents

Footnote Index

Stock-based Compensation

The following table presents the restricted share awards granted and related weighted average fair value per share amounts.


	Thirty-Nine Week Periods Ended
	March 30, 2022		March 24, 2021
Restricted share awards
Restricted share awards granted	0.4		0.5
Weighted average fair value per share	$	52.89	$	40.49

Dividends

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend in response to liquidity needs created by the COVID-19 pandemic. ~~Before this suspension, we paid dividends of $0.38 per share quarterly.~~ In the thirty-nine week ~~period~~periods ended March 30, 2022 and March 24, 2021, dividends paid were solely related to the ~~previously~~ accrued dividends for restricted share awards that were granted prior to the suspension and 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.I~~n the thirty-nine week period ended March 25, 2020, we paid dividends of $43.3 million to common stock shareholders.~~

~~Table of Contents~~

~~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.~~

Thirty-Nine Week Periods Ended
March 24,
2021 March 25,
2020
Stock options
Stock options granted 0 0.3
Weighted average exercise price per share $ 0 $ 38.51
Weighted average fair value per share $ 0 $ 6.83
Restricted share awards
Restricted share awards granted 0.5 0.3
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 thirty-nine week period ended 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, i~~n the thirty-nine week period ended March 25, 2020, we repurchased 0.8 million shares of our common stock for $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 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.~~

~~Table of Contents~~

~~Footnote Index~~

13. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes and interest is as follows:


		Thirty-Nine Week Periods Ended					Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Income taxes, net of (refunds)	Income taxes, net of (refunds)	$	2.8	$	(4.7)	Income taxes, net of (refunds)	$	(11.6)	$	2.8
Interest, net of amounts capitalized	Interest, net of amounts capitalized	30.8		32.6		Interest, net of amounts capitalized	23.5		30.8

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


		Thirty-Nine Week Periods Ended					Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Operating lease additions(1)	Operating lease additions(1)	$	51.4	$	216.4	Operating lease additions(1)	$	214.7	$	51.4
Finance lease additions						Finance lease additions	12.6		6.1
Accrued capital expenditures	Accrued capital expenditures	4.3		14.7		Accrued capital expenditures	7.6		4.3
Retirement of fully depreciated assets		13.1		14.0
Dividends declared but not paid		0.0		14.8
Retirement of fully depreciated assets(2)						Retirement of fully depreciated assets(2)	120.9		13.1

(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~~30, 2022 primarily included operating lease additions associated with the ~~116~~66 restaurants purchased from athree former ~~franchisee on September 5, 2019 acquisition date.~~franchisees and the modifications of 25 leases. Refer to Note 152 - ~~Fiscal 2020~~ Chili’s Restaurant ~~Acquisition~~Acquisitions and to Note 9 - Leases for further details.

(2)The thirty-nine week period ended March 30, 2022 included the retirement of fully depreciated assets no longer in use based on a periodic review performed during fiscal 2022.

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 March ~~24, 2021~~30, 2022 and June ~~24, 2020,~~30, 2021, we have outstanding lease guarantees or are secondarily liable for an estimated ~~$33.8~~$28.7 million and ~~$39.7~~$29.2 million, respectively. These amounts represent the ~~known~~maximum 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~~2022 through fiscal ~~2027.~~2032.

Table of Contents

Footnote Index

We have received notices of default and have been named a party in lawsuits pertaining to some of these leases in circumstances where the current lessee did not pay its rent obligations. 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. As of March 30, 2022, we have contingent liabilities of $3.2 million for our estimated exposure of the lease defaults related to these lease guarantees. These contingent liabilities are classified within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited).

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of March ~~24, 2021,~~30, 2022, we had ~~$29.5~~$5.8 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next ~~1 to 13~~7 months.

Cyber Security ~~Incident~~Litigation

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 contains a $2.0 million insurance retention that was fully accrued during fiscal 2018. Since the incident, through March 24, 2021, we have incurred total cumulative costs of $8.9 million related to the cyber security incident. This includes the $2.0 million retention recorded, $2.6 million in costs that have been reimbursed by our insurance carriers, $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

~~Table of Contents~~

~~Footnote Index~~

~~carriers.~~ We ~~have~~ settled all claims from ~~three~~ payment card companies related to this incident and ~~the settlement amounts are included in these costs. We~~ do not expect material claims ~~from payment card companies~~ in the future.

~~Cyber Security Litigation~~

The Company was also 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.~~this incident. 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 April 14, 2021,~~Briefing of our appeal to the 11th Circuit Court of Appeals seeking to overturn the district ~~court issued an order granting~~court’s class certification orders is complete. Oral argument of the appeal is scheduled for June 8, 2022 in ~~part and deferring in part the plaintiffs’ motion for class certification.~~

Jacksonville, Florida. We believe we have defenses and intend to continue defending the Litigation. As such, as of March ~~24, 2021,~~30, 2022, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded 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 0no 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 were recorded at their fair values.

Net acquisition-related charges of $1.1 million and $2.6 million were recorded during the thirteen and thirty-nine week periods ended March 25, 2020, respectively, to Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited). In the thirteen week period ended March 25, 2020, the net charges consisted of $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 $4.1 million for professional services, transaction and transition related costs and $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.

~~Table of Contents~~

~~Footnote Index~~

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.~~

~~(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 with the franchisee.

~~16. SUBSEQUENT EVENTS~~

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

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

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 March ~~24, 2021~~30, 2022 and March ~~25, 2020,~~24, 2021, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

Table of Contents

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.~~brands, as well as virtual brands including It’s Just Wings® and Maggiano’s Italian Classics™. At March ~~24, 2021,~~30, 2022, we owned, operated or franchised ~~1,657~~1,650 restaurants, consisting of ~~1,120~~1,187 Company-owned restaurants and ~~537~~463 franchised restaurants, located in the United States, 2728 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 offerings through our partnerships with DoorDash and Google Food Ordering.~~

~~Table of Contents~~

Impact of COVID-19 Pandemic

~~The COVID-19~~In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic ~~caused~~and a National Public Health Emergency. The spread of COVID-19 has prompted changes in consumer behavior and social distancing preferences as well as dining room closures and dining room capacity restrictions mandated or encouraged by federal, state and local governments. The number of open dining rooms and the dining room capacity restrictions have fluctuated over the course of the pandemic based on state and local mandates, and has resulted in significant ~~decrease in~~adverse impacts to our guest traffic and sales ~~since March 2020.~~ primarily in fiscal 2021.

In fiscal 2020, we temporarily closed all Company-owned restaurant dining and banquet rooms and transitioned to an off-premise business model by leveraging our carryout and delivery capabilities. We began opening dining rooms again in May 2020 and have maintained dining room capacities in accordance with state and local government mandates since then. At the end of the third quarter of fiscal 2021, substantially all of our Company-owned restaurant dining and banquet rooms or patios were open in some capacity.

~~To enhance the safety of our team members and guests,~~2022, we have ~~implemented mandatory table distancing~~experienced limited product shortages and service disruptions in our ~~dining rooms,~~supply chain, limited availability of labor to operate our restaurants due to a tight labor market, and ~~we increased our already strict sanitation requirements. We conduct daily health~~an increase in employee turnover. It is possible that supply chain and ~~temperature checks~~labor shortages or disruptions could continue or increase in future periods if demand for ~~all employees before they begin their shift~~goods, transportation and 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 is to protect the health and safety of team members and guests while continuing to serve our communities.labor remains high.

The ~~ultimate~~future impact of the COVID-19 pandemic ~~in both the short and long term is not currently estimable~~cannot be reasonably estimated due to the uncertainty ~~surrounding~~about the extent and duration of the ~~pandemic,~~spread of the virus, the availability, acceptance and ~~acceptance~~efficacy of preventative vaccines, the emergence and 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 pandemic, including measures to significantly reduce costs, capital expenditures, and 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 will improve guest traffic, grow sales and ~~profit,~~profits, and engage team ~~members and work to return our business to pre-pandemic levels.~~members. 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 managing our restaurants to establish a lasting presence for our brands in key markets around the world.

Our primary strategy ~~remains~~is 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 remain consistent with pre-pandemic levels as we continue to provide great food and service. 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 ~~continue to invest~~have invested in our technology and off-premise options as more guests are opting for ~~to-go~~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~~partnerships with delivery ~~partner DoorDash, or by calling the restaurant. Since fiscal 2018,~~service providers have been instrumental in growing our off-premise business ~~has grown by 275%. Our partnership with DoorDash has been instrumental in connecting with~~and offering our guests ~~and providing convenience, especially~~continued service during the COVID-19 pandemic. ~~DoorDash~~We leveraged technology so that delivery service provider orders are sent directly into our point of sale system, ~~which has facilitated~~creating efficiencies and a ~~streamlined integration~~system that allows us to better serve our ~~kitchens.~~guests. We believe that guests will continue to prefer convenience and off-premise ~~options after the pandemic concerns dissipate.~~options. We plan to continue ~~investing~~investments in our technology systems to support our ~~carryout~~To-Go 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 at Chili’s to enhance this experience.~~ These devices ~~allow~~provide functionality for guests to pay at the table, ~~reordering,~~to order or re-order, to engage in digital entertainment, to provide guest feedback and ~~interaction~~to interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty ~~database includes more than 8 million~~program offers free chips and salsa or a non-alcoholic beverage to members ~~and allows us to~~based on their visit frequency. We customize offerings for these guests based on their purchase ~~behavior. We plan~~behavior, and we continue to ~~continue focusing~~shift more of our overall marketing spend onto these customized

~~Table of Contents~~

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 strategy is to differentiate from our competitors with a flexible platform of value offerings at both lunch and dinner and to connect with our guests through our My Chili’s Rewards loyalty program. We are committed to offering consistent, quality products at a price point that is compelling to our guests. Our ~~“3 for $10” platform allows~~value

Table of Contents

platforms allow guests to ~~combine~~mix and match select menu items at a ~~starter, a non-alcoholic drink and an entrée for just $10.00~~discounted price 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.~~price. 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,~~brands, are also a critical part of our strategy. In the ~~third quarter~~thirty-nine week period ended March 30, 2022, Chili’s off-premise sales, including both To-go and delivery, were approximately 35% of ~~fiscal~~Company sales, with approximately 52% coming from To-Go and 48% from delivery. In the thirty-nine week period ended March 24, 2021, Chili’s off-premise sales, including both ~~to-go~~To-go and delivery, were approximately 45% of Company sales, with approximately 59% coming from ~~to-go~~To-Go and 41% from delivery. We regularly evaluate our processes and menu at Chili’s to identify opportunities where we can improve our service quality and food. We ~~continue to~~continually focus on ~~our core equities and improving~~ guest satisfaction ~~with our food and service~~ by improving our operational execution ~~of our operations~~and standards.

Maggiano’s - At Maggiano’s, we believe our focus on operating fundamentals and technology provide the foundation for future efficiencies and growth. For example, Maggiano’s ~~exclusive~~partnerships with delivery ~~partnership with DoorDash creates a more affordable rate structure, making~~service providers make third party delivery more sustainable and efficient for the brand to operate. In addition, ~~to the DoorDash platform,~~ our guests have the ability to order delivery directly through the Maggiano’s 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 its banquet business caused by restrictions on large social gatherings.~~revenues. Maggiano’s historically hosts a significant portion of its banquets in the holiday season ~~which occurred~~ during ~~our~~the second and third quarters of the fiscal ~~2021.~~year.

Virtual ~~Opportunities~~Brands - ~~It’s Just Wings is a~~We are investing in virtual ~~brand offering launched on June 23, 2020~~brands, restaurant-like menu offerings that isare only available ~~through DoorDash~~for purchase digitally, to drive restaurant traffic and ~~Google Food Ordering. This platform allows~~sales growth at both Chili’s and Maggiano’s. We expect that our virtual brands will enable us to capitalize on the growth in off-premise dining and to leverage excess kitchen capacity in our existing restaurant infrastructure, while adding minimal complexity in ~~the restaurants.~~ our restaurants’ kitchens.

It’s Just Wings, launched on June 23, 2020, is ~~a no-frills~~an offering ~~that consists~~consisting of chicken wings available in 11a variety of different sauces and rubs, curly fries, ranch dressing and ~~fried Oreos~~hand pies for a value price. Maggiano’s Italian Classics offers a select group of items from the full menu of Maggiano’s Little Italy including several appetizers, salads, pastas, entrées, mac & cheese and hand pies.

These brands are available for purchase through our third party service providers including DoorDash, UberEats, Google Food Ordering and the brand-specific websites itsjustwings.com and maggianosclassics.com. The operating results for the virtual brands are included in the results of our Chili’s and Maggiano’s brands, based on the restaurants that prepared and processed the food orders. We ~~will~~plan to continue to ~~identify opportunities~~test and strategically launch additional virtual brands in the future to further drive ~~restaurant growth by utilizing~~ our ~~existing restaurant infrastructure, DoorDash partnership and Google Food Ordering.~~growth.

Franchise Partnerships - Our franchisees continue to grow our brands around the world, opening ten restaurants and entering into two new development agreement for the thirty-nine week period ended March ~~24, 2021.~~30, 2022. 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 our virtual brand offerings.

Table of Contents

Company Development - The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended March ~~24, 2021~~30, 2022 and March ~~25, 2020,~~24, 2021, respectively, total full year projected openings in fiscal ~~2021,~~2022 and the total restaurants open at each period end:


	Openings During the			Openings During the		Full Year Projected Openings
	Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended				Total Open Restaurants at
	March 30, 2022	March 24, 2021		March 30, 2022	March 24, 2021	Fiscal 2022	March 30, 2022	March 24, 2021
Company-owned restaurants
Chili’s domestic	1	2		3	6	5	1,130	1,063
Chili’s international	—	—		—	—	—	5	5
Maggiano’s domestic	—	—		—	—	—	52	52
Total Company-owned	1	2		3	6	5	1,187	1,120
Franchise restaurants
Chili’s domestic	—	2		1	3	1	103	172
Chili’s international	1	2		9	6	13-15	358	363
Maggiano’s domestic	—	—		—	1	—	2	2
Total franchise	1	4		10	10	14-16	463	537
Total restaurants
Chili’s domestic	1	4		4	9	6	1,233	1,235
Chili’s international	1	2		9	6	13-15	363	368
Maggiano’s domestic	—	—		—	1	—	54	54
Total	2	6		13	16	19-21	1,650	1,657

~~Table of 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. In~~During the thirty-nine week period ended March ~~24, 2021,~~30, 2022, we ~~relocated two~~acquired 66 Chili’s ~~domestic~~restaurants previously owned by three former franchisees. The acquisition of these restaurants is not reflected in Openings during the thirty-nine week period ended March 30, 2022 or Full Year Projected Openings total as they are existing restaurant locations transitioning ownership. These acquired restaurants are included in Total Open Restaurants at March 30, 2022 within the total for Company-owned restaurants ~~with no additional relocations planned for the remainder of fiscal 2021.~~Chili’s domestic.

At March ~~24, 2021,~~30, 2022, we own property for 4252 of the ~~1,120~~1,187 Company-owned restaurants. The net book values associated with these restaurants included land of ~~$33.1~~$43.4 million and buildings of ~~$11.6~~$15.7 million.

Revenues

Thirteen and Thirty-Nine Week Periods Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021

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 ~~inclu~~deinclude revenues generated by the operation of Company-owned restaurants including gift card redemptions and revenues from our virtual ~~brand revenues.~~brands.

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

Table of Contents

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 March 25, 2020		$	764.4	$	95.6	$	860.0
Thirteen Week Period Ended March 24, 2021								Thirteen Week Period Ended March 24, 2021	$	763.0	$	65.4	$	828.4
Change from:	Change from:							Change from:
Comparable restaurant sales~~(1)~~	Comparable restaurant sales~~(1)~~	0.0		(27.0)		(27.0)		Comparable restaurant sales~~(1)~~	73.0		32.6		105.6
Restaurant acquisitions(1)								Restaurant acquisitions(1)	38.1		—		38.1
Restaurant openings								Restaurant openings	2.8		—		2.8
Restaurant closures(2)	Restaurant closures(2)	(4.6)		—		(4.6)		Restaurant closures(2)	0.4		—		0.4
Restaurant openings		4.4		—		4.4
Restaurant relocations		0.5		—		0.5

Company sales	Company sales	0.3		(27.0)		(26.7)		Company sales	114.3		32.6		146.9
Royalties(4)		(1.3)		—		(1.3)
Royalties(3)								Royalties(3)	0.1		0.1		0.2
Franchise fees and other revenues	Franchise fees and other revenues	(0.4)		(3.2)		(3.6)		Franchise fees and other revenues	2.2		2.7		4.9
Franchise and other revenues	Franchise and other revenues	(1.7)		(3.2)		(4.9)		Franchise and other revenues	2.3		2.8		5.1
Thirteen Week Period Ended March 24, 2021		$	763.0	$	65.4	$	828.4
Thirteen Week Period Ended March 30, 2022								Thirteen Week Period Ended March 30, 2022	$	879.6	$	100.8	$	980.4


		Total Revenues							Total Revenues
		Chili’s		Maggiano’s		Total Revenues			Chili’s		Maggiano’s		Total Revenues
Thirty-Nine Week Period Ended March 25, 2020		$	2,203.1	$	312.2	$	2,515.3
Thirty-Nine Week Period Ended March 24, 2021								Thirty-Nine Week Period Ended March 24, 2021	$	2,145.9	$	183.3	$	2,329.2
Change from:	Change from:							Change from:
Comparable restaurant sales~~(1)~~	Comparable restaurant sales~~(1)~~	(91.9)		(116.1)		(208)		Comparable restaurant sales~~(1)~~	239.2		115.1		354.3
Restaurant acquisitions(1)								Restaurant acquisitions(1)	69.2		—		69.2
Restaurant openings								Restaurant openings	11.4		—		11.4
Restaurant closures(2)	Restaurant closures(2)	(21.1)		—		(21.1)		Restaurant closures(2)	1.2		—		1.2
Restaurant acquisitions(3)		49.7		—		49.7
Restaurant openings		13.9		—		13.9
Restaurant relocations	Restaurant relocations	1.8		—		1.8		Restaurant relocations	0.5		—		0.5

Company sales	Company sales	(47.6)		(116.1)		(163.7)		Company sales	321.5		115.1		436.6
Royalties~~(4)~~(3)	Royalties~~(4)~~(3)	(8.8)		—		(8.8)		Royalties~~(4)~~(3)	3.5		0.2		3.7
Franchise fees and other revenues	Franchise fees and other revenues	(0.8)		(12.8)		(13.6)		Franchise fees and other revenues	4.5		8.6		13.1
Franchise and other revenues	Franchise and other revenues	(9.6)		(12.8)		(22.4)		Franchise and other revenues	8.0		8.8		16.8
Thirty-Nine Week Period Ended March 24, 2021		$	2,145.9	$	183.3	$	2,329.2
Thirty-Nine Week Period Ended March 30, 2022								Thirty-Nine Week Period Ended March 30, 2022	$	2,475.4	$	307.2	$	2,782.6

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

~~(2)Restaurant closures include the impact of permanently closed locations and temporary closures longer than 14 consecutive days.~~

~~(3)~~We acquired ~~116~~23 Chili’s restaurants on September 2, 2021, 37 Chili’s restaurants on October 31, 2021 and six Chili’s restaurants on February 1, 2022 from ~~a franchisee effective September 5, 2019. This amount represents~~three franchisees. The revenues generated by these restaurants since the ~~change~~date of the acquisitions are included in Company sales attributed to these restaurants over the 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~~for the thirteen and thirty-nine week periods ended March ~~24,~~30, 2022.

(2)Restaurant closures primarily represents the increase in Company sales in fiscal 2022 related to restaurants temporarily closed in fiscal 2021 ~~are primarily due to lower sales by our franchisees~~ due to the ~~COVID-19~~ pandemic.

(3)Our franchisees generated sales of approximately ~~$190.8~~$192.3 million and ~~$543.7~~$609.7 million for the thirteen and thirty-nine week periods ended March ~~24, 2021, respectively,~~30, 2022 compared to ~~$218.0~~$190.8 million and ~~$742.6~~$543.7 million in sales for the thirteen and thirty-nine week periods ended March ~~25, 2020, respectively.~~24, 2021.

Table of Contents

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and thirty-nine week periods ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020:~~24, 2021:


		Percentage Change in the Thirteen Week Period Ended March 24, 2021 versus March 25, 2020											Percentage Change in the Thirteen Week Period Ended March 30, 2022 versus March 24, 2021
		Comparable Restaurant Sales(1)(2)		Price Impact		Mix-Shift Impact(3)		Traffic Impact		Restaurant Capacity(4)			Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)
Company-owned	Company-owned	(3.3)	%	0.6	%	(6.2)	%	2.3	%	0.0	%	Company-owned	13.5	%	4.3	%	5.7	%	3.5	%	6.2	%
Chili’s	Chili’s	0.0	%	0.5	%	(4.5)	%	4.0	%	0.0	%	Chili’s	10.3	%	4.3	%	3.9	%	2.1	%	6.5	%
Maggiano’s	Maggiano’s	(29.6)	%	1.2	%	(9.2)	%	(21.6)	%	0.0	%	Maggiano’s	50.5	%	4.8	%	16.8	%	28.9	%	0.0	%
Chili’s Franchise(5)		0.2	%
Franchise(4)												Franchise(4)	20.3	%
U.S.	U.S.	5.2	%									U.S.	9.0	%
International	International	(8.8)	%									International	28.4	%
Chili’s Domestic(6)		0.6	%
System-wide(7)		(2.8)	%
Chili’s domestic(5)												Chili’s domestic(5)	9.9	%
Maggiano’s domestic(5)												Maggiano’s domestic(5)	50.7	%
System-wide(6)												System-wide(6)	14.5	%


		Percentage Change in the Thirty-Nine Week Period Ended March 24, 2021 versus March 25, 2020											Percentage Change in the Thirty-Nine Week Period Ended March 30, 2022 versus March 24, 2021
		Comparable Restaurant Sales(1)(2)		Price Impact		Mix-Shift Impact(3)		Traffic Impact		Restaurant Capacity(4)			Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)
Company-owned	Company-owned	(8.7)	%	0.4	%	(6.7)	%	(2.4)	%	2.5	%	Company-owned	16.0	%	2.4	%	6.0	%	7.6	%	6.1	%
Chili’s	Chili’s	(4.4)	%	0.3	%	(4.5)	%	(0.2)	%	2.6	%	Chili’s	11.9	%	2.5	%	3.6	%	5.8	%	6.4	%
Maggiano’s	Maggiano’s	(39.2)	%	1.4	%	(10.5)	%	(30.1)	%	0.0	%	Maggiano’s	63.7	%	1.8	%	21.5	%	40.4	%	0.0	%
Chili’s Franchise(5)		(6.9)	%
Franchise(4)												Franchise(4)	20.3	%
U.S.	U.S.	(1.7)	%									U.S.	11.2	%
International	International	(15.9)	%									International	29.5	%
Chili’s Domestic(6)		(4.0)	%
System-wide(7)		(8.5)	%
Chili’s domestic(5)												Chili’s domestic(5)	11.7	%
Maggiano’s domestic(5)												Maggiano’s domestic(5)	63.7	%
System-wide(6)												System-wide(6)	16.6	%

(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.~~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.~~

~~(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)~~(3)Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods ~~year-over-year. The COVID-19 related restaurant closures are temporary~~year-over-year, including the effect of the acquisition of 23 Chili’s restaurants in the first quarter of fiscal 2022, 37 Chili’s restaurants in the second quarter of fiscal 2022 and ~~therefore no adjustment has been made to capacity.~~six Chili’s restaurants in the third quarter of fiscal 2022.

~~(5)~~(4)Chili’s and Maggiano’s franchise sales generated by franchisees are not included in Total 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 presenting ~~Chili’s franchise comparable restaurant sales~~Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.

~~(6)~~(5)Chili’s and Maggiano’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s and Maggiano’s restaurants in the United States. Beginning in the third quarter of fiscal 2022, the Maggiano’s franchise restaurant has been in operation for more than 18 months and is therefore included in the calculation of Comparable Restaurant Sales.

~~(7)~~

Table of Contents

(6)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~~Company-owned and franchise-operated ~~Chili’s~~ restaurants.

~~Table of Contents~~

Costs and Expenses

Thirteen Week Period Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021

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


		Thirteen Week Periods Ended								Favorable (Unfavorable) Variance					Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	213.9	26.3	%	$	226.7	27.0	%	$	12.8	0.7	%	Food and beverage costs	$	270.3	28.1	%	$	213.9	26.3	%	$	(56.4)	(1.8)	%
Restaurant labor	Restaurant labor	270.8		33.3	%	285.9		34.0	%	15.1		0.7	%	Restaurant labor	329.1		34.3	%	270.8		33.3	%	(58.3)		(1.0)	%
Restaurant expenses	Restaurant expenses	216.1		26.5	%	220.2		26.2	%	4.1		(0.3)	%	Restaurant expenses	244.1		25.4	%	216.1		26.5	%	(28.0)		1.1	%
Depreciation and amortization	Depreciation and amortization	37.4				43.5				6.1				Depreciation and amortization	42.2				37.4				(4.8)
General and administrative	General and administrative	33.7				23.3				(10.4)				General and administrative	39.2				33.7				(5.5)
Other (gains) and charges	Other (gains) and charges	4.3				19.3				15.0				Other (gains) and charges	6.1				4.3				(1.8)
Interest expenses	Interest expenses	14.1				14.3				0.2				Interest expenses	11.1				14.1				3.0
Other income, net	Other income, net	(0.3)				(0.4)				(0.1)				Other income, net	(0.4)				(0.3)				0.1

As a percentage of Company sales:

•Food and beverage costs ~~decreased 0.7%~~increased 1.8%, including ~~0.6%~~2.9% of ~~favorable menu item mix, 0.3% of favorable~~higher meat, poultry and other commodity ~~pricing primarily related~~costs due to ~~beef~~supply chain constraints and ~~produce and 0.1%~~inflationary pressures, partially offset by 1.1% of increased menu ~~pricing, partially offset by 0.3% of unfavorable commodity pricing primarily related to dairy, poultry and other.~~pricing.

•Restaurant labor ~~decreased 0.7%~~increased 1.0%, including ~~1.3%~~2.0% of ~~favorable~~higher hourly labor expenses due to ~~reduced staffing requirements~~increased wage rates, training and ~~labor shortages~~overtime, 0.8% of higher manager expenses for merit increases and ~~0.3%~~manager training due to greater than normal manager turnover, partially offset by 1.3% of sales leverage and 0.5% of lower other labor ~~expenses, partially offset by 0.6% of higher manager bonus expenses due to improved operational performance metrics and 0.3% of sales deleverage.~~expenses.

•Restaurant expenses ~~increased 0.3%~~decreased 1.1%, including ~~3.3%~~2.2% of ~~higher expenses related to delivery fees and supplies driven by the growth in off-premise~~ sales leverage and 0.5% of lower delivery fee expenses due to changes in sales ~~deleverage,~~channel mix, partially offset by ~~2.2% of lower advertising expenses,~~ 0.4% of ~~lower~~higher utilities, 0.3% of higher supervision costs, 0.3% of higher repairs and maintenance expenses, ~~0.3% of lower miscellaneous restaurant supplies expenses,~~ 0.2% of ~~lower credit card fees~~higher workers’ compensation and general liability expenses and 0.4% of ~~lower~~higher other restaurant expenses.

Depreciation and amortization ~~decreased $6.1~~increased $4.8 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended March ~~25, 2020~~24, 2021	$	~~43.5~~37.4
Change from:
~~Retirements and fully depreciated restaurant assets~~	~~(5.3)~~
~~Finance leases~~	~~(3.8)~~
Additions for new and existing restaurant assets	~~1.9~~5.7
Acquisition of ~~franchise~~Chili’s restaurants(1)	2.0
Finance leases	~~0.5~~1.5
Corporate assets	~~0.4~~0.6
~~Other~~Retirements and fully depreciated restaurant assets	~~0.2~~ (5.0)

Thirteen Week Period Ended March ~~24, 2021~~30, 2022	$	~~37.4~~42.2

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 66 Chili’s restaurants acquired in the first three quarters of fiscal 2022.

Table of Contents

General and administrative expenses increased ~~$10.4~~$5.5 million as follows:


	General and Administrative
Thirteen Week Period Ended March ~~25, 2020~~24, 2021	$	~~23.3~~33.7
Change from:
~~Performance-based compensation~~Recruiting~~(1)~~	~~6.9~~
~~Stock-based compensation(2)~~	~~5.0~~1.1
Defined contribution plan employer expenses	~~(1.0)~~1.0
Payroll-related expenses	~~(1.0)~~1.0
Professional fees	0.6
Stock-based compensation	0.5
Travel and entertainment expenses	~~(0.4)~~0.5
~~Professional fees~~Performance-based compensation	~~(0.2)~~0.3
Other	~~1.1~~0.5
Thirteen Week Period Ended March ~~24, 2021~~30, 2022	$	~~33.7~~39.2

~~(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.

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


		Thirteen Week Periods Ended					Thirteen Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Loss from natural disasters, net of (insurance recoveries)		$	1.8	$	(0.9)
Restaurant closure charges						Restaurant closure charges	$	1.2	$	0.3
Remodel-related costs	Remodel-related costs	0.9		0.6		Remodel-related costs	0.9		0.9
COVID-19 related charges	COVID-19 related charges	0.9		16.1		COVID-19 related charges	0.7		0.9
Restaurant closure charges		0.3		0.3
Foreign currency transaction (gain) loss		0.1		2.3
Enterprise system implementation costs						Enterprise system implementation costs	0.5		—
Acquisition-related costs, net						Acquisition-related costs, net	0.6		—

Acquisition of franchise restaurants costs, net		—		1.1

Loss from natural disasters, net of (insurance recoveries)						Loss from natural disasters, net of (insurance recoveries)	—		1.8
Other	Other	0.3		(0.2)		Other	2.2		0.4
		$	4.3	$	19.3		$	6.1	$	4.3

Interest expenses decreased $3.0 million due to lower interest rates and average borrowing balances on our revolving credit facility in fiscal 2022.

Table of Contents

Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021

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


		Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance					Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	606.3	26.5	%	$	653.6	26.7	%	$	47.3	0.2	%	Food and beverage costs	$	757.4	27.8	%	$	606.3	26.5	%	$	(151.1)	(1.3)	%
Restaurant labor	Restaurant labor	774.6		33.9	%	846.2		34.5	%	71.6		0.6	%	Restaurant labor	949.4		34.9	%	774.6		33.9	%	(174.8)		(1.0)	%
Restaurant expenses	Restaurant expenses	629.9		27.5	%	652.2		26.6	%	22.3		(0.9)	%	Restaurant expenses	712.1		26.1	%	629.9		27.5	%	(82.2)		1.4	%
Depreciation and amortization	Depreciation and amortization	112.0				120.9				8.9				Depreciation and amortization	123.1				112.0				(11.1)
General and administrative	General and administrative	94.2				95.9				1.7				General and administrative	108.8				94.2				(14.6)
Other (gains) and charges	Other (gains) and charges	13.5				30.7				17.2				Other (gains) and charges	17.0				13.5				(3.5)
Interest expenses	Interest expenses	43.1				44.2				1.1				Interest expenses	34.8				43.1				8.3
Other income, net	Other income, net	(1.2)				(1.4)				(0.2)				Other income, net	(1.2)				(1.2)				—

As a percentage of Company sales:

•Food and beverage costs ~~decreased 0.2%~~increased 1.3%, including ~~0.2%~~2.0% of higher poultry, meat and other commodity costs due to supply chain constraints and inflationary pressures, partially offset by 0.7% of favorable menu ~~item mix and 0.1% of increased menu pricing, partially offset by 0.1% of unfavorable commodity pricing related to dairy.~~pricing.

•Restaurant labor ~~decreased 0.6%~~increased 1.0%, including ~~1.3% favorable~~1.9% of higher hourly restaurant labor ~~expenses~~costs primarily including wage rates, training and ~~0.4%~~overtime and 0.8% of ~~favorable~~higher manager salaries ~~expenses, both due to reduced staffing requirements~~and training resulting from merit increases and greater than normal manager turnover, partially offset by 1.6% of sales leverage and 0.1% of lower other restaurant labor ~~expenses, partially offset by 1.0% of sales deleverage and 0.2% of higher manager bonus expenses due to improved operational performance metrics.~~expenses.

•Restaurant expenses ~~increased 0.9%~~decreased 1.4%, ~~including 3.3% of higher expenses related to delivery fees and supplies in connection with the growth in off-premise sales and 1.6%~~driven by 2.7% of sales ~~deleverage,~~leverage and 0.6% of lower delivery fee expenses due to changes in sales channel mix, partially offset by ~~2.2%~~0.7% of ~~lower advertising expenses, 0.9% of lower~~higher repairs and maintenance expenses, ~~0.3%~~0.4% of ~~lower credit card fees,~~higher utilities expenses, 0.2% of ~~lower utilities~~higher supervision costs, 0.2% of higher workers’ compensation and general liability expenses, 0.2% of higher advertising expenses and ~~0.4%~~0.2% of ~~lower~~higher other restaurant expenses.

Depreciation and amortization ~~decreased $8.9~~increased $11.1 million as follows:


	Depreciation and Amortization
Thirty-Nine Week Period Ended March ~~25, 2020~~24, 2021	$	~~120.9~~112.0
Change from:
~~Retirements and fully depreciated restaurant assets~~	~~(17.5)~~
~~Finance leases~~	~~(1.9)~~
Additions for existing and new restaurant assets	~~6.1~~14.6
Finance leases	4.8
Acquisition of Chili’s restaurants(1)	~~2.8~~3.7
Corporate assets	~~1.2~~ 1.4
Retirements and fully depreciated restaurant assets	(13.6)
Other	~~0.4~~0.2
Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022	$	~~112.0~~123.1

(1)~~Acquisition of Chili’s restaurants represents~~Represents the ~~change in~~incremental depreciation and amortization of the assets and finance leases of the ~~116~~66 Chili’s restaurants acquired ~~on September 5, 2019. The increase resulted primarily from~~in the ~~timing~~first three quarters of ~~the acquisition.~~fiscal 2022.

Table of Contents

General and administrative ~~expen~~expe~~ses~~nses increased ~~$1.7~~$14.6 million as follows:


	General and Administrative
Thirty-Nine Week Period Ended March ~~25, 2020~~24, 2021	$	~~95.9~~94.2
Change from:
~~Performance-based compensation(1)~~	~~9.1~~
~~Stock-based compensation(2)~~	~~2.2~~
Defined contribution plan employer expenses~~(3)~~(1)	~~(6.0)~~6.6
Payroll-related expenses	~~(3.1)~~3.0
Stock-based compensation	2.9
Professional fees	2.9
Recruiting	2.1
Travel and entertainment expenses	~~(1.8)~~1.3
~~Professional fees~~Performance-based compensation	~~(1.7)~~(5.9)
Other	~~(0.4)~~1.7
Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022	$	~~94.2~~108.8

(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. 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.

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

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


		Thirty-Nine Week Periods Ended					Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Remodel-related costs						Remodel-related costs	$	4.0	$	1.8
Lease contingencies						Lease contingencies	2.9		—
Restaurant closure charges						Restaurant closure charges	1.7		2.2
Acquisition-related costs, net						Acquisition-related costs, net	1.5		—
Enterprise system implementation costs						Enterprise system implementation costs	1.4		—
Loss from natural disasters, net of (insurance recoveries)						Loss from natural disasters, net of (insurance recoveries)	0.8		2.0
COVID-19 related charges	COVID-19 related charges	$	3.1	$	16.1	COVID-19 related charges	0.2		3.1
Restaurant impairment charges	Restaurant impairment charges	2.5		4.6		Restaurant impairment charges	—		2.5
Restaurant closure charges		2.2		3.4
Loss from natural disasters, net of (insurance recoveries)		2.0		(0.6)
Remodel-related costs		1.8		2.1
Lease modification gain, net		(0.5)		(3.1)
Foreign currency transaction (gain) loss		(0.3)		2.2
Acquisition of franchise restaurants costs, net		—		2.6
Other	Other	2.7		3.4		Other	4.5		1.9
		$	13.5	$	30.7		$	17.0	$	13.5

Interest expenses decreased ~~$1.1~~$8.3 million due to lower interest rates and average borrowing balances on our revolving credit facility ~~partially offset by higher interest rates on our revolving credit facility~~ in ~~2021 and higher interest expenses~~fiscal 2022.

Income Taxes


	Thirteen Week Periods Ended						Thirty-Nine Week Periods Ended
	March 30, 2022		March 24, 2021		Favorable / (Unfavorable)		March 30, 2022		March 24, 2021		Favorable / (Unfavorable) Variance
Effective income tax rate	5.4	%	11.7	%	6.3	%	4.7	%	0.4	%	(4.3)	%

The federal statutory tax rate was 21.0% for the ~~Chili’s tabletop device finance lease which rolled out to restaurants beginning~~thirteen and thirty-nine week periods ended March 30, 2022 and March 24, 2021.

The effective income tax rate in the ~~second quarter of fiscal 2020 and completed in~~thirteen week period ended March 30, 2022 decreased compared to the ~~fourth quarter of fiscal 2020.~~

thirteen week period ended March 24, 2021 primarily due to the more favorable impact from the FICA tip tax credit,

Table of Contents

~~Segment Results~~

~~The third quarter of fiscal 2021 results for~~partially offset by the ~~thirteen and thirty-nine week periods include the continued~~reduced favorable impact from the COVID-19 pandemic. Dining room restrictions and our guests’ personal safety preferences have resulted in a shift to our off-premise dining options, which has changed our staffing requirements. Expensesexcess tax benefits associated with ~~off-premise~~stock-based compensation.

The effective income tax rate in the thirty-nine week period ended March 30, 2022 increased compared to the thirty-nine week period ended March 24, 2021 primarily due to the reduced favorable impact from the FICA tip tax credit and ~~other operational expenses are noted below.~~the excess tax benefits associated with stock-based compensation.

Segment Results

Chili’s Segment

Thirteen Week Period Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021


		Thirteen Week Periods Ended				Favorable (Unfavorable) Variance					Variance as percentage			Thirteen Week Periods Ended								Favorable (Unfavorable) Variance			Variance as percentage
		March 24, 2021		March 25, 2020						March 30, 2022					March 24, 2021
Company sales	Company sales	$	749.0	$	748.7			$	0.3					0.0		%	Company sales	$	863.3		$	749.0		$	114.3		15.3	%
Royalties	Royalties	7.7		9.0		(1.3)					(14.4)	%	Royalties	7.8					7.7			0.1			1.3	%
Franchise fees and other revenues	Franchise fees and other revenues	6.3		6.7		(0.4)					(6.0)	%	Franchise fees and other revenues	8.5					6.3			2.2			34.9	%
Franchise and other revenues	Franchise and other revenues	14.0		15.7		(1.7)					(10.8)	%	Franchise and other revenues	16.3					14.0			2.3			16.4	%
Total revenues	Total revenues	$	763.0	$	764.4	$	(1.4)				(0.2)	%	Total revenues	$	879.6				$	763.0		$	116.6		15.3	%

Chili’s Total revenues ~~decreased~~increased by ~~0.2%~~15.3% primarily due to ~~lower~~ dining room ~~guest~~sales growth from higher traffic, price increases, favorable mix, the acquisition of 66 Chili’s restaurants from three former franchisees and ~~lower royalties,~~five new restaurant openings, partially offset by ~~increased off-premise sales including It’s Just Wings.~~decreased To-Go sales. 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					Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	198.7	26.6	%	$	204.1	27.3	%	$	5.4	0.7	%	Food and beverage costs	$	245.6	28.4	%	$	198.7	26.6	%	$	(46.9)	(1.8)	%
Restaurant labor	Restaurant labor	248.7		33.2	%	251.1		33.5	%	2.4		0.3	%	Restaurant labor	295.0		34.2	%	248.7		33.2	%	(46.3)		(1.0)	%
Restaurant expenses	Restaurant expenses	194.2		25.9	%	193.2		25.8	%	(1.0)		(0.1)	%	Restaurant expenses	215.2		24.9	%	194.2		25.9	%	(21.0)		1.0	%
Depreciation and amortization	Depreciation and amortization	31.0				36.5				5.5				Depreciation and amortization	35.9				31.0				(4.9)
General and administrative	General and administrative	7.0				5.9				(1.1)				General and administrative	9.5				7.0				(2.5)
Other (gains) and charges	Other (gains) and charges	3.1				14.9				11.8				Other (gains) and charges	5.2				3.1				(2.1)

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

•Chili’s Food and beverage costs ~~decreased 0.7%~~increased 1.8%, including ~~0.5%~~3.0% of ~~favorable menu item mix, 0.4% of favorable~~higher meat, poultry and other commodity ~~pricing related~~costs due to ~~beef~~supply chain constraints and ~~produce and 0.1%~~inflationary pressures, partially offset by 1.2% of increased menu ~~pricing, partially offset by 0.3% of unfavorable commodity pricing primarily related to dairy and poultry.~~pricing.

•Chili’s Restaurant labor ~~decreased 0.3%~~increased 1.0%, including ~~0.8%~~1.8% of ~~favorable hourly~~restaurant labor ~~expenses~~costs including wage rates, training and overtime, 0.7% of higher manager salaries and training due to ~~reduced staffing requirements~~merit increases and ~~labor shortages~~greater than normal manager turnover and 0.1% of ~~lower~~higher other labor expenses, partially offset by ~~0.6%~~1.1% of ~~higher~~sales leverage and 0.5% of lower manager bonus ~~expenses due to improved operational performance metrics.~~expenses.

•Chili’s Restaurant expenses ~~increased 0.1%~~decreased 1.0%, including ~~3.4%~~2.6% of ~~higher~~sales leverage and 0.4% of lower delivery fee expenses ~~related~~due to ~~delivery fees and supplies driven by the growth~~changes in ~~off-premise~~ sales channel mix, partially offset by ~~2.3%~~0.7% of ~~lower advertising~~higher utilities expenses, ~~0.4%~~0.5% of ~~lower miscellaneous restaurant supplies, 0.3%~~higher rent expenses, 0.5% of ~~lower~~higher repairs and maintenance expenses and 0.3% of ~~lower~~higher other restaurant expenses.

Table of Contents

Chili’s Depreciation and amortization ~~decreased $5.5~~increased $4.9 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended March ~~25, 2020~~24, 2021	$	~~36.5~~31.0
Change from:
~~Retirements and fully depreciated restaurant assets~~	~~(4.3)~~
~~Finance leases~~	~~(3.7)~~
Additions for new and existing restaurant assets	~~1.9~~5.3
Acquisition of ~~franchise~~Chili’s restaurants(1)	~~0.5~~2.0
~~Other~~Finance leases	~~0.1~~1.4
Retirements and fully depreciated restaurant assets	(3.8)

Thirteen Week Period Ended March ~~24, 2021~~30, 2022	$	~~31.0~~35.9

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 66 Chili’s restaurants acquired in the first three quarters of fiscal 2022.

Chili’s General and administrative increased ~~$1.1~~$2.5 million as follows:


	General and Administrative
Thirteen Week Period Ended March ~~25, 2020~~24, 2021	$	~~5.9~~7.0
Change from:
~~Performance-based compensation~~Recruiting	~~2.0~~
~~Stock-based compensation~~	~~0.9~~1.0
Defined contribution plan employer expenses	~~(0.7)~~0.6

Payroll-related expenses	~~(0.7)~~0.4
Performance-based compensation	0.1
Other	~~(0.4)~~0.4
Thirteen Week Period Ended March ~~24, 2021~~30, 2022	$	~~7.0~~9.5

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 on September 5, 2019. Refer to “Revenues” section above for further details about Chili’s revenues changes.


	Thirteen Week Periods Ended
	March 30, 2022		March 24, 2021
Restaurant closure charges	$	1.2	$	0.3
Remodel-related costs	0.9		0.9
Acquisition of franchise restaurants-related costs	0.6		—
COVID-19 related charges	0.5		0.8
Loss from natural disasters, net of (insurance recoveries)	—		1.1

Other	2.0		—
	$	5.2	$	3.1

Table of Contents

Thirty-Nine Week Period Ended March 30, 2022 compared to March 24, 2021


	Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	March 30, 2022		March 24, 2021
Company sales	$	2,428.5	$	2,107.0	$	321.5	15.3	%
Royalties	25.4		21.9		3.5		16.0	%
Franchise fees and other revenues	21.5		17.0		4.5		26.5	%
Franchise and other revenues	46.9		38.9		8.0		20.6	%
Total revenues	$	2,475.4	$	2,145.9	$	329.5	15.4	%

Chili’s Total revenues increased 15.4% primarily due to dining room sales growth from higher traffic, favorable mix, price increases, the acquisition of 66 Chili’s restaurants from three former franchisees and five new restaurant openings, partially offset by decreased To-Go sales. 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:


		Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance					Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	563.2	26.7	%	$	581.6	27.0	%	$	18.4	0.3	%	Food and beverage costs	$	683.8	28.2	%	$	563.2	26.7	%	$	(120.6)	(1.5)	%
Restaurant labor	Restaurant labor	710.3		33.7	%	735.2		34.1	%	24.9		0.4	%	Restaurant labor	846.1		34.8	%	710.3		33.7	%	(135.8)		(1.1)	%
Restaurant expenses	Restaurant expenses	564.6		26.8	%	568.2		26.4	%	3.6		(0.4)	%	Restaurant expenses	624.8		25.7	%	564.6		26.8	%	(60.2)		1.1	%
Depreciation and amortization	Depreciation and amortization	92.4				99.3				6.9				Depreciation and amortization	104.3				92.4				(11.9)
General and administrative	General and administrative	17.8				23.5				5.7				General and administrative	24.7				17.8				(6.9)
Other (gains) and charges	Other (gains) and charges	11.1				23.9				12.8				Other (gains) and charges	10.2				11.1				0.9

As a percentage of Company sales:

•Chili’s Food and beverage costs ~~decreased 0.3%~~increased 1.5%, including ~~0.3%~~2.1% of ~~favorable menu item mix~~higher poultry, meat and ~~0.1%~~other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by 0.6% of increased menu ~~pricing, partially offset by 0.1% of unfavorable commodity pricing primarily related to dairy.~~pricing.

•Chili’s Restaurant labor ~~decreased 0.4%~~increased 1.1%, including ~~1.0%~~2.0% of ~~favorable~~higher restaurant hourly labor costs primarily including wage rates, training and overtime and 0.7% of higher manager ~~expenses~~salaries and training due to ~~reduced staffing requirements,~~merit increases and greater than normal manager turnover, partially offset by ~~0.5%~~1.2% of sales ~~deleverage~~leverage and ~~0.1%~~0.4% of ~~higher other labor~~lower manager bonus expenses.

•Chili’s Restaurant expenses ~~increased 0.4%~~decreased 1.1%, including ~~3.4% of higher expenses related to delivery fees and supplies driven by the growth in off-premise sales and 0.9%~~2.1% of sales ~~deleverage,~~leverage and 0.6% of lower delivery fee expenses due to changes in sales channel mix, partially offset by ~~2.4%~~0.5% of ~~lower advertising expenses, 0.7% of lower~~higher repairs and maintenance expenses, ~~0.2%~~0.4% of ~~lower credit card fees~~higher utilities expenses, 0.4% of higher rent expenses and ~~0.6%~~0.3% of ~~lower~~higher other restaurant expenses.

Table of Contents

Chili’s Depreciation and amortization ~~decreased $6.9~~increased $11.9 million as follows:


	Depreciation and Amortization
Thirty-Nine Week Period Ended March ~~25, 2020~~24, 2021	$	~~99.3~~92.4
Change from:
~~Retirements and fully depreciated restaurant assets~~	~~(14.1)~~
~~Finance leases~~	~~(1.8)~~
Additions for existing and new restaurant assets	~~5.8~~13.9
Finance leases	4.5
Acquisition of Chili’s restaurants(1)	~~2.8~~ 3.7
Retirements and fully depreciated restaurant assets	(10.3)
Other	~~0.4~~0.1
Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022	$	~~92.4~~104.3

(1)~~Acquisition of Chili’s restaurants represents~~Represents the ~~change in~~incremental depreciation and amortization of the assets and finance leases of the ~~116~~66 Chili’s restaurants acquired ~~on September 5, 2019. The increase resulting from~~in the ~~timing~~first three quarters of ~~the acquisition.~~fiscal 2022.

~~Table of Contents~~

Chili’s General and administrative ~~decreased $5.7~~increased $6.9 million as follows:


	General and Administrative
Thirty-Nine Week Period Ended March ~~25, 2020~~24, 2021	$	~~23.5~~17.8
Change from:
Defined contribution plan employer expenses(1)	~~(4.7)~~4.9
~~Payroll-related expenses~~Recruiting	~~(1.7)~~1.5
Travel and entertainment expenses	~~(0.8)~~0.6
~~Professional fees~~Payroll-related expenses	~~(0.4)~~
~~Performance-based compensation(2)~~	~~2.4~~0.5
Stock-based compensation	~~0.1~~ 0.5
Performance-based compensation	(1.6)
Other	~~(0.6)~~0.5
Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022	$	~~17.8~~24.7

(1)Defined contribution plan employer expenses ~~decreased~~increased due to the ~~temporary suspension~~reinstatement 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 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.

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


		Thirty-Nine Week Periods Ended					Thirty-Nine Week Periods Ended
		March 24, 2021		March 25, 2020			March 30, 2022		March 24, 2021
Remodel-related costs						Remodel-related costs	$	3.9	$	1.8
Restaurant closure charges						Restaurant closure charges	1.7		2.1
Acquisition of franchise restaurants-related costs						Acquisition of franchise restaurants-related costs	1.5		—
Loss from natural disasters, net of (insurance recoveries)						Loss from natural disasters, net of (insurance recoveries)	0.8		1.3
Restaurant impairment charges						Restaurant impairment charges	—		2.1
COVID-19 related charges	COVID-19 related charges	$	2.9	$	13.8	COVID-19 related charges	—		2.9
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	Other	1.4		1.1		Other	2.3		0.9
		$	11.1	$	23.9		$	10.2	$	11.1

Table of Contents

Maggiano’s Segment

Thirteen Week Period Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021


		Thirteen Week Periods Ended				Favorable (Unfavorable) Variance					Variance as a percentage			Thirteen Week Periods Ended								Favorable (Unfavorable) Variance			Variance as a percentage
		March 24, 2021		March 25, 2020						March 30, 2022					March 24, 2021
Company sales	Company sales	$	64.7	$	91.7			$	(27.0)					(29.4)		%	Company sales	$	97.3		$	64.7		$	32.6		50.4	%
Royalties	Royalties	0.0		0.0		0.0					100.0	%	Royalties	0.1					0.0			0.1			100.0	%
Franchise fees and other revenues	Franchise fees and other revenues	0.7		3.9		(3.2)					(82.1)	%	Franchise fees and other revenues	3.4					0.7			2.7			385.7	%
Franchise and other revenues	Franchise and other revenues	0.7		3.9		(3.2)					(82.1)	%	Franchise and other revenues	3.5					0.7			2.8			400.0	%
Total revenues	Total revenues	$	65.4	$	95.6	$	(30.2)				(31.6)	%	Total revenues	$	100.8				$	65.4		$	35.4		54.1	%

Maggiano’s Total revenues ~~decreased 31.6%~~increased 54.1% primarily due to ~~lower~~higher dining and banquet room ~~guest traffic including lower banquet volumes driven by the COVID-19 pandemic, partially offset by increased off-premise sales.~~sales and traffic. 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:


		Thirteen Week Periods Ended								Favorable (Unfavorable) Variance					Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	15.2	23.5	%	$	22.6	24.6	%	$	7.4	1.1	%	Food and beverage costs	$	24.7	25.4	%	$	15.2	23.5	%	$	(9.5)	(1.9)	%
Restaurant labor	Restaurant labor	22.1		34.2	%	34.8		37.9	%	12.7		3.7	%	Restaurant labor	34.1		35.0	%	22.1		34.2	%	(12.0)		(0.8)	%
Restaurant expenses	Restaurant expenses	21.7		33.5	%	26.9		29.4	%	5.2		(4.1)	%	Restaurant expenses	28.7		29.5	%	21.7		33.5	%	(7.0)		4.0	%
Depreciation and amortization	Depreciation and amortization	3.4				3.8				0.4				Depreciation and amortization	3.4				3.4				—
General and administrative	General and administrative	1.3				1.1				(0.2)				General and administrative	2.3				1.3				(1.0)
Other (gains) and charges	Other (gains) and charges	0.3				2.4				2.1				Other (gains) and charges	0.0				0.3				0.3

As a percentage of Company sales:

•Maggiano’s Food and beverage costs ~~decreased 1.1%~~increased 1.9%, including ~~2.4%~~2.7% of higher seafood, dairy and other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by 0.7% of increased menu pricing and 0.1% 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.~~mix.

•Maggiano’s Restaurant labor ~~decreased 3.7%~~increased 0.8%, including ~~7.1%~~4.2% of ~~favorable~~higher restaurant hourly labor costs primarily including wage rates, training and overtime, 1.5% of higher manager salaries and training and 0.5% of higher manager bonus expenses, ~~and 1.1%~~partially offset by 5.0% of ~~favorable manager expenses both due to reduced staffing requirements~~sales leverage 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.~~expense.

•Maggiano’s Restaurant expenses ~~increased 4.1%~~decreased 4.0%, ~~including 6.9%~~driven by 9.8% of sales ~~deleverage and 2.0% of~~leverage, partially offset by higher expenses ~~related to delivery fees and supplies driven by the growth in off-premise sales. Partial offsets include 1.5%~~including 1.8% of ~~lower~~ repairs and maintenance expenses, ~~0.8%~~1.7% of ~~lower variable~~supervision expenses, 1.0% of advertising expenses, 0.7% of higher rent expenses, ~~0.5%~~0.4% of ~~lower banquet expenses, 0.5% of lower~~ credit card fees ~~0.5%~~and 0.2% of ~~lower utilities, 0.4% of lower advertising expenses and 0.6% of lower~~ other restaurant expenses.

Table of Contents

Thirty-Nine Week Period Ended March ~~24, 2021~~30, 2022 compared to March ~~25, 2020~~24, 2021


		Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance					Variance as a percentage			Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance			Variance as a percentage
		March 24, 2021		March 25, 2020						March 30, 2022					March 24, 2021
Company sales	Company sales	$	181.1	$	297.2			$	(116.1)					(39.1)		%	Company sales	$	296.2		$	181.1		$	115.1		63.6	%
Royalties	Royalties	0.1		0.1		0.0					—	%	Royalties	0.3					0.1			0.2			200.0	%
Franchise fees and other revenues	Franchise fees and other revenues	2.1		14.9		(12.8)					(85.9)	%	Franchise fees and other revenues	10.7					2.1			8.6			409.5	%
Franchise and other revenues	Franchise and other revenues	2.2		15.0		(12.8)					(85.3)	%	Franchise and other revenues	11.0					2.2			8.8			400.0	%
Total revenues	Total revenues	$	183.3	$	312.2	$	(128.9)				(41.3)	%	Total revenues	$	307.2				$	183.3		$	123.9		67.6	%

Maggiano’s Total revenues ~~decreased 41.3%~~increased 67.6% primarily ~~driven by reduced~~due to higher dining and banquet room ~~traffic due to the COVID-19 pandemic, partially offset by increased off-premise sales.~~sales and traffic. 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					Thirty-Nine Week Periods Ended								Favorable (Unfavorable) Variance
		March 24, 2021				March 25, 2020									March 30, 2022				March 24, 2021
		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	$	43.1	23.8	%	$	72.0	24.2	%	$	28.9	0.4	%	Food and beverage costs	$	73.6	24.8	%	$	43.1	23.8	%	$	(30.5)	(1.0)	%
Restaurant labor	Restaurant labor	64.3		35.5	%	111.0		37.4	%	46.7		1.9	%	Restaurant labor	103.3		34.9	%	64.3		35.5	%	(39.0)		0.6	%
Restaurant expenses	Restaurant expenses	64.6		35.7	%	83.6		28.1	%	19.0		(7.6)	%	Restaurant expenses	86.8		29.3	%	64.6		35.7	%	(22.2)		6.4	%
Depreciation and amortization	Depreciation and amortization	10.4				11.8				1.4				Depreciation and amortization	10.2				10.4				0.2
General and administrative	General and administrative	3.9				4.3				0.4				General and administrative	6.2				3.9				(2.3)
Other (gains) and charges	Other (gains) and charges	1.2				2.5				1.3				Other (gains) and charges	0.2				1.2				1.0

As a percentage of Company sales:

•Maggiano’s Food and beverage costs ~~decreased 0.4%~~increased 1.0%, including ~~1.9%~~1.5% of higher seafood and other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by 0.3% of increased menu pricing and 0.2% 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.mix.

•Maggiano’s Restaurant labor decreased ~~1.9%~~0.6%, including ~~6.2%~~6.1% of ~~favorable hourly~~sales leverage and 0.3% of lower other labor expenses, ~~and 1.1% of favorable manager expenses both due to reduced staffing requirements,~~ partially offset by ~~5.0% of sales deleverage and 0.4%~~3.3% of higher ~~employee health insurance~~restaurant hourly labor costs primarily including wage rates, training and overtime, 1.3% of higher manager salaries and training and 1.2% of higher manager bonus expenses.

•Maggiano’s Restaurant expenses ~~increased 7.6%~~decreased 6.4%, ~~including 10.0%~~driven by 11.7% of sales ~~deleverage and 2.0% of higher expenses related to delivery fees and supplies driven by the growth in off-premise sales,~~leverage, partially offset by ~~1.6%~~higher expenses including 1.7% of ~~lower~~ repairs and maintenance expenses, ~~0.6%~~1.5% of ~~lower credit card fees, 0.6%~~supervision expenses, 1.2% of ~~lower~~higher advertising expenses, ~~0.5% lower banquet expenses, 0.4%~~0.7% of ~~lower~~higher utilities and 0.2% of ~~lower variable rent expenses and 0.5% of lower~~ other restaurant expenses.

~~Income Taxes~~

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 the thirteen and thirty-nine week periods ended March 24, 2021 and March 25, 2020.~~

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

~~Table of Contents~~

~~tip tax credit, partially offset by the favorable impact of excess tax benefits associated with stock-based compensation.~~

Liquidity and Capital Resources

COVID-19 Impact on Liquidity

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~~or repurchase shares of our common 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~~At the ~~uncertainty~~outset of the COVID-19 pandemic in ~~the economy~~fiscal 2020 and ~~to preserve liquidity,~~into early fiscal 2021, we took proactive precautionary measures to ~~raise additional capital,~~preserve liquidity, reduce costs and pause non-critical projects that dodid not significantly impact our current operations. ~~These measures during~~In the second half of fiscal 2021, ~~included:~~our operational results and liquidity returned to pre-pandemic levels.

Table of Contents

Beginning in the first quarter of fiscal 2022, we took or plan to take the following actions:

•~~Amended~~Revised our revolving credit facility during the first quarter of fiscal ~~2021~~2022 to extend the maturity date and provide additional ~~flexibility during this time;~~flexibility;

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

•~~Reduced~~Selectively increased marketing ~~general and administrative and restaurant expenses;~~spend;

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

•~~Amended~~Repaid 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~~first installment of $27.2 million of payroll taxes deferred in accordance with the CARES Act ~~which resulted~~ in ~~an anticipated refund~~the second quarter of ~~$4.6 million.~~fiscal 2022 and will repay the remaining $27.2 million that is due on December 31, 2022.

Cash Flows

Cash Flows from Operating Activities

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


	Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
	March 30, 2022		March 24, 2021
Net cash provided by operating activities	$	211.6	$	268.6	$	(57.0)

Net cash provided by operating activities ~~increased~~decreased primarily due to the ~~deferral~~repayment of the first installment of $27.2 million of payroll ~~tax payments as allowed~~taxes that were previously deferred under the CARES Act, as well as an increase in payments of performance based compensation and ~~higher accounts payable due~~bonuses in the current year, partially offset by improved operating performance in the first three quarters of fiscal 2022 compared to the prior year and the timing of ~~other~~ operational receipts and ~~payments, partially offset by lower net income in the thirty-nine week period ended March 24, 2021.~~payments.

Cash Flows from Investing Activities


		Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance			Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
		March 24, 2021		March 25, 2020					March 30, 2022		March 24, 2021
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	$	(62.4)	$	(82.0)	$	19.6	Payments for property and equipment	$	(109.0)	$	(62.4)	$	(46.6)
Payments for franchise restaurant acquisitions								Payments for franchise restaurant acquisitions	(106.0)		—		(106.0)
Proceeds from sale leaseback transactions, net of related expenses								Proceeds from sale leaseback transactions, net of related expenses	20.5		—		20.5
Proceeds from note receivable								Proceeds from note receivable	1.0		1.5		(0.5)
Proceeds from sale of assets	Proceeds from sale of assets	1.6		1.0		0.6		Proceeds from sale of assets	0.1		1.6		(1.5)
Proceeds from note receivable		1.5		2.2		(0.7)
Payments for franchise restaurant acquisitions		—		(94.6)		94.6

Net cash used in investing activities	Net cash used in investing activities	$	(59.3)	$	(173.4)	$	114.1	Net cash used in investing activities	$	(193.4)	$	(59.3)	$	(134.1)

Net cash used in investing activities ~~decreased~~increased primarily due to ~~$94.6~~$106.0 million of cash consideration ~~and related transactional charges~~ paid for the purchase of ~~116~~66 Chili’s restaurants from ~~a franchisee~~three franchisees, partially offset by proceeds of $20.5 million received from the sale leaseback transactions on six of the acquired restaurants. Additionally, capital expenditures increased in fiscal 2022 primarily for equipment purchases and an increase in the ~~prior year.~~pace of the Chili’s remodel initiative.

Table of Contents

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

Cash Flows from Financing Activities


		Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance			Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance
		March 24, 2021		March 25, 2020					March 30, 2022		March 24, 2021
Cash flows from financing activities	Cash flows from financing activities							Cash flows from financing activities
Borrowings on revolving credit facility								Borrowings on revolving credit facility	$	595.5	$	28.4	$	567.1
Payments on revolving credit facility	Payments on revolving credit facility	$	(210.0)	$	(630.0)	$	420.0	Payments on revolving credit facility	(502.5)		(210.0)		(292.5)
Borrowings on revolving credit facility		28.4		806.8		(778.4)
Purchases of treasury stock								Purchases of treasury stock	(100.8)		(4.1)		(96.7)
Payments on long-term debt	Payments on long-term debt	(14.3)		(12.4)		(1.9)		Payments on long-term debt	(17.6)		(14.3)		(3.3)
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 for debt issuance costs	(3.1)		(2.2)		(0.9)
Payments of dividends	Payments of dividends	(1.5)		(43.3)		41.8		Payments of dividends	(1.1)		(1.5)		0.4
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	14.1		1.6		12.5		Proceeds from issuance of treasury stock	0.4		14.1		(13.7)
Net cash (used in) provided by financing activities		$	(189.6)	$	89.4	$	(279.0)
Net cash used in financing activities								Net cash used in financing activities	$	(29.2)	$	(189.6)	$	160.4

Net cash used in financing activities ~~increased~~decreased primarily due to $93.0 million of net borrowing activity in fiscal 2022 compared to $181.6 million of net repayment activity in fiscal 2021 ~~compared to $176.8 million of net borrowing activity in fiscal 2020~~ on the revolving credit facility, partially offset by ~~the impact of suspending the dividend payments and share repurchases, and by~~ an increase in ~~proceeds from stock option exercises.~~share repurchases following the reinstatement of the share repurchase program in August 2021.

Revolving Credit Facility

On August 18, 2021, we revised our existing $1.0 billion revolving credit facility to an $800.0 million revolving credit facility. Net ~~repayments~~borrowings of ~~$181.6~~$93.0 million were ~~made~~drawn during the thirty-nine week period ended March ~~24, 2021~~30, 2022 on the ~~$1.0 billion~~ revolving credit facility. As of March ~~24, 2021, $708.7~~30, 2022, $535.7 million of credit was available under the ~~revolving credit facility. Additionally, subsequent to the end of the third quarter of fiscal 2021, $20.0 million of net payments were made on the~~new revolving credit facility.

The $800.0 million revolving credit facility matures on August 18, 2026 and bears interest of LIBOR plus an applicable margin of 1.500% to 2.250% and an undrawn commitment fee of 0.250% to 0.350%, both based on a function of our debt-to-cash-flow ratio. As of March ~~24, 2021,~~30, 2022, our interest rate was 2.250% consisting of LIBOR of 0.500% plus the applicable margin of 1.750%. In the thirty-nine week period ended March 30, 2022, we incurred and capitalized $3.1 million of debt issuance costs associated with the new revolver, which are included in Other assets in the Consolidated Balance Sheets (Unaudited).

As of March 30, 2022, we were in compliance with our covenants pursuant to the ~~amended~~$800.0 million revolving credit facility and under the terms of the indentures governing our 3.875% notes and 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~~Our share repurchase program ~~was suspended in response to the liquidity needs created by the COVID-19 pandemic. Prior to the suspension, our share repurchase program was~~is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate 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 fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic. In August 2021, our Board of Directors reinstated the share repurchase program, allowing for a total available repurchase authority of $300.0 million. In the thirty-nine week period ended March ~~24, 2021,~~30, 2022, we repurchased 2.4 million shares of our common stock for $100.8 million, including 2.3 million shares purchased as part of our share repurchase program and 0.1 million shares ~~related~~purchased from team members to ~~shares repurchased to~~ satisfy ~~team member~~ tax withholding obligations on the vesting of restricted shares. ~~Before the suspension~~As of March 30, 2022, approximately $204.0 million was available under our share repurchase ~~program,~~ authorizations.

i~~n the thirty-nine week period ended March 25, 2020, we repurchased 0.8 million shares~~Table of ~~our common stock for $32.3 million.~~Contents

Dividend Program

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend ~~was suspended~~ in response to the liquidity needs created by the COVID-19 pandemic. In the thirty-nine week ~~period~~periods ended March 30, 2022 and March 24, 2021, dividends paid were solely related to the previously accrued dividends for restricted share awards that were granted prior to the suspension and 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. ~~In the thirty-nine week period ended March 25, 2020, we paid dividends of $43.3 million to common stock shareholders.~~

~~Table of Contents~~

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~~guests at ~~substantially~~ all of our locations through our dining rooms and off-premise ~~offerings. We will continue to monitor the situation~~offerings, and have resumed normal business operations in accordance with state and 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

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 entered into certain pre-commencement leases as disclosed in Note 9 - Leases and have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 14 - Contingencies, in the Notes to 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

The impact of recent accounting pronouncements can be found at Note 21 - ~~Effect~~Basis of ~~New Accounting Standards~~Presentation in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report.

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.~~30, 2021.

ITEM 4. 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

There were no changes in our internal control over financial reporting during the thirteen week period ended March ~~24, 2021~~30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

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

~~Table of Contents~~

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,~~30, 2021, 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 still evolving as the United States is in the process~~Lack of ~~distributing vaccines beginning in December 2020 in an effort to reduce the spread~~continued public acceptance of the ~~virus. However, lack~~COVID-19 vaccines and boosters, their on-going efficacy and emergence of ~~successful distribution and/or effectiveness~~new variants of ~~the vaccines over a large population size~~COVID-19 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 COVID-19 will change, including the duration or re-emergence of restrictions and dining room closure requirements, staffing levels for reopened dining rooms, supply chain disruptions 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 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,~~30, 2021, 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.

Table of Contents

During the thirteen week period ended March ~~24, 2021,~~30, 2022, there have been no 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.~~

30, 2021.

~~Table of Contents~~

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

~~During~~In the fourth quarter of fiscal 2020, our share repurchase program was suspended ~~due~~in response to the ~~impacts of~~business downturn caused by the COVID-19 pandemic. In August 2021, our Board of Directors reinstated the share repurchase program, allowing for a total available repurchase authority of $300.0 million.

During the thirteen week period ended March ~~24, 2021,~~30, 2022, 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)
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 —


	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 30, 2021 through February 2, 2022	0.0	$	38.07	—	$	230.0
February 3, 2022 through March 2, 2022	0.0	38.64		—	230.0
March 3, 2022 through March 30, 2022	0.8	33.57		0.8	204.0
Total	0.8	33.60		0.8

(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 March ~~24, 2021,~~30, 2022, ~~3,660~~4,989 shares were tendered by team members at an average price of $~~52.37~~38.13.

(2)The final amount shown is as of March ~~24, 2021.~~30, 2022.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS


Exhibit						Description
3.1						Certificate of Incorporation of Registrant, as amended(1)
3.2						Bylaws of Registrant(2)

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 March ~~24, 2021~~30, 2022 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.

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: ~~April 28, 2021~~May 4, 2022	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: ~~April 28, 2021~~May 4, 2022	By:	/S/ JOSEPH G. TAYLOR
		Joseph G. Taylor,
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)


					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