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 December ~~29, 2021~~28, 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 January ~~28, 2022: 44,599,164~~27, 2023: 44,062,888 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 (Loss) Income (Unaudited) - Thirteen and Twenty-Six Week Periods Ended December 28, 2022 and December 29, 2021 ~~and December 23, 2020~~			3
Consolidated Balance Sheets - December ~~29, 2021~~ 28, 2022 (Unaudited) and June ~~30, 2021~~29, 2022			4
Consolidated Statements of Cash Flows (Unaudited) - T wenty -S ix Week Periods Ended December 28, 2022 and December 29, 2021			5
Consolidated Statements of Shareholders’ Deficit (Unaudited) - Twenty-Six Week Periods Ended December ~~29, 2021~~28, 2022 and December ~~23, 2020~~29, 2021			56
Notes to Consolidated Financial Statements (Unaudited)			67
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2319
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4035
Item 4. Controls and Procedures			4035
PART II. OTHER INFORMATION			4136
Item 1. Legal Proceedings			4136
Item 1A. Risk Factors			4136
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4237
Item 5. Other Information			4237
Item 6. Exhibits			4338
SIGNATURES			4339

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In millions, except per share amounts)


		Thirteen Week Periods Ended				Twenty-Six Week Periods Ended					Thirteen Week Periods Ended				Twenty-Six Week Periods Ended
		December 29, 2021		December 23, 2020		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021		December 28, 2022		December 29, 2021
Revenues	Revenues									Revenues
Company sales	Company sales	$	904.5	$	746.2	$	1,764.1	$	1,474.4	Company sales	$	1,009.4	$	915.8	$	1,955.5	$	1,781.4
Franchise and other revenues		21.3		14.5		38.1		26.4
Franchise revenues										Franchise revenues	9.6		10.0		19.0		20.8
Total revenues	Total revenues	925.8		760.7		1,802.2		1,500.8		Total revenues	1,019.0		925.8		1,974.5		1,802.2
Operating costs and expenses	Operating costs and expenses									Operating costs and expenses
Food and beverage costs	Food and beverage costs	252.8		198.9		487.1		392.4		Food and beverage costs	289.4		252.8		578.9		487.1
Restaurant labor	Restaurant labor	315.4		255.8		620.3		503.8		Restaurant labor	334.6		315.4		665.2		620.3
Restaurant expenses	Restaurant expenses	236.7		211.3		468.0		413.8		Restaurant expenses	268.4		236.7		537.2		468.0
Depreciation and amortization	Depreciation and amortization	41.6		37.2		80.9		74.6		Depreciation and amortization	41.8		41.6		83.7		80.9
General and administrative	General and administrative	33.1		30.0		69.6		60.5		General and administrative	35.6		33.1		75.1		69.6
Other (gains) and charges	Other (gains) and charges	6.4		5.4		10.9		9.2		Other (gains) and charges	8.5		6.4		13.5		10.9
Total operating costs and expenses	Total operating costs and expenses	886.0		738.6		1,736.8		1,454.3		Total operating costs and expenses	978.3		886.0		1,953.6		1,736.8
Operating income	Operating income	39.8		22.1		65.4		46.5		Operating income	40.7		39.8		20.9		65.4
Interest expenses	Interest expenses	11.2		14.4		23.7		29.0		Interest expenses	13.9		11.2		26.2		23.7
Other income, net	Other income, net	(0.5)		(0.5)		(0.8)		(0.9)		Other income, net	(0.3)		(0.5)		(0.7)		(0.8)
Income before income taxes		29.1		8.2		42.5		18.4
Provision (benefit) for income taxes		1.5		(3.8)		1.7		(4.3)
Net income		$	27.6	$	12.0	$	40.8	$	22.7
(Loss) Income before income taxes										(Loss) Income before income taxes	27.1		29.1		(4.6)		42.5
(Benefit) Provision for income taxes										(Benefit) Provision for income taxes	(0.8)		1.5		(2.3)		1.7
Net (loss) income										Net (loss) income	$	27.9	$	27.6	$	(2.3)	$	40.8

Basic net income per share		$	0.61	$	0.26	$	0.90	$	0.50
Basic net (loss) income per share										Basic net (loss) income per share	$	0.63	$	0.61	$	(0.05)	$	0.90

Diluted net income per share		$	0.60	$	0.26	$	0.88	$	0.49
Diluted net (loss) income per share										Diluted net (loss) income per share	$	0.62	$	0.60	$	(0.05)	$	0.88

Basic weighted average shares outstanding	Basic weighted average shares outstanding	45.1		45.3		45.5		45.2		Basic weighted average shares outstanding	44.0		45.1		44.0		45.5

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	45.9		46.1		46.4		45.9		Diluted weighted average shares outstanding	44.8		45.9		44.0		46.4

Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(0.1)	$	0.5	$	(0.5)	$	0.8	Foreign currency translation adjustment	$	0.1	$	(0.1)	$	(0.9)	$	(0.5)
Other comprehensive income (loss)	Other comprehensive income (loss)	(0.1)		0.5		(0.5)		0.8		Other comprehensive income (loss)	0.1		(0.1)		(0.9)		(0.5)
Comprehensive income		$	27.5	$	12.5	$	40.3	$	23.5
Comprehensive (loss) income										Comprehensive (loss) income	$	28.0	$	27.5	$	(3.2)	$	40.3

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
		December 29, 2021		June 30, 2021			December 28, 2022		June 29, 2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	15.6	$	23.9	Cash and cash equivalents	$	14.7	$	13.5
Accounts receivable, net	Accounts receivable, net	91.8		65.2		Accounts receivable, net	92.0		66.4
Inventories	Inventories	32.7		28.9		Inventories	36.9		35.6
Restaurant supplies	Restaurant supplies	55.0		52.6		Restaurant supplies	55.6		55.5
Prepaid expenses	Prepaid expenses	18.5		13.6		Prepaid expenses	34.7		25.7
Income taxes receivable, net	Income taxes receivable, net	7.0		23.0		Income taxes receivable, net	3.3		4.5
Total current assets	Total current assets	220.6		207.2		Total current assets	237.2		201.2
Property and equipment, at cost	Property and equipment, at cost					Property and equipment, at cost
Land	Land	43.4		33.1		Land	44.2		43.4
Buildings and leasehold improvements	Buildings and leasehold improvements	1,664.4		1,595.2		Buildings and leasehold improvements	1,623.4		1,603.9
Furniture and equipment	Furniture and equipment	859.4		818.1		Furniture and equipment	750.6		793.0
Construction-in-progress	Construction-in-progress	19.7		14.9		Construction-in-progress	50.5		33.6
		2,586.9		2,461.3			2,468.7		2,473.9
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,746.6)		(1,686.5)		Less accumulated depreciation and amortization	(1,641.8)		(1,657.2)
Net property and equipment	Net property and equipment	840.3		774.8		Net property and equipment	826.9		816.7
Other assets	Other assets					Other assets
Operating lease assets	Operating lease assets	1,095.2		1,007.4		Operating lease assets	1,142.9		1,160.5
Goodwill	Goodwill	194.9		188.2		Goodwill	194.8		195.1
Deferred income taxes, net	Deferred income taxes, net	53.6		50.9		Deferred income taxes, net	72.6		62.5
Intangibles, net	Intangibles, net	29.2		21.1		Intangibles, net	25.9		27.4
Other	Other	23.5		25.3		Other	19.3		21.0
Total other assets	Total other assets	1,396.4		1,292.9		Total other assets	1,455.5		1,466.5
Total assets	Total assets	$	2,457.3	$	2,274.9	Total assets	$	2,519.6	$	2,484.4
LIABILITIES AND SHAREHOLDERS’ DEFICIT	LIABILITIES AND SHAREHOLDERS’ DEFICIT					LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	118.8	$	127.7	Accounts payable	$	142.2	$	134.3
Gift card liability	Gift card liability	135.2		106.4		Gift card liability	105.8		83.9
Accrued payroll	Accrued payroll	73.5		122.4		Accrued payroll	91.3		111.0
Operating lease liabilities	Operating lease liabilities	113.1		97.7		Operating lease liabilities	112.2		112.7
Other accrued liabilities	Other accrued liabilities	128.8		117.4		Other accrued liabilities	122.0		116.1

Total current liabilities	Total current liabilities	569.4		571.6		Total current liabilities	573.5		558.0
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	1,047.3		917.9		Long-term debt and finance leases, less current installments	1,023.3		989.1
Long-term operating lease liabilities, less current portion	Long-term operating lease liabilities, less current portion	1,086.6		1,006.7		Long-term operating lease liabilities, less current portion	1,133.1		1,151.1
Other liabilities	Other liabilities	81.4		82.0		Other liabilities	57.2		54.3
Commitments and contingencies (Note 14)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)
Shareholders’ deficit	Shareholders’ deficit					Shareholders’ deficit
Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued; and 44.6 million shares outstanding at December 29, 2021, and 45.9 million shares outstanding at June 30, 2021)		7.0		7.0
Common stock (250.0 million authorized shares; $0.10 par value; 60.3 million shares issued and 44.0 million shares outstanding at December 28, 2022, and 70.3 million shares issued and 43.8 million shares outstanding at June 29, 2022)						Common stock (250.0 million authorized shares; $0.10 par value; 60.3 million shares issued and 44.0 million shares outstanding at December 28, 2022, and 70.3 million shares issued and 43.8 million shares outstanding at June 29, 2022)	6.0		7.0
Additional paid-in capital	Additional paid-in capital	683.7		685.4		Additional paid-in capital	688.7		690.9
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5.2)		(4.7)		Accumulated other comprehensive loss	(6.2)		(5.3)
Accumulated deficit	Accumulated deficit	(225.3)		(266.1)		Accumulated deficit	(456.8)		(148.4)
Treasury stock, at cost (25.7 million shares at December 29, 2021, and 24.4 million shares at June 30, 2021)		(787.6)		(724.9)
Treasury stock, at cost (16.3 million shares at December 28, 2022, and 26.5 million shares at June 29, 2022)						Treasury stock, at cost (16.3 million shares at December 28, 2022, and 26.5 million shares at June 29, 2022)	(499.2)		(812.3)
Total shareholders’ deficit	Total shareholders’ deficit	(327.4)		(303.3)		Total shareholders’ deficit	(267.5)		(268.1)
Total liabilities and shareholders’ deficit	Total liabilities and shareholders’ deficit	$	2,457.3	$	2,274.9	Total liabilities and shareholders’ deficit	$	2,519.6	$	2,484.4

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

(In millions)


		Twenty-Six Week Periods Ended					Twenty-Six Week Periods Ended
		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	40.8	$	22.7
Adjustments to reconcile Net income to Net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(2.3)	$	40.8
Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:						Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	80.9		74.6		Depreciation and amortization	83.7		80.9
Stock-based compensation	Stock-based compensation	9.9		6.9		Stock-based compensation	5.9		9.9
Restructure and impairment charges	Restructure and impairment charges	5.4		3.8		Restructure and impairment charges	7.2		5.4
Net loss on disposal of assets	Net loss on disposal of assets	1.6		0.8		Net loss on disposal of assets	2.1		1.6
Other	Other	2.1		1.7		Other	0.9		2.1
Changes in assets and liabilities, net of the impact of acquisitions:	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	(24.6)		(23.1)		Accounts receivable, net	(28.4)		(24.6)
Inventories	Inventories	(2.7)		0.2		Inventories	(2.0)		(2.7)
Restaurant supplies	Restaurant supplies	(0.5)		(0.2)		Restaurant supplies	(0.4)		(0.5)
Prepaid expenses	Prepaid expenses	(5.0)		2.1		Prepaid expenses	(9.2)		(5.0)
Operating lease assets, net of liabilities	Operating lease assets, net of liabilities	6.4		(11.8)		Operating lease assets, net of liabilities	(1.5)		6.4
Deferred income taxes, net	Deferred income taxes, net	(2.8)		(15.3)		Deferred income taxes, net	(10.3)		(2.8)
Other assets	Other assets	(0.1)		(0.1)		Other assets	(0.1)		(0.1)
Accounts payable	Accounts payable	(5.7)		(4.0)		Accounts payable	5.0		(5.7)
Gift card liability	Gift card liability	28.0		20.1		Gift card liability	22.0		28.0
Accrued payroll	Accrued payroll	(49.0)		(4.8)		Accrued payroll	(20.2)		(49.0)
Other accrued liabilities	Other accrued liabilities	6.3		7.3		Other accrued liabilities	9.3		6.3
Current income taxes	Current income taxes	16.4		9.9		Current income taxes	4.0		16.4
Other liabilities	Other liabilities	0.0		39.2		Other liabilities	2.3		0.0
Net cash provided by operating activities	Net cash provided by operating activities	107.4		130.0		Net cash provided by operating activities	68.0		107.4
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	(74.1)		(37.1)		Payments for property and equipment	(95.3)		(74.1)
Proceeds from note receivable						Proceeds from note receivable	2.1		—

Payments for franchise restaurant acquisitions	Payments for franchise restaurant acquisitions	(104.5)		—		Payments for franchise restaurant acquisitions	—		(104.5)
Proceeds from sale leaseback transactions, net of related expenses	Proceeds from sale leaseback transactions, net of related expenses	20.5		—		Proceeds from sale leaseback transactions, net of related expenses	—		20.5
Proceeds from sale of assets		0.0		1.3
Proceeds from note receivable		—		1.3

Net cash used in investing activities	Net cash used in investing activities	(158.1)		(34.5)		Net cash used in investing activities	(93.2)		(158.1)
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	487.5		28.4		Borrowings on revolving credit facility	280.0		487.5
Payments on revolving credit facility	Payments on revolving credit facility	(355.0)		(95.0)		Payments on revolving credit facility	(240.0)		(355.0)
Payments on long-term debt						Payments on long-term debt	(11.3)		(11.7)
Purchases of treasury stock	Purchases of treasury stock	(74.7)		(3.9)		Purchases of treasury stock	(2.1)		(74.7)
Payments on long-term debt		(11.7)		(9.8)
Payments of dividends						Payments of dividends	(0.2)		(1.0)
Payments for debt issuance costs	Payments for debt issuance costs	(3.1)		(2.2)		Payments for debt issuance costs	—		(3.1)
Payments of dividends		(1.0)		(1.3)
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	0.4		8.5		Proceeds from issuance of treasury stock	0.0		0.4
Net cash provided by (used in) financing activities		42.4		(75.3)
Net cash provided by financing activities						Net cash provided by financing activities	26.4		42.4
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(8.3)		20.2		Net change in cash and cash equivalents	1.2		(8.3)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	23.9		43.9		Cash and cash equivalents at beginning of period	13.5		23.9
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	15.6	$	64.1	Cash and cash equivalents at end of period	$	14.7	$	15.6

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Shareholders’ Deficit(Unaudited)

(In millions)


	Twenty-Six Week Period Ended December 28, 2022
	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at June 29, 2022	$	7.0	$	690.9	$	(148.4)	$	(812.3)	$	(5.3)	$	(268.1)
Net loss	—		—		(30.2)		—		—		(30.2)
Other comprehensive loss	—		—		—		—		(1.0)		(1.0)
Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	—		4.7		—		—		—		4.7
Purchases of treasury stock	—		0.2		—		(2.2)		—		(2.0)
Issuances of treasury stock	—		(7.8)		—		7.8		—		—
Retirement of stock	(1.0)		—		(306.1)		307.1		—		—
Balances at September 28, 2022	$	6.0	$	688.0	$	(484.7)	$	(499.6)	$	(6.3)	$	(296.6)
Net income	—		—		27.9		—		—		27.9
Other comprehensive income	—		—		—		—		0.1		0.1
Dividends	—		—		—		—		—		—
Stock-based compensation	—		1.2		—		—		—		1.2
Purchases of treasury stock	—		0.0		—		(0.1)		—		(0.1)
Issuances of treasury stock	—		(0.5)		—		0.5		—		0.0

Balances at December 28, 2022	$	6.0	$	688.7	$	(456.8)	$	(499.2)	$	(6.2)	$	(267.5)


	Twenty-Six Week Period Ended December 29, 2021
	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at June 30, 2021	$	7.0	$	685.4	$	(266.1)	$	(724.9)	$	(4.7)	$	(303.3)

Net income	—		—		13.2		—		—		13.2
Other comprehensive loss	—		—		—		—		(0.4)		(0.4)
Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	—		4.3		—		—		—		4.3
Purchases of treasury stock	—		(2.0)		—		(37.6)		—		(39.6)
Issuances of treasury stock	—		(8.3)		—		8.6		—		0.3
Balances at September 29, 2021	$	7.0	$	679.4	$	(252.9)	$	(753.9)	$	(5.1)	$	(325.5)
Net income	—		—		27.6		—		—		27.6
Other comprehensive loss	—		—		—		—		(0.1)		(0.1)
Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	—		5.6		—		—		—		5.6
Purchases of treasury stock	—		0.0		—		(35.1)		—		(35.1)
Issuances of treasury stock	—		(1.3)		—		1.4		—		0.1

Balances at December 29, 2021	$	7.0	$	683.7	$	(225.3)	$	(787.6)	$	(5.2)	$	(327.4)

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

~~Chili’s Restaurant Acquisitions~~

~~Note 3~~

Revenue Recognition

Note 43

Other Gains and Charges

Note 4

Income Taxes

Note 5

Net (Loss) Income ~~Taxes~~Per Share

1211

Note 6

~~Net Income Per Share~~Segment Information

1211

Note 7

~~Segment Information~~Fair Value Measurements

1314

Note 8

~~Fair Value Measurements~~Leases

Note 9

~~Leases~~Debt

1715

Note 10

~~Debt~~Accrued Liabilities

1816

Note 11

~~Accrued and Other Liabilities~~Shareholders’ Deficit

1916

Note 12

~~Shareholders’ Deficit~~

~~Note 13~~

Supplemental Cash Flow Information

2117

Note 13

Contingencies

Note 14

~~Contingencies~~Fiscal 2022 Chili’s Restaurant Acquisitions

2218

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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 December ~~29, 2021~~28, 2022 and June ~~30, 2021,~~29, 2022, and for the thirteen and twenty-six week periods ended December ~~29, 2021~~28, 2022 and December ~~23, 2020,~~29, 2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Effective for the first quarter of fiscal 2023, we are presenting certain revenue streams related to gift cards, digital entertainment, Maggiano’s banquet service charges and delivery fees within Company sales to better align with the presentation used within the casual dining industry. Our presentation of Franchise revenues will now include only revenues related to the ongoing franchise-operated restaurants. Comparative figures in prior years have been adjusted to conform to the current year’s presentation. These reclassifications have no effect on Total revenues or Net income previously reported.

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, as well as virtual brands including It’s Just Wings® and Maggiano’s Italian ~~Classics™~~Classics®. AtAs of December ~~29, 2021,~~28, 2022, we owned, operated or franchised ~~1,653~~1,648 restaurants, consisting of 1,182 Company-owned restaurants and ~~471~~466 franchised restaurants, located in the United States, 28 countries and 2two United States territories.

~~Fiscal Year~~

We have a 52 or 53 week fiscal year ending on the last Wednesday in June. We utilize a 13 week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter contains 14 weeks. Fiscal year 2022 contains 52 weeks and will end on June 29, 2022. Fiscal year 2021 ended on June 30, 2021 and contained 53 weeks.

Use of Estimates

The preparation of the 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 (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 Consolidated Financial Statements contained in our June ~~30, 2021~~29, 2022 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 (loss) income in the Consolidated Statements of Comprehensive (Loss) 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 (loss) 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).

~~Impact of~~ COVID-19 Pandemic and Other Impacts to Our Operating Environment

~~In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic and a National Public Health Emergency. The spread of~~During fiscal 2022, increasing COVID-19 ~~has prompted changes~~cases 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~~United States, including the ~~course of the pandemic based on state and local mandates, which has resulted in significant impacts to~~Omicron variant, significantly impacted our guest traffic and ~~sales primarily in~~sales. Many of our restaurants had face mask requirements and some of our restaurants had proof of vaccination requirements, for our customers, team members or both. During fiscal ~~2021.~~2022 and fiscal 2023, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs. The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events could lead to further capacity restrictions, mask and

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~~We have been carefully assessing~~vaccine mandates, wage inflation, staffing challenges, product cost inflation and disruptions in the ~~effect of COVID-19 on~~supply chain that impact our ~~business as conditions continue~~restaurants’ ability to ~~evolve throughout~~obtain the ~~communities we serve. At this time,~~products needed to support their operation. Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing 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 and could lead to further reduced sales, capacity restrictions, restaurant closures, delaysaverage amount guests spend in our ~~supply chain or impair our ability to staff accordingly which could adversely impact our financial results.~~restaurants.

New Accounting Standards Implemented in Fiscal ~~2022~~2023

We reviewed ~~all~~ accounting pronouncements that became effective for our fiscal ~~2022~~2023 and determined that either they were not applicable or they did not have a material impact on the Consolidated Financial Statements (Unaudited). We also reviewed ~~all~~ recently issued accounting pronouncements to be adopted in future periods and determined that they are not expected to have a material impact on the Consolidated Financial Statements (Unaudited).

2. ~~CHILI’S RESTAURANT ACQUISITIONS~~

On October 31, 2021, we completed the acquisition of certain assets and liabilities related to 37 previously franchised Chili’s restaurants located in the Great Lakes and Northeast region of the United States, the “Great Lakes Region Acquisition.” 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).

The total purchase price of $56.0 million, excluding post-closing adjustments, was funded with borrowings from our existing credit facility. We accounted for this acquisition as a business combination. The assets and liabilities of these restaurants were recorded at their preliminary fair values and are subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The final purchase price allocation is expected to be completed during the third 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 date of acquisition.

On September 2, 2021, we completed the acquisition of certain assets and liabilities related to 23 previously franchised Chili’s restaurants located in the Mid-Atlantic region of the United States, the “Mid-Atlantic Region Acquisition.” 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).

The total purchase price of $48.0 million, excluding post-closing adjustments, 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). We accounted for this acquisition as a business combination. The assets and liabilities of these restaurants were recorded at their preliminary fair values and are subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The final purchase price allocation is expected to be completed during the third 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 date of acquisition.

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

Mid-Atlantic Region Great Lakes Region
Fair Value September 2, 2021 Fair Value October 31, 2021
Current assets $ 1.4 $ 2.1
Property and equipment(2)
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 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).

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The following table reflects the changes in deferred franchise and development fees between June ~~30, 2021~~29, 2022 and December ~~29, 2021:~~28, 2022:

Deferred Franchise and Development Fees

Balance as of June ~~30, 2021~~29, 2022

~~11.4~~10.1

Additions

~~0.7~~1.7

~~Amount recognized for Chili's restaurant acquisitions(1)~~

~~(0.7)~~

Amount recognized to Franchise ~~and other~~ revenues

~~(0.8)~~(0.5)

Balance as of December ~~29, 2021~~28, 2022

~~10.6~~11.3

~~(1)~~ The remaining deferred franchise and development fee balances associated with the 60 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 December ~~29, 2021:~~28, 2022:


Fiscal Year	Fiscal Year	Franchise and Development Fees Revenue Recognition		Fiscal Year	Franchise and Development Fees Revenue Recognition
Remainder of 2022		$	0.5
2023		0.9
Remainder of 2023				Remainder of 2023	$	0.4
2024	2024	0.9		2024	0.9
2025	2025	0.8		2025	0.8
2026	2026	0.8		2026	0.8
2027				2027	0.7
Thereafter	Thereafter	6.7		Thereafter	7.7
		$	10.6		$	11.3

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Deferred Gift Card Revenues

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 ~~30, 2021~~29, 2022 and December ~~29, 2021:~~28, 2022:


	Gift Card Liability

Balance as of June ~~30, 2021~~29, 2022	$	~~106.4~~83.9
Gift card sales	~~91.6~~80.3
Gift card redemptions recognized to Company sales	~~(50.6)~~(50.2)
Gift card breakage recognized to ~~Franchise and other revenues~~Company sales	~~(12.2)~~(6.6)
Other	(1.6)
Balance as of December ~~29, 2021~~28, 2022	$	~~135.2~~105.8

3. OTHER GAINS AND CHARGES

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


	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021		December 28, 2022		December 29, 2021
Restaurant closure charges	$	3.3	$	0.3	$	4.8	$	0.5
Severance and other benefit charges	2.4		—		2.9		—
Loss from natural disasters, net of (insurance recoveries)	1.1		0.2		0.9		0.8
Enterprise system implementation costs	1.0		0.3		2.0		0.9
Remodel-related costs	0.2		1.6		1.0		3.1
Lease contingencies	—		2.9		—		2.9


Other	0.5		1.1		1.9		2.7
	$	8.5	$	6.4	$	13.5	$	10.9

•Restaurant closure charges relates to closure costs and leases associated with certain closed Chili’s restaurants for all periods presented and one closed Maggiano’s in the first quarter of fiscal 2023.

•Severance and other benefit chargesrelates to changes in our management team and organizational structure.

•Loss from natural disasters, net of (insurance recoveries)in the current yearprimarily consists of costs incurred related to Hurricane Ian and the Winter Storm in December 2022.

•Enterprise system implementation costsprimarily consists of consulting fees and subscription fees related to the ongoing enterprise system implementation for all periods presented.

•Remodel-related costs relates to existing fixed asset write-offs associated with the ongoing Chili’s and Maggiano’s remodel projects for all periods presented.

•Lease contingenciesin the prior year were recorded for potential lease defaults on certain lease guarantees and subleases.

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4. ~~OTHER GAINS AND CHARGES~~

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

Thirteen Week Periods Ended Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020 December 29,
2021 December 23,
2020
Lease contingencies $ 2.9 $ — $ 2.9 $ —
Remodel-related costs 1.6 0.7 3.1 0.9
Acquisition-related costs, net 0.9 — 0.9 —
Enterprise system implementation costs 0.3 — 0.9 —
Restaurant closure charges 0.3 0.4 0.5 1.9
COVID-19 related charges (0.8) 1.0 (0.5) 2.2
Restaurant impairment charges — 2.5 — 2.5
Other 1.2 0.8 3.1 1.7
$ 6.4 $ 5.4 $ 10.9 $ 9.2

~~Fiscal 2022~~

•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.

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

•Acquisition-related costs, net primarily related to the 60 restaurants acquired from franchisees in the first and the second quarter, refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

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

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

•COVID-19 related charges primarily consisted of 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, partially offset by charges for employee assistance and related payroll taxes for certain team members.

~~Fiscal 2021~~

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

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

•COVID-19 related charges primarily consisted of employee assistance costs and other expenses for the conversion of certain parking lots into dining areas, and initial purchases of face masks and hand sanitizers required to reopen dining rooms.

•Restaurant impairment charges 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.

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5. INCOME TAXES

Thirteen Week Periods Ended Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020 December 29,
2021 December 23,
2020
Effective income tax rate 5.2 % (46.3) % 4.0 % (23.4) %


	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021		December 28, 2022		December 29, 2021
Effective income tax rate	(3.0)	%	5.2	%	50.0	%	4.0	%

The federal statutory tax rate ~~for the periods presented~~ was 21.0%~~. Our effective income tax rate~~ for the thirteen and twenty-six week periods ended December 28, 2022 and December 29, ~~2021 was lower than~~2021.

The change in the ~~federal statutory~~effective income tax rate ~~primarily due~~in the twenty-six week period ended December 28, 2022 to the ~~favorable impact from the FICA tip tax credit. The~~ twenty-six week period ended December 29, 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~~is primarily due to lower Income before income taxes ~~is as follows:~~


	~~Twenty-Six Week Period Ended~~
	December 29, 2021
~~Income tax expense at statutory rate - 21.0%~~	$	~~8.9~~
~~FICA tip tax credit~~	~~(7.6)~~
~~Stock-based compensation excess tax benefits~~	~~(0.7)~~
~~State income taxes, net~~and leverage of ~~federal benefit~~	~~2.6~~

~~Other~~	~~(1.5)~~
~~Provision (benefit) for income taxes - 4.0%~~	$	~~1.7~~

~~Our effective income tax rate for the thirteen and twenty-six week periods ended December 23, 2020 was lower than the federal statutory rate due to the favorable impact from~~ the FICA tip ~~tax credit. The twenty-six week period ended December 23, 2020 also included~~credit, partially offset by the ~~favorable impact of~~ excess tax ~~benefits~~shortfalls associated with stock-based compensation.

6.5. NET (LOSS) INCOME PER SHARE

Basic net (loss) income per share is computed by dividing Net (loss) income by the Basic weighted average shares outstanding for the reporting period. Diluted net (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of Diluted net (loss) 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 (loss) income per share calculation. Basic weighted average shares outstanding are reconciled to Diluted weighted average shares outstanding as follows:


		Thirteen Week Periods Ended		Twenty-Six Week Periods Ended			Thirteen Week Periods Ended		Twenty-Six Week Periods Ended
		December 29, 2021	December 23, 2020	December 29, 2021	December 23, 2020		December 28, 2022	December 29, 2021	December 28, 2022	December 29, 2021
Basic weighted average shares outstanding	Basic weighted average shares outstanding	45.1	45.3	45.5	45.2	Basic weighted average shares outstanding	44.0	45.1	44.0	45.5
Dilutive stock options(1)	Dilutive stock options(1)	0.2	0.2	0.3	0.1	Dilutive stock options(1)	0.0	0.2	—	0.3
Dilutive restricted shares(1)	Dilutive restricted shares(1)	0.6	0.6	0.6	0.6	Dilutive restricted shares(1)	0.8	0.6	—	0.6
Total dilutive impact	Total dilutive impact	0.8	0.8	0.9	0.7	Total dilutive impact	0.8	0.8	—	0.9
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	45.9	46.1	46.4	45.9	Diluted weighted average shares outstanding	44.8	45.9	44.0	46.4

Awards excluded due to anti-dilutive effect	Awards excluded due to anti-dilutive effect	0.9	0.6	0.5	1.1	Awards excluded due to anti-dilutive effect	1.4	0.9	2.8	0.5

(1)Due to the net loss for the twenty-six week period ended December 28, 2022, zero incremental shares are included because the effect would be anti-dilutive.

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7.6. SEGMENT INFORMATION

Our operating segments are Chili’s and Maggiano’s. The Chili’s segment includes the results of our Company-owned Chili’s restaurants, which are principally located in the United States, within the full-service casual dining segment of the industry. The Chili’s segment also has Company-owned restaurants in Canada, and franchised locations in the United States, 28 countries and 2two United States territories. The Maggiano’s segment includes the results of our Company-owned Maggiano’s restaurants in the United States as well as the results from our domestic franchise business. The Other segment includes costs related to our restaurant support teams for the Chili’s and Maggiano’s brands, including operations, finance, franchise, marketing, human resources and culinary innovation. The Other segment also includes costs related to the common and shared infrastructure, including accounting, information technology, purchasing, guest relations, legal and restaurant development.

Company sales for each segment include revenues generated by the operation of Company-owned restaurants including ~~gift card redemptions~~food and ~~revenues from our It’s Just Wings and Maggiano’s Italian Classics virtual brands. Franchise and other revenues for each operating segment include royalties, gift card breakage,~~beverage sales, net of discounts, Maggiano’s banquet service charge income, gift card breakage, delivery income, digital entertainment ~~revenue, franchise advertising fees, franchise and development fees, gift card equalization~~revenues, merchandise income and gift card discount costs from third-party gift card sales. Franchise revenues for each operating segment include royalties, franchise advertising fees, franchise and development fees and gift card equalization.

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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, ~~utilities, property~~repair and ~~equipment~~ maintenance expenses, delivery fees, utilities, credit card processing fees, property taxes, and ~~worker’s comp~~workers’ compensation and general liability ~~insurance.~~expenses.

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


		Thirteen Week Period Ended December 29, 2021									Thirteen Week Period Ended December 28, 2022
		Chili’s(1)		Maggiano’s		Other		Consolidated			Chili’s		Maggiano's		Corporate		Consolidated
Company sales	Company sales	$	791.9	$	112.6	$	—	$	904.5	Company sales	$	869.3	$	140.1	$	—	$	1,009.4
Royalties		8.6		0.1		—		8.7
Franchise fees and other revenues		7.7		4.9		—		12.6
Franchise and other revenues		16.3		5.0		—		21.3
Franchise revenues										Franchise revenues	9.4		0.2		—		9.6
Total revenues	Total revenues	808.2		117.6		—		925.8		Total revenues	878.7		140.3		—		1,019.0

Food and beverage costs	Food and beverage costs	224.8		28.0		—		252.8		Food and beverage costs	253.7		35.7		—		289.4
Restaurant labor	Restaurant labor	277.6		37.8		—		315.4		Restaurant labor	292.3		42.3		—		334.6
Restaurant expenses	Restaurant expenses	205.0		31.5		0.2		236.7		Restaurant expenses	234.1		34.2		0.1		268.4
Depreciation and amortization	Depreciation and amortization	35.4		3.4		2.8		41.6		Depreciation and amortization	36.0		3.3		2.5		41.8
General and administrative	General and administrative	7.2		1.9		24.0		33.1		General and administrative	8.5		1.5		25.6		35.6
Other (gains) and charges	Other (gains) and charges	2.2		—		4.2		6.4		Other (gains) and charges	5.7		0.3		2.5		8.5
Total operating costs and expenses	Total operating costs and expenses	752.2		102.6		31.2		886.0		Total operating costs and expenses	830.3		117.3		30.7		978.3
Operating income (loss)	Operating income (loss)	56.0		15.0		(31.2)		39.8		Operating income (loss)	48.4		23.0		(30.7)		40.7
Interest expenses	Interest expenses	1.4		0.1		9.7		11.2		Interest expenses	0.9		0.1		12.9		13.9
Other income, net	Other income, net	(0.2)		—		(0.3)		(0.5)		Other income, net	—		—		(0.3)		(0.3)
Income (loss) before income taxes	Income (loss) before income taxes	$	54.8	$	14.9	$	(40.6)	$	29.1	Income (loss) before income taxes	$	47.5	$	22.9	$	(43.3)	$	27.1


	Thirteen Week Period Ended December 29, 2021
	Chili's(1)		Maggiano's		Corporate		Consolidated
Company sales(2)	$	798.4	$	117.4	$	—	$	915.8
Franchise revenues(2)	9.8		0.2		—		10.0
Total revenues	808.2		117.6		—		925.8

Food and beverage costs	224.8		28.0		—		252.8
Restaurant labor	277.6		37.8		—		315.4
Restaurant expenses	205.0		31.5		0.2		236.7
Depreciation and amortization	35.4		3.4		2.8		41.6
General and administrative	7.2		1.9		24.0		33.1
Other (gains) and charges	2.2		—		4.2		6.4
Total operating costs and expenses	752.2		102.6		31.2		886.0
Operating income (loss)	56.0		15.0		(31.2)		39.8
Interest expenses	1.4		0.1		9.7		11.2
Other income, net	(0.2)		—		(0.3)		(0.5)
Income (loss) before income taxes	$	54.8	$	14.9	$	(40.6)	$	29.1

1312

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		Thirteen Week Period Ended December 23, 2020									Twenty-Six Week Period Ended December 28, 2022
		Chili’s		Maggiano’s		Other		Consolidated			Chili’s		Maggiano's		Corporate		Consolidated
Company sales	Company sales	$	683.0	$	63.2	$	—	$	746.2	Company sales	$	1,709.9	$	245.6	$	—	$	1,955.5
Royalties		7.6		0.1		—		7.7
Franchise fees and other revenues		5.8		1.0		—		6.8
Franchise and other revenues		13.4		1.1		—		14.5
Franchise revenues										Franchise revenues	18.7		0.3		—		19.0
Total revenues	Total revenues	696.4		64.3		—		760.7		Total revenues	1,728.6		245.9		—		1,974.5

Food and beverage costs	Food and beverage costs	183.7		15.2		—		198.9		Food and beverage costs	514.6		64.3		—		578.9
Restaurant labor	Restaurant labor	233.4		22.4		—		255.8		Restaurant labor	586.7		78.5		—		665.2
Restaurant expenses	Restaurant expenses	188.7		22.1		0.5		211.3		Restaurant expenses	471.0		65.9		0.3		537.2
Depreciation and amortization	Depreciation and amortization	30.8		3.4		3.0		37.2		Depreciation and amortization	72.0		6.5		5.2		83.7
General and administrative	General and administrative	5.4		1.3		23.3		30.0		General and administrative	18.0		4.0		53.1		75.1
Other (gains) and charges	Other (gains) and charges	4.4		0.8		0.2		5.4		Other (gains) and charges	8.7		0.8		4.0		13.5
Total operating costs and expenses	Total operating costs and expenses	646.4		65.2		27.0		738.6		Total operating costs and expenses	1,671.0		220.0		62.6		1,953.6
Operating income (loss)	Operating income (loss)	50.0		(0.9)		(27.0)		22.1		Operating income (loss)	57.6		25.9		(62.6)		20.9
Interest expenses	Interest expenses	1.4		0.1		12.9		14.4		Interest expenses	1.9		0.2		24.1		26.2
Other income, net	Other income, net	(0.2)		—		(0.3)		(0.5)		Other income, net	—		—		(0.7)		(0.7)
Income (loss) before income taxes	Income (loss) before income taxes	$	48.8	$	(1.0)	$	(39.6)	$	8.2	Income (loss) before income taxes	$	55.7	$	25.7	$	(86.0)	$	(4.6)

Segment assets										Segment assets	$	2,128.5	$	230.0	$	161.1	$	2,519.6
Segment goodwill										Segment goodwill	156.4		38.4		—		194.8
Payments for property and equipment										Payments for property and equipment	85.1		6.1		4.1		95.3


		Twenty-Six Week Period Ended December 29, 2021									Twenty-Six Week Period Ended December 29, 2021
		Chili’s(1)		Maggiano’s		Other		Consolidated			Chili’s(1)		Maggiano's		Corporate		Consolidated
Company sales(2)	Company sales(2)	$	1,565.2	$	198.9	$	—	$	1,764.1	Company sales(2)	$	1,575.3	$	206.1	$	—	$	1,781.4
Royalties		17.6		0.2		—		17.8
Franchise fees and other revenues		13.0		7.3		—		20.3
Franchise and other revenues		30.6		7.5		—		38.1
Franchise revenues(2)										Franchise revenues(2)	20.5		0.3		—		20.8
Total revenues	Total revenues	1,595.8		206.4		—		1,802.2		Total revenues	1,595.8		206.4		—		1,802.2

Food and beverage costs	Food and beverage costs	438.2		48.9		—		487.1		Food and beverage costs	438.2		48.9		—		487.1
Restaurant labor	Restaurant labor	551.1		69.2		—		620.3		Restaurant labor	551.1		69.2		—		620.3
Restaurant expenses	Restaurant expenses	409.6		58.1		0.3		468.0		Restaurant expenses	409.6		58.1		0.3		468.0
Depreciation and amortization	Depreciation and amortization	68.4		6.8		5.7		80.9		Depreciation and amortization	68.4		6.8		5.7		80.9
General and administrative	General and administrative	15.2		3.9		50.5		69.6		General and administrative	15.2		3.9		50.5		69.6
Other (gains) and charges	Other (gains) and charges	5.0		0.2		5.7		10.9		Other (gains) and charges	5.0		0.2		5.7		10.9
Total operating costs and expenses	Total operating costs and expenses	1,487.5		187.1		62.2		1,736.8		Total operating costs and expenses	1,487.5		187.1		62.2		1,736.8
Operating income (loss)	Operating income (loss)	108.3		19.3		(62.2)		65.4		Operating income (loss)	108.3		19.3		(62.2)		65.4
Interest expenses	Interest expenses	2.8		0.2		20.7		23.7		Interest expenses	2.8		0.2		20.7		23.7
Other income, net	Other income, net	(0.3)		—		(0.5)		(0.8)		Other income, net	(0.3)		—		(0.5)		(0.8)
Income (loss) before income taxes	Income (loss) before income taxes	$	105.8	$	19.1	$	(82.4)	$	42.5	Income (loss) before income taxes	$	105.8	$	19.1	$	(82.4)	$	42.5

Segment assets		$	2,073.4	$	235.9	$	148.0	$	2,457.3
Segment goodwill		156.5		38.4		—		194.9
Payments for property and equipment	Payments for property and equipment	65.4		5.0		3.7		74.1		Payments for property and equipment	$	65.4	$	5.0	$	3.7	$	74.1

(1)Chili’s segment information includes the results of operations and the fair values of assets related to the 68 restaurants purchased from three former franchisees subsequent to the various acquisition dates during fiscal 2022. Refer to Note 14 - Fiscal 2022 Chili’s Restaurant Acquisitions for further details.

(2)Certain changes in presentation have been made to fiscal 2022 revenue amounts to enhance comparability to the fiscal 2023 presentation. These reclassifications have no effect on Total revenues or Net income previously reported. Refer to Note 1 - Basis of Presentation for further details.

1413

Table of Contents

Footnote Index

Twenty-Six Week Period Ended December 23, 2020
Chili’s Maggiano’s Other Consolidated
Company sales $ 1,358.0 $ 116.4 $ — $ 1,474.4
Royalties 14.2 0.1 — 14.3
Franchise fees and other revenues 10.7 1.4 — 12.1
Franchise and other revenues 24.9 1.5 — 26.4
Total revenues 1,382.9 117.9 — 1,500.8
Food and beverage costs 364.5 27.9 — 392.4
Restaurant labor 461.6 42.2 — 503.8
Restaurant expenses 370.1 42.9 0.8 413.8
Depreciation and amortization 61.4 7.0 6.2 74.6
General and administrative 10.8 2.6 47.1 60.5
Other (gains) and charges 8.0 0.9 0.3 9.2
Total operating costs and expenses 1,276.4 123.5 54.4 1,454.3
Operating income (loss) 106.5 (5.6) (54.4) 46.5
Interest expenses 2.8 0.1 26.1 29.0
Other income, net (0.3) — (0.6) (0.9)
Income (loss) before income taxes $ 104.0 $ (5.7) $ (79.9) $ 18.4
Payments for property and equipment $ 32.8 $ 1.0 $ 3.3 $ 37.1

~~(1)Chili’s segment information for fiscal 2022 includes the results of operations and the preliminary fair value of assets related to the~~ 60 ~~restaurants purchased from two former franchisees subsequent to the acquisition dates. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.~~

8.7. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received ~~for~~to sell an asset or paid to transfer a liability, ~~or the exit price,~~ in an orderly transaction between market participants onat the measurement ~~date.~~date under market conditions. 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 other than 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 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 December 29, 2021 and June 30, 2021, of $10.8 million and $9.6 million, respectively.

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~~Footnote Index~~

~~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 twenty-six week periods ended December 29, 2021, no indicators of impairment 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 twenty-six week periods ended December 29, 2021 and December 23, 2020, no indicators of impairment were identified.

~~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 our annual goodwill impairment analysis in the second quarter of fiscal 2022 using a qualitative approach based on these factors and no indicators of impairment were identified. During the thirteen and twenty-six week periods ended December 29, 2021, management concluded that no triggering event occurred.

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 two quarters of fiscal 2022, we completed the acquisition of 60 Chili’s restaurants from two 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.

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~~Footnote Index~~

~~Long-Term Debt~~

The carrying amount of debt outstanding related to 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:


		December 29, 2021				June 30, 2021					December 28, 2022				June 29, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
3.875% notes	3.875% notes	$	299.5	$	309.0	$	299.3	$	309.0	3.875% notes	$	299.9	$	296.4	$	299.7	$	295.4
5.000% notes	5.000% notes	347.9		375.0		347.5		369.3		5.000% notes	348.6		338.9		348.2		329.0

Non-Financial Assets

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. The fair values of other non-financial assets are determined based on appraisals, sales prices of comparable assets or estimates of discounted cash flow and are categorized as Level 3.

We review the carrying amounts of non-financial assets, primarily long-lived property and equipment, finance lease assets, operating lease assets, reacquired franchise rights, goodwill and transferable liquor licenses 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. Any impairment charges are included in Other (gains) and charges in the Consolidated Statements of Comprehensive (Loss) Income (Unaudited). During the thirteen and twenty-six week periods ended December 28, 2022 and December 29, 2021, no indicators of impairment were identified.

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. Accumulated amortization associated with definite-lived intangible assets at December 28, 2022 and June 29, 2022, was $13.9 million and $12.6 million, respectively.

Chili’s Restaurant Acquisitions

In fiscal 2022, we completed the acquisition of 68 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 14 - Fiscal 2022 Chili’s Restaurant Acquisitions for further details.

9.Table of Contents

Footnote Index

8. 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 (Loss) Income (Unaudited) were as follows:

Thirteen Week Periods Ended Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020 December 29,
2021 December 23,
2020
Operating lease cost $ 43.2 $ 42.0 $ 84.6 $ 83.7
Variable lease cost 15.1 14.9 30.2 28.9
Finance lease amortization 6.1 4.2 11.7 8.2
Finance lease interest 1.4 1.4 3.0 2.9
Short-term lease cost 0.2 0.1 0.3 0.2
Sublease income (1.3) (1.2) (2.4) (2.2)
Total lease costs, net $ 64.7 $ 61.4 $ 127.4 $ 121.7

~~Pre-Commencement Leases~~

As of the end of the second quarter of fiscal 2022, we have 17 pre-commencement leases for new Chili’s locations with undiscounted fixed payments over the initial term of $25.4 million. 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 included in the balances at December 29, 2021. At December 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $23.3 million, Operating lease liabilities of $0.6 million, and Long-term operating lease liabilities, less current portion of $22.9 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 included in the balances at December 29, 2021. At December 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $47.7 million, Operating lease liabilities of $1.5 million, and Long-term operating lease liabilities, less current

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~~Footnote Index~~

portion of $46.7 million. The leases were recorded net of purchase price accounting adjustments and prepaid rent at the date of acquisition. Refer to Note 2 - Chili’s Restaurant Acquisitions for further details.

~~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 December 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $18.1 million, Operating lease liabilities of $0.4 million, and Long-term operating lease liabilities, less current portion of $17.7 million.


	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021		December 28, 2022		December 29, 2021
Operating lease cost	$	45.1	$	43.2	$	90.2	$	84.6
Variable lease cost	15.2		15.1		30.8		30.2
Finance lease amortization	4.9		6.1		10.1		11.7
Finance lease interest	1.0		1.4		2.1		3.0
Short-term lease cost	0.1		0.2		0.2		0.3
Sublease income	(0.6)		(1.3)		(1.5)		(2.4)
Total lease costs, net	$	65.7	$	64.7	$	131.9	$	127.4

~~10.~~9. DEBT

Long-term debt consists of the following:


		December 29, 2021		June 30, 2021			December 28, 2022		June 29, 2022
Revolving credit facility	Revolving credit facility	$	303.8	$	171.3	Revolving credit facility	$	311.3	$	271.3
5.000% notes	5.000% notes	350.0		350.0		5.000% notes	350.0		350.0
3.875% notes(1)	3.875% notes(1)	300.0		300.0		3.875% notes(1)	300.0		300.0
Finance lease obligations	Finance lease obligations	120.0		121.3		Finance lease obligations	78.9		90.2
Total long-term debt and finance leases	Total long-term debt and finance leases	1,073.8		942.6		Total long-term debt and finance leases	1,040.2		1,011.5
Less: unamortized debt issuance costs and discounts	Less: unamortized debt issuance costs and discounts	(2.6)		(3.2)		Less: unamortized debt issuance costs and discounts	(1.5)		(2.1)
Total long-term debt, less unamortized debt issuance costs and discounts	Total long-term debt, less unamortized debt issuance costs and discounts	1,071.2		939.4		Total long-term debt, less unamortized debt issuance costs and discounts	1,038.7		1,009.4
Less: current installments of long-term debt and finance leases~~(1)~~(2)	Less: current installments of long-term debt and finance leases~~(1)~~(2)	(23.9)		(21.5)		Less: current installments of long-term debt and finance leases~~(1)~~(2)	(15.4)		(20.3)
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	$	1,047.3	$	917.9	Long-term debt and finance leases, less current installments	$	1,023.3	$	989.1

(1)Obligations under our 3.875% notes, which will mature in May 2023, have been classified as long-term, reflecting our intent and ability to refinance these notes through our existing revolving credit facility.

(2)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 1110 - 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 twenty-six week period ended December ~~29, 2021,~~28, 2022, net borrowings of ~~$132.5~~$40.0 million were drawn on ~~the~~our revolving credit facility. As of December ~~29, 2021, $496.2~~28, 2022, $488.7 million of credit was available under the ~~new~~ revolving credit facility.

~~In the twenty-six week period ended December 29, 2021, we incurred and capitalized $3.1 million~~

Table of ~~debt issuance costs associated with the new revolver, which are included in Other assets in the Consolidated Balance Sheets (Unaudited).~~Contents

Footnote Index

Financial Covenants

Our debt agreements contain various financial covenants that, among other things, require the maintenance of certain leverage ratios. As of December ~~29, 2021,~~28, 2022, we were in compliance with our covenants pursuant to the $800.0

~~Table of Contents~~

~~Footnote Index~~

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 ~~2022.~~

2023.

~~11.~~10. ACCRUED ~~AND OTHER~~ LIABILITIES

Other accrued liabilities consist of the following:


		December 29, 2021		June 30, 2021			December 28, 2022		June 29, 2022
Property tax	Property tax	$	25.7	$	22.4	Property tax	$	25.3	$	23.3
Current installments of finance leases		23.9		21.5
Insurance	Insurance	22.9		21.7		Insurance	24.8		23.5
Sales tax	Sales tax	19.7		23.2		Sales tax	20.5		14.4
Current installments of long-term debt and finance leases						Current installments of long-term debt and finance leases	15.4		20.3
Utilities and services						Utilities and services	10.3		9.6
Interest	Interest	6.3		6.9		Interest	7.2		6.5
Utilities and services		8.9		8.4

Other~~(1)~~	Other~~(1)~~	21.4		13.3		Other~~(1)~~	18.5		18.5
		$	128.8	$	117.4		$	122.0	$	116.1

~~(1)~~Other primarily consists of contingent lease liabilities related to our lease guarantees, guest deposits for Maggiano’s banquets, rent-related accruals, certain exit-related lease accruals, deferred franchise and development fees, charitable donations and other various accruals. Refer to Note 14 - Contingencies for additional information about our secondarily liable lease guarantees.

~~Other liabilities consist of the following:~~

December 29,
2021 June 30,
2021
Insurance $ 36.5 $ 35.0
Deferred payroll taxes(1)
27.2 27.2
Deferred franchise and development fees 9.6 10.4
Unrecognized tax benefits 2.7 3.5
Other 5.4 5.9
$ 81.4 $ 82.0

~~(1)Deferred payroll taxes consists of the second installment of the deferral of the employer portion of certain payroll related taxes as allowed under the CARES Act which is due on December 31, 2022.~~

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~~Footnote Index~~

~~12.~~11. SHAREHOLDERS’ DEFICIT

~~The changes~~Retirement of Common Stock

During the first quarter of fiscal 2023, the Board of Directors approved the retirement of 10.0 million shares of Treasury stock for a weighted average price per share of $30.71. As of December 28, 2022, 16.3 million shares remain in ~~Total shareholders’ deficit during the twenty-six week periods ended December 29, 2021 and December 23, 2020, respectively, were as follows:~~

Twenty-Six Week Period Ended December 29, 2021
Common Stock Additional
Paid-In
Capital Accumulated Deficit Treasury
Stock Accumulated
Other
Comprehensive
Loss Total
Balances at June 30, 2021 $ 7.0 $ 685.4 $ (266.1) $ (724.9) $ (4.7) $ (303.3)
Net income — — 13.2 — — 13.2
Other comprehensive loss — — — — (0.4) (0.4)
Dividends — — 0.0 — — 0.0
Stock-based compensation — 4.3 — — — 4.3
Purchases of treasury stock — (2.0) — (37.6) — (39.6)
Issuances of treasury stock — (8.3) — 8.6 — 0.3
Balances at September 29, 2021 $ 7.0 $ 679.4 $ (252.9) $ (753.9) $ (5.1) $ (325.5)
Net income — — 27.6 — — 27.6
Other comprehensive loss — — — — (0.1) (0.1)
Dividends — — 0.0 — — 0.0
Stock-based compensation — 5.6 — — — 5.6
Purchases of treasury stock — 0.0 — (35.1) — (35.1)
Issuances of treasury stock — (1.3) — 1.4 — 0.1
Balances at December 29, 2021 $ 7.0 $ 683.7 $ (225.3) $ (787.6) $ (5.2) $ (327.4)

Twenty-Six Week Period Ended December 23, 2020
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)
treasury.

Share Repurchases

~~Table of Contents~~

~~Footnote Index~~

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 twenty-six week period ended December ~~29, 2021,~~28, 2022, we repurchased ~~1.6~~0.1 million shares of our common stock for ~~$74.7~~$2.1 million, ~~including 1.5 million shares purchased as part~~all of ~~our share repurchase program and 0.1 million shares~~which were purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. As of December ~~29, 2021,~~28, 2022, approximately ~~$230.0~~$204.0 million ~~was available under our~~of share repurchase ~~authorizations.~~authorization remains under the current share repurchase program.

Stock-based Compensation

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


		Twenty-Six Week Periods Ended					Twenty-Six Week Periods Ended
		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021
Restricted share awards	Restricted share awards					Restricted share awards
Restricted share awards granted	Restricted share awards granted	0.4		0.5		Restricted share awards granted	0.7		0.4
Weighted average fair value per share	Weighted average fair value per share	$	53.27	$	39.89	Weighted average fair value per share	$	29.48	$	53.27

~~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. In the twenty-six week periods ended December 29, 2021 and December 23, 2020, dividends paid were solely related to the 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.16

~~13.~~

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Footnote Index

12. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes and interest is as follows:

Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020
Income taxes, net of (refunds) $ (11.2) $ 0.8
Interest, net of amounts capitalized 20.7 26.2


	Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021
Income taxes, net	$	4.4	$	(11.2)
Interest, net of amounts capitalized	23.6		20.7

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


		Twenty-Six Week Periods Ended					Twenty-Six Week Periods Ended
		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021
Operating lease additions(1)	Operating lease additions(1)	$	141.8	$	38.0	Operating lease additions(1)	$	45.5	$	141.8
Finance lease additions	Finance lease additions	11.9		3.9		Finance lease additions	0.2		11.9
Accrued capital expenditures	Accrued capital expenditures	5.6		7.9		Accrued capital expenditures	17.9		5.6
Retirement of fully depreciated assets	Retirement of fully depreciated assets	14.5		7.7		Retirement of fully depreciated assets	84.5		14.5

(1)The twenty-six week period ended December 29, 2021 primarily included operating lease additions associated with the 60 restaurants purchased from two former franchisees. Refer to Note 214 - Fiscal 2022 Chili’s Restaurant Acquisitions ~~and to Note 9 - Leases~~ for further details.

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~~Footnote Index~~

~~14.~~13. 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 December ~~29, 2021~~28, 2022 and June ~~30, 2021,~~29, 2022, we have outstanding lease guarantees or are secondarily liable for an estimated ~~$31.9~~$22.8 million and ~~$29.2~~$26.3 million, respectively. These amounts represent the maximum known potential liability of 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 ~~2022~~2023 through fiscal ~~2027.~~2028.

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~~an 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 December ~~29, 2021,~~28, 2022, we have ~~recorded~~ contingent liabilities of ~~$4.0~~$1.1 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 December ~~29, 2021,~~28, 2022, we had $5.8 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 10 months.

Cyber Security 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. We settled all claims from payment card companies related to this incident and do not expect material claims from payment card companies in the future. ~~The~~In connection with this event, 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 (the “Litigation”) relating to this incident. In the Litigation, plaintiffs assert various claims 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.

~~On November 16, 2021, we submitted~~

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Footnote Index

Oral argument of our ~~appellate brief to the 11~~th ~~Circuit Court~~appeal of ~~Appeals seeking to overturn~~ the district court’s class certification ~~orders. The US Chamber~~order was held before the Eleventh Circuit Court of ~~Commerce and~~Appeals on June 8, 2022 in Jacksonville, Florida. We await the Restaurant Law Center/Retail Litigation Center/National Retail Federation filed respective amicus briefs in support of our position two weeks later. Plaintiffs filed their response brief on January 6, 2022. Our reply brief is due on February 28, 2022.

court’s ruling. In the interim, all matters at the district court have been stayed. We believe we have defenses and intend to continue defending the Litigation. As such, as of December ~~29, 2021,~~28, 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 process involving 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 no 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.

14. FISCAL 2022 CHILI’S RESTAURANT ACQUISITIONS

During 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.

•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 $57.1 million, including post-closing adjustments, funded with borrowings from our existing credit facility.

•Northwest Region Acquisition - On February 1, 2022, we acquired six previously franchised Chili’s restaurants and on May 5, 2022, we acquired two additional previously franchised Chili’s restaurants located in the Northwest region of the United States for a total purchase price of $2.0 million, including 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 acquired restaurants were recorded at their fair values. The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the acquisition dates.

2218

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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 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 for the material acquisitions are as follows:


	Mid-Atlantic Region		Great Lakes Region
	Fair Value September 2, 2021		Fair Value October 31, 2021
Current assets	$	1.4	$	2.1
Property and equipment	46.2		43.6
Operating lease assets	23.6		47.8
Reacquired franchise rights(1)	4.7		4.6
Goodwill(2)	—		7.2
Current liabilities	(1.4)		(1.4)
Finance lease liabilities, less current portion	(3.7)		—
Operating lease liabilities, less current portion	(23.1)		(46.8)
Net assets acquired(3)	$	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)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.

(3)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.

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 twenty-six week periods ended December ~~29, 2021~~28, 2022 and December ~~23, 2020,~~29, 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.

Overview

~~Impact~~

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COVID-19 Pandemic and Other Impacts to Our Operating Environment

~~In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic and a National Public Health Emergency. The spread of~~During fiscal 2022, increasing COVID-19 ~~has prompted changes~~cases 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~~United States, including the ~~course of the pandemic based on state and local mandates, which has resulted in significant impacts to~~Omicron variant, significantly impacted our guest traffic and ~~sales primarily~~sales. Many of our restaurants had face mask requirements and some of our restaurants had proof of vaccination requirements, for our customers, team members or both. During fiscal 2022 and fiscal 2023, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs. The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events could lead to further capacity restrictions, mask and vaccine mandates, wage inflation, staffing challenges, product cost inflation and disruptions in ~~fiscal 2021.~~

~~Chili’s and Maggiano’s~~the supply chain that impact our restaurants’ ability to ~~continue serving~~obtain the products needed to support their operation. Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing the average amount guests during the COVID-19 pandemic is the result of our strategic decision to invest in technology, virtual brands, and off-premise capabilities including online ordering, mobile app ordering, curbside service and third-party delivery.

~~We have experienced limited material shortages and service disruptions~~spend in our ~~supply chain and in the availability of labor to operate our~~ restaurants. We also experienced an increase in employee turnover in the first two quarters of fiscal 2022. We recognize there is significant demand for talent and are actively working to safeguard, engage, attract and retain our employees. It is possible that shortages or disruptions could increase during fiscal 2022 as demand for goods, transportation and labor increases.

~~Impact on Financial Outlook~~

The ultimate impact of the COVID-19 pandemic cannot be reasonably estimated due to the uncertainty about the extent and duration of the spread of the virus, the availability, acceptance and 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 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~~increase profits, bring back guests and engage team members. Our strategies and culture are intended to ~~differentiate~~strengthen our ~~brands from the competition~~position in casual dining and ~~to focus on the guest experience. We are effectively and efficiently managing~~grow our ~~restaurants to establish a lasting presence for our brands in key markets around the world.~~core business over time. Our primary brand strategy is to make our guests feel special through great food and quality service so that they return to our restaurants.

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Guest Engagement Through Technology - We have invested in our technology and off-premise options as more guests are opting for To-Go and delivery. We expanded partnerships with third-party delivery companies, and Chili’s, ~~partnership with~~Maggiano’s, and It’s Just Wings brands are currently available on DoorDash, ~~has been instrumental in growing off-premise business~~Uber Eats, and ~~offering our guests continued service during the COVID-19 pandemic. We leveraged technology so that DoorDash orders~~Grubhub. Orders to these third-party delivery companies are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. We believe that guests will continue to prefer convenience and off-premise options. We plan to continue investments in our technology systems to support our To-Go and delivery capabilities.

In dining rooms, we use tabletop devices to engage our guests at the table. These devices ~~allow~~provide functionality for guests to pay at the table, ~~reordering,~~order or re-order, engage in digital entertainment, to provide guest feedback and ~~interaction~~interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency. We customize offerings for these guests based on their purchase behavior, and we continue to shift more of our overall marketing spend to these customized channels and promotions. We believe this strategy gives us a sustained competitive advantage over independent restaurants and the majority of our competitors.behavior.

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~~we are committed to offering consistent, quality products at a price point that is compelling to our guests. ~~Our~~We discontinued the 3 for $10.99 platform during the fourth quarter of fiscal 2022 and replaced it with 3 for Me, a flexible value ~~platforms allow~~bundle providing guests an unbeatable everyday value, while allowing us to ~~mix and match select menu items at a discounted price as part~~be more flexible in terms of pricing, in light of the ~~every-day base menu.~~inflationary challenges. Guests can order customized meals inclusive of a non-alcoholic drink, appetizer and entrée starting at just $10.99. The bundle can be augmented with a premium appetizer, dessert, or alcoholic beverage, each for just $2.49 extra. 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 brands It’s Just Wings and Maggiano’s Italian Classics, are also a critical part of our strategy. In the twenty-six week period ended December 29, 2021, Chili’s off-premise sales, including both to-go and delivery, were approximately 35% of Company sales, with approximately 53% coming from To-Go and 47% 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 focus on our core equities and improving guest satisfaction with our food and service by improving execution of our operations standards.

Maggiano’s - At Maggiano’s, we believe our focus on operating fundamentals and technology provide the foundation for future efficiencies and growth. For example, Maggiano’s partnerships with delivery ~~partnership with DoorDash makes~~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 It’s Just Wings, to sustain revenues.~~ Maggiano’s historically hosts a significant portion of its banquets in the holiday season during the second and third quarters of the fiscal year.

Virtual Brands - We ~~are investing~~have invested in virtual brands, restaurant-like menu offerings that are only available for purchase digitally, to drive restaurant traffic and sales ~~growth. We expect that our~~growth at both Chili’s and Maggiano’s. Our virtual brands ~~will enable~~have enabled 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 our restaurants’ kitchens.

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It’s Just Wings, ~~launched on June 23, 2020,~~ is an offering consisting of chicken wings available in a variety of different sauces and rubs, curly fries, ranch dressing ~~fried Oreos~~ and hand pies for a value price. Maggiano’s Italian Classics offers a select group of items ~~from~~inspired by the ~~full~~ menu of Maggiano’s Little Italy including several appetizers, salads, pastas, entrées, mac & cheese and hand pies.

~~They~~These brands are available for purchase through ~~DoorDash, Google Food Ordering~~our third party service providers and ~~their respective~~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 plan to continue to test and strategically launch additional virtual brands in the future to further drive our growth.~~

Franchise Partnerships - Our franchisees continue to grow our brands around the world, opening nine restaurants ~~and entering into two new development agreement~~ for the twenty-six week period ended December ~~29, 2021.~~28, 2022. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and

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existing franchise partners. We are also supporting our franchise partners with opportunities to expand sales through our virtual brand offerings.

Company Development - The following table details the number of restaurant openings during the thirteen and twenty-six week periods ended December ~~29, 2021~~28, 2022 and December ~~23, 2020,~~29, 2021, respectively, total full year projected openings in fiscal ~~2022,~~2023 and the total restaurants open at each period end:


		Openings During the			Openings During the		Full Year Projected Openings				Openings During the			Openings During the		Full Year Projected Openings
		Thirteen Week Periods Ended		Twenty-Six Week Periods Ended				Total Open Restaurants at			Thirteen Week Periods Ended		Twenty-Six Week Periods Ended				Total Open Restaurants at
		December 29, 2021	December 23, 2020		December 29, 2021	December 23, 2020	Fiscal 2022	December 29, 2021	December 23, 2020		December 28, 2022	December 29, 2021		December 28, 2022	December 29, 2021	Fiscal 2023	December 28, 2022	December 29, 2021
Company-owned restaurants	Company-owned restaurants									Company-owned restaurants
Chili’s domestic	Chili’s domestic	1	1		2	4	4	1,125	1,061	Chili’s domestic	4	1		4	2	14	1,126	1,125
Chili’s international	Chili’s international	—	—		—	—	—	5	5	Chili’s international	—	—		—	—	—	5	5
Maggiano’s domestic	Maggiano’s domestic	—	—		—	—	—	52	52	Maggiano’s domestic	—	—		—	—	—	51	52
Total Company-owned	Total Company-owned	1	1		2	4	4	1,182	1,118	Total Company-owned	4	1		4	2	14	1,182	1,182
Franchise restaurants	Franchise restaurants									Franchise restaurants
Chili’s domestic	Chili’s domestic	1	—		1	1	3	109	171	Chili’s domestic	—	1		1	1	1	101	109
Chili’s international	Chili’s international	5	1		8	4	10-13	360	364	Chili’s international	6	5		8	8	16-20	363	360
Maggiano’s domestic	Maggiano’s domestic	—	1		—	1	—	2	2	Maggiano’s domestic	—	—		—	—	—	2	2
Total franchise	Total franchise	6	2		9	6	13-16	471	537	Total franchise	6	6		9	9	17-21	466	471
Total restaurants	Total restaurants									Total restaurants
Chili’s domestic	Chili’s domestic	2	1		3	5	7	1,234	1,232	Chili’s domestic	4	2		5	3	15	1,227	1,234
Chili’s international	Chili’s international	5	1		8	4	10-13	365	369	Chili’s international	6	5		8	8	16-20	368	365
Maggiano’s domestic	Maggiano’s domestic	—	1		—	1	—	54	54	Maggiano’s domestic	—	—		—	—	—	53	54
Total	Total	7	3		11	10	17-20	1,653	1,655	Total	10	7		13	11	31-35	1,648	1,653

~~During~~Relocations are not included in the ~~twenty-six week period ended December 29, 2021, we acquired 60~~table above. We relocated one Chili’s ~~restaurants previously owned by two former franchisees. The acquisition of these restaurants is not reflected in Openings~~domestic Company-owned restaurant during the twenty-six week period ended December 29, 2021 or Full Year Projected Openings total as they are existing restaurant locations transitioning ownership. These acquired restaurants are included in Total Open Restaurants at December 29, 2021 within the total for Company-owned restaurants Chili’s domestic.second quarter of fiscal 2023.

At December ~~29, 2021,~~28, 2022, we own property for 5351 of the 1,182 Company-owned restaurants and two closed restaurants. The net book values associated with these restaurants included land of $43.4 million and buildings of ~~$19.1~~$13.6 million.

Revenues

Thirteen and Twenty-Six Week Periods Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

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

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•Company sales include revenues generated by the operation of Company-owned restaurants including ~~gift card redemptions~~food and ~~revenues from our It’s Just Wings and Maggiano’s Italian Classics virtual brands.~~

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

•

~~Table of Contents~~Franchise revenues include royalties, franchise advertising fees, franchise and development fees and gift card equalization.

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 December 23, 2020		$	696.4	$	64.3	$	760.7
Thirteen Week Period Ended December 29, 2021								Thirteen Week Period Ended December 29, 2021	$	808.2	$	117.6	$	925.8
Change from:	Change from:							Change from:
Comparable restaurant sales	Comparable restaurant sales	78.5		49.4		127.9		Comparable restaurant sales	60.4		23.2		83.6
Restaurant acquisitions(1)								Restaurant acquisitions(1)	11.9		—		11.9
Restaurant openings	Restaurant openings	3.2		—		3.2		Restaurant openings	4.4		—		4.4
Restaurant acquisitions(1)		27.0		—		27.0
Restaurant closures(2)		0.2		—		0.2
Maggiano's banquet income								Maggiano's banquet income	—		1.7		1.7
Gift card discount costs								Gift card discount costs	0.4		0.1		0.5
Gift card breakage								Gift card breakage	(2.4)		(0.3)		(2.7)
Digital entertainment revenues								Digital entertainment revenues	0.7		—		0.7
Merchandise income								Merchandise income	0.1		—		0.1
Delivery service fee income								Delivery service fee income	(1.0)		0.3		(0.7)
Restaurant closures								Restaurant closures	(3.6)		(2.3)		(5.9)

Company sales	Company sales	108.9		49.4		158.3		Company sales	70.9		22.7		93.6
Royalties(3)		1.0		—		1.0
Franchise fees and other revenues		1.9		3.9		5.8
Franchise and other revenues		2.9		3.9		6.8
Thirteen Week Period Ended December 29, 2021		$	808.2	$	117.6	$	925.8
Franchise revenues(2)								Franchise revenues(2)	(0.4)		—		(0.4)
Thirteen Week Period Ended December 28, 2022								Thirteen Week Period Ended December 28, 2022	$	878.7	$	140.3	$	1,019.0


		Total Revenues							Total Revenues
		Chili’s		Maggiano’s		Total Revenues			Chili’s		Maggiano’s		Total Revenues
Twenty-Six Week Period Ended December 23, 2020		$	1,382.9	$	117.9	$	1,500.8
Twenty-Six Week Period Ended December 29, 2021								Twenty-Six Week Period Ended December 29, 2021	$	1,595.8	$	206.4	$	1,802.2
Change from:	Change from:							Change from:
Comparable restaurant sales	Comparable restaurant sales	166.2		82.5		248.7		Comparable restaurant sales	88.9		38.5		127.4
Restaurant acquisitions(1)								Restaurant acquisitions(1)	45.6		—		45.6
Restaurant openings	Restaurant openings	8.6		—		8.6		Restaurant openings	7.0		—		7.0
Restaurant acquisitions(1)		31.1		—		31.1
Restaurant closures(2)		0.8		—		0.8
Restaurant relocations		0.5		—		0.5
Maggiano's banquet income								Maggiano's banquet income	—		2.8		2.8
Gift card discount costs								Gift card discount costs	0.7		0.2		0.9
Gift card breakage								Gift card breakage	(2.0)		(0.3)		(2.3)
Merchandise income								Merchandise income	0.1		—		0.1
Digital entertainment revenues								Digital entertainment revenues	1.1		—		1.1
Delivery service fee income								Delivery service fee income	(1.9)		0.4		(1.5)
Restaurant closures								Restaurant closures	(4.9)		(2.1)		(7.0)

Company sales	Company sales	207.2		82.5		289.7		Company sales	134.6		39.5		174.1
Royalties(3)		3.4		0.1		3.5
Franchise fees and other revenues		2.3		5.9		8.2
Franchise and other revenues		5.7		6.0		11.7
Twenty-Six Week Period Ended December 29, 2021		$	1,595.8	$	206.4	$	1,802.2
Franchise revenues(2)								Franchise revenues(2)	(1.8)		—		(1.8)
Twenty-Six Week Period Ended December 28, 2022								Twenty-Six Week Period Ended December 28, 2022	$	1,728.6	$	245.9	$	1,974.5

(1)We acquired 23 Chili’s restaurants on September 2, 2021, ~~and~~ 37 Chili’s restaurants on October 31, 2021, six Chili’s restaurants on February 1, 2022 and two Chili’s restaurants on May 5, 2022 from ~~two~~three franchisees. The revenues generated by these restaurants since the date of the acquisitions are included in Company

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sales for the thirteen and twenty-six week periods ended December 28, 2022.

(2)Our Chili’s and Maggiano’s franchisees generated sales of approximately $213.4 million and $2.6 million and $419.0 million and $5.0 million respectively for the thirteen and twenty-six week periods ended December 28, 2022 compared to $201.8 million and $2.2 million and $415.1 million and $4.2 million respectively in sales for the thirteen and twenty-six week periods ended December 29, 2021.

~~(2)Restaurant closures include the change~~ Franchise revenues decreased primarily because of lower royalties due to variance in ~~Company sales resulting from temporary closures longer than 14 consecutive days that occurred in the previous 18 months, partially offset by permanently closed locations.~~

~~(3)Our franchisees generated sales of approximately $204.0 million~~royalty rates, and $419.3 million for the thirteen and twenty-six week periods ended December 29, 2021 compared to $187.7 million and $353.2 million in sales for the thirteen and twenty-six week periods ended December 23, 2020.lower franchise advertising fees.

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The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and twenty-six week periods ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020:~~29, 2021:


		Percentage Change in the Thirteen Week Period Ended December 29, 2021 versus December 23, 2020											Percentage Change in the Thirteen Week Period Ended December 28, 2022 versus December 29, 2021
		Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)			Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)
Company-owned	Company-owned	17.7	%	2.1	%	6.8	%	8.8	%	4.6	%	Company-owned	9.7	%	9.7	%	5.5	%	(5.5)	%	0.9	%
Chili’s	Chili’s	12.1	%	2.4	%	3.4	%	6.3	%	4.9	%	Chili’s	8.0	%	10.0	%	5.6	%	(7.6)	%	1.1	%
Maggiano’s	Maggiano’s	78.1	%	(0.1)	%	24.9	%	53.3	%	0.0	%	Maggiano’s	21.2	%	7.7	%	5.1	%	8.4	%	(1.9)	%
Chili’s Franchise(4)		17.0	%
Franchise(4)												Franchise(4)	6.2	%
U.S.	U.S.	4.8	%									U.S.	4.1	%
International	International	27.7	%									International	7.3	%
Chili’s Domestic(5)		11.5	%
Chili’s domestic(5)												Chili’s domestic(5)	7.5	%

System-wide(6)	System-wide(6)	17.6	%									System-wide(6)	9.1	%


		Percentage Change in the Twenty-Six Week Period Ended December 29, 2021 versus December 23, 2020											Percentage Change in the Twenty-Six Week Period Ended December 28, 2022 versus December 29, 2021
		Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)			Comparable Restaurant Sales(1)		Price Impact		Mix-Shift Impact(2)		Traffic Impact		Restaurant Capacity(3)
Company-owned	Company-owned	17.4	%	1.5	%	6.1	%	9.8	%	3.0	%	Company-owned	7.6	%	8.5	%	4.3	%	(5.2)	%	3.0	%
Chili’s	Chili’s	12.7	%	1.7	%	3.2	%	7.8	%	3.2	%	Chili’s	5.9	%	8.7	%	4.3	%	(7.1)	%	3.2	%
Maggiano’s	Maggiano’s	71.0	%	(0.2)	%	24.6	%	46.6	%	0.0	%	Maggiano’s	19.9	%	6.9	%	4.2	%	8.8	%	(1.0)	%
Chili’s Franchise(4)		20.2	%
Franchise(4)												Franchise(4)	6.4	%
U.S.	U.S.	12.5	%									U.S.	1.8	%
International	International	29.6	%									International	8.9	%
Chili’s Domestic(5)		12.7	%
Chili’s domestic(5)												Chili’s domestic(5)	5.4	%

System-wide(6)	System-wide(6)	17.7	%									System-wide(6)	7.3	%

(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.~~months. Restaurants temporarily closed 14 days or more are excluded from Comparable Restaurant Sales. Percentage amounts are calculated based on the comparable periods year-over-year.

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

(3)Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year, including the effect of the ~~acquisition of 23 Chili’s restaurants in the first quarter of fiscal 2022 and 37 Chili’s restaurants in the second quarter of~~acquisitions completed during fiscal 2022.

(4)Chili’s and Maggiano’s franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive (Loss) 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.

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

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(6)System-wide Comparable Restaurant Sales are derived from sales generated by ~~Company-owned~~ Chili’s and Maggiano’s ~~restaurants~~Company-owned and ~~sales generated at~~ franchise-operated ~~Chili’s~~ restaurants.

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Costs and Expenses

Thirteen Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 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
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	252.8	27.9	%	$	198.9	26.7	%	$	(53.9)	(1.2)	%	Food and beverage costs	$	289.4	28.7	%	$	252.8	27.6	%	$	(36.6)	(1.1)	%
Restaurant labor	Restaurant labor	315.4		34.9	%	255.8		34.3	%	(59.6)		(0.6)	%	Restaurant labor	334.6		33.1	%	315.4		34.4	%	(19.2)		1.3	%
Restaurant expenses	Restaurant expenses	236.7		26.2	%	211.3		28.3	%	(25.4)		2.1	%	Restaurant expenses	268.4		26.6	%	236.7		25.9	%	(31.7)		(0.7)	%
Depreciation and amortization	Depreciation and amortization	41.6				37.2				(4.4)				Depreciation and amortization	41.8				41.6				(0.2)
General and administrative	General and administrative	33.1				30.0				(3.1)				General and administrative	35.6				33.1				(2.5)
Other (gains) and charges	Other (gains) and charges	6.4				5.4				(1.0)				Other (gains) and charges	8.5				6.4				(2.1)
Interest expenses	Interest expenses	11.2				14.4				3.2				Interest expenses	13.9				11.2				(2.7)
Other income, net	Other income, net	(0.5)				(0.5)				—				Other income, net	(0.3)				(0.5)				(0.2)

As a percentage of Company sales:

•Food and beverage costs increased ~~1.2%~~1.1%, including ~~1.8%~~4.6% of higher meat, poultry and other commodity costs due to ~~supply chain constraints and~~ inflationary pressures, ~~and 0.1% of unfavorable menu item mix,~~ partially offset by ~~0.7%~~2.7% of increased menu ~~pricing.~~pricing 0.8% of favorable menu item mix.

•Restaurant labor ~~increased 0.6%~~decreased 1.3%, including ~~1.7%~~2.7% of sales leverage and 0.4% of lower other labor expenses, partially offset by 0.8% of higher hourly labor expenses primarily due to increased wage rates ~~training~~ and ~~overtime, 0.8%~~staffing levels, 0.6% of higher manager expenses due to ~~merit increases~~increased manager salaries and headcount, and 0.4% of higher manager ~~training due to greater than normal manager turnover, partially offset by 1.8% of sales leverage and 0.1% of lower other labor expenses.~~bonus.

•Restaurant expenses ~~decreased 2.1%~~increased 0.7%, including ~~2.9%~~0.8% of ~~sales leverage~~higher repairs and ~~0.6% of lower~~maintenance expenses, ~~related to delivery fees driven by the decline in off-premise sales, partially offset by~~ 0.4% of higher delivery fees due to increased volume and promotions, 0.2% of higher utilities ~~0.3%~~expenses, 0.2% of higher workers’ compensation and general liability expenses, ~~resulting from unfavorable claims experience,~~ 0.2% of higher ~~supervision costs~~rent and 0.5% of higher other restaurant ~~expenses.~~expenses, partially offset by 1.6% of sales leverage.

Depreciation and amortization increased ~~$4.4~~$0.2 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended December ~~23, 2020~~29, 2021	$	~~37.2~~41.6
Change from:
Additions for new and existing restaurant assets	5.0
~~Finance leases~~	~~1.8~~
Acquisition of Chili’s restaurants(1)	~~1.5~~0.8
Corporate assets	~~0.4~~0.5
Retirements and fully depreciated restaurant assets	~~(4.5)~~(4.7)
Finance leases	(1.3)
Other	~~0.2~~ (0.1)
Thirteen Week Period Ended December ~~29, 2021~~28, 2022	$	~~41.6~~41.8

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 6045 Chili’s restaurants acquired insubsequent to the first ~~two quarters~~quarter of fiscal 2022.

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General and administrative expenses increased ~~$3.1~~$2.5 million as follows:


	General and Administrative
Thirteen Week Period Ended December ~~23, 2020~~29, 2021	$	~~30.0~~33.1
Change from:
Performance-based compensation~~(1)~~	~~(5.2)~~6.2
Defined contribution plan employer expenses~~(2)~~	~~2.7~~0.6
~~Stock-based compensation~~Payroll expenses	~~2.2~~0.3
~~Payroll-related expenses~~Stock-based compensation(1)	~~1.0~~ (4.3)
Professional fees	~~0.8~~ (0.3)

Travel and entertainment expenses	~~0.4~~ (0.1)
Other	~~1.2~~0.1
Thirteen Week Period Ended December ~~29, 2021~~28, 2022	$	~~33.1~~35.6

(1)~~Performance-based~~Stock-based compensation decreased due to ~~adjustment in~~ the reversal of performance-based award expense as certain performance targets are no longer expected ~~bonus payout for fiscal 2022 resulting from lower business performance metrics compared~~ to ~~the targets.~~be achieved.

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

Other (gains) and charges consisted of the following (for further details, refer to Note 43 - Other Gains and Charges):


		Thirteen Week Periods Ended					Thirteen Week Periods Ended
		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021
Restaurant closure charges						Restaurant closure charges	$	3.3	$	0.3
Severance and other benefit charges						Severance and other benefit charges	2.4		—
Loss from natural disasters, net of (insurance recoveries)						Loss from natural disasters, net of (insurance recoveries)	1.1		0.2
Enterprise system implementation costs						Enterprise system implementation costs	1.0		0.3
Remodel-related costs						Remodel-related costs	0.2		1.6
Lease contingencies	Lease contingencies	$	2.9	$	—	Lease contingencies	—		2.9
Remodel-related costs		1.6		0.7
Acquisition-related costs, net		0.9		—
Enterprise system implementation costs		0.3		—
Restaurant closure charges		0.3		0.4
COVID-19 related charges		(0.8)		1.0
Restaurant impairment charges		—		2.5

Other	Other	1.2		0.8		Other	0.5		1.1
		$	6.4	$	5.4		$	8.5	$	6.4

Interest expenses ~~decreased $3.2~~increased $2.7 million due to ~~lower~~higher interest rates ~~and average borrowing balances~~ on our revolving credit facility in fiscal 2023 compared to fiscal 2022.

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Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

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


		Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance					Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	487.1	27.6	%	$	392.4	26.6	%	$	(94.7)	(1.0)	%	Food and beverage costs	$	578.9	29.6	%	$	487.1	27.3	%	$	(91.8)	(2.3)	%
Restaurant labor	Restaurant labor	620.3		35.2	%	503.8		34.2	%	(116.5)		(1.0)	%	Restaurant labor	665.2		34.0	%	620.3		34.8	%	(44.9)		0.8	%
Restaurant expenses	Restaurant expenses	468.0		26.5	%	413.8		28.0	%	(54.2)		1.5	%	Restaurant expenses	537.2		27.5	%	468.0		26.3	%	(69.2)		(1.2)	%
Depreciation and amortization	Depreciation and amortization	80.9				74.6				(6.3)				Depreciation and amortization	83.7				80.9				(2.8)
General and administrative	General and administrative	69.6				60.5				(9.1)				General and administrative	75.1				69.6				(5.5)
Other (gains) and charges	Other (gains) and charges	10.9				9.2				(1.7)				Other (gains) and charges	13.5				10.9				(2.6)
Interest expenses	Interest expenses	23.7				29.0				5.3				Interest expenses	26.2				23.7				(2.5)
Other income, net	Other income, net	(0.8)				(0.9)				(0.1)				Other income, net	(0.7)				(0.8)				(0.1)

As a percentage of Company sales:

•Food and beverage costs increased ~~1.0%~~2.3%, including ~~1.4%~~5.5% of higher poultry, meat, produce, and other commodity costs due to ~~supply chain constraints and~~ inflationary pressures, ~~and 0.1% of unfavorable menu item mix,~~ partially offset by ~~0.5%~~2.3% of increased menu pricing and 0.9% of favorable menu ~~pricing.~~item mix.

•Restaurant labor ~~increased 1.0%~~decreased 0.8%, including ~~2.0%~~2.2% of sales leverage, partially offset by 0.9% of higher hourly ~~restaurant~~ labor ~~costs~~expenses primarily ~~including~~due to increased wage rates ~~training~~ and ~~overtime and 0.9%~~staffing levels, 0.6% of ~~higher~~increased manager salaries and ~~training resulting from merit increases~~headcount, 0.3% of increased manager bonus, and ~~greater than normal manager turnover, partially offset by 1.9%~~0.4% of ~~sales leverage.~~higher other labor expenses.

•Restaurant expenses ~~decreased 1.5%~~increased 1.2%, driven by ~~3.1% of sales leverage and~~ 0.7% ~~of lower delivery fees, partially offset by 0.8%~~ of higher repairs and maintenance expenses, 0.7% of higher delivery fee expenses, 0.4% of higher utilities expenses, ~~0.4%~~0.2% of higher ~~advertising~~rent expenses, 0.2% of higher ~~supervision costs~~workers’ compensation and ~~0.5%~~general liability expenses, and 0.4% of higher other restaurant ~~expenses.~~expenses, These increases were partially offset by 1.4% of sales leverage.

Depreciation and amortization increased ~~$6.3~~$2.8 million as follows:


	Depreciation and Amortization
Twenty-Six Week Period Ended December ~~23, 2020~~29, 2021	$	~~74.6~~80.9
Change from:
Additions for existing and new restaurant assets	~~8.9~~
~~Finance leases~~	~~3.3~~10.3
Acquisition of Chili’s restaurants(1)	~~1.7~~3.1
Corporate assets	~~0.8~~1.0
Retirements and fully depreciated restaurant assets	~~(8.6)~~(9.7)
Finance leases	(1.8)

Other	~~0.2~~ (0.1)
Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022	$	~~80.9~~83.7

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 6068 Chili’s restaurants acquired in ~~the first two quarters of~~ fiscal 2022.

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General and administrative ~~expenses~~expenses increased ~~$9.1~~$5.5 million as follows:


	General and Administrative
Twenty-Six Week Period Ended December ~~23, 2020~~29, 2021	$	~~60.5~~69.6
Change from:
Performance-based compensation	7.2

Payroll expenses	1.2
Recruiting	0.4
~~Defined contribution plan employer expenses~~Stock-based compensation(1)	~~5.6~~ (4.1)
~~Stock-based compensation~~	~~2.4~~
Professional fees	~~2.3~~ (1.4)
~~Payroll-related expenses~~	~~2.0~~
~~Travel and entertainment expenses~~	~~0.8~~
~~Performance-based compensation(2)~~	~~(6.2)~~
Other	2.2
Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022	$	~~69.6~~75.1

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

~~(2)Performance-based~~Stock-based compensation decreased due to ~~adjustment in~~ the reversal of performance-based award expense as certain performance targets are no longer expected ~~bonus payout for fiscal 2022 resulting from lower business performance metrics compared~~ to ~~the targets.~~be achieved.

Other (gains) and charges consisted of the following (for further details, refer to Note 43 - Other Gains and Charges):

Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020
Remodel-related costs $ 3.1 $ 0.9
Lease contingencies 2.9 —
Acquisition-related costs, net 0.9 —
Enterprise system implementation costs 0.9 —
Restaurant closure charges 0.5 1.9
COVID-19 related charges (0.5) 2.2
Restaurant impairment charges — 2.5
Other 3.1 1.7
$ 10.9 $ 9.2

~~Interest expenses decreased $5.3 million due to lower interest rates and average borrowing balances on our revolving credit facility in fiscal 2022.~~


	Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021
Restaurant closure charges	$	4.8	$	0.5
Severance and other benefit charges	2.9		—
Enterprise system implementation costs	2.0		0.9
Loss from natural disasters, net of (insurance recoveries)	0.9		0.8
Remodel-related costs	1.0		3.1
Lease contingencies	—		2.9
Other	1.9		2.7
	$	13.5	$	10.9

Income Taxes

Thirteen Week Periods Ended Twenty-Six Week Periods Ended
December 29,
2021 December 23,
2020 Favorable / (Unfavorable) December 29,
2021 December 23,
2020 Favorable / (Unfavorable) Variance
Effective income tax rate 5.2 % (46.3) % (51.5) % 4.0 % (23.4) % (27.4) %


	Thirteen Week Periods Ended				Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021		December 28, 2022		December 29, 2021
Effective income tax rate	(3.0)	%	5.2	%	50.0	%	4.0	%

The federal statutory tax rate was 21.0% for the thirteen and twenty-six week periods ended December ~~29, 2021~~28, 2022 and December ~~23, 2020.~~29, 2021.

The change in the effective income tax rate in the thirteen ~~and twenty-six~~ week ~~periods~~period ended December 28, 2022 to the thirteen week period ended December 29, 2021, ~~increased compared to the thirteen and twenty-six week periods ended December 23, 2020~~is primarily due to ~~a reduced~~

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

The change in the ~~first quarter~~effective income tax rate in the twenty-six week period ended December 28, 2022 to the twenty-six week period ended December 29, 2021, is primarily due to lower Income before income taxes and leverage of ~~fiscal 2022.~~the FICA tip credit, partially offset by the excess tax shortfalls associated with stock-based compensation.

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Segment Results

Chili’s Segment

Thirteen Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage
December 29,
2021 December 23,
2020
Company sales $ 791.9 $ 683.0 $ 108.9 15.9 %
Royalties 8.6 7.6 1.0 13.2 %
Franchise fees and other revenues 7.7 5.8 1.9 32.8 %
Franchise and other revenues 16.3 13.4 2.9 21.6 %
Total revenues $ 808.2 $ 696.4 $ 111.8 16.1 %


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	December 28, 2022		December 29, 2021
Company sales	$	869.3	$	798.4	$	70.9	8.9	%
Franchise revenues	9.4		9.8		(0.4)		(4.1)	%
Total revenues	$	878.7	$	808.2	$	70.5	8.7	%

Chili’s Total revenues increased by ~~16.1%~~8.7% primarily due to ~~higher dining room guest sales and traffic,~~menu price increases, favorable menu item mix, the acquisition of 6045 Chili’s restaurants ~~from two former franchisees~~subsequent to the first quarter of fiscal 2022, and ~~six new~~seven restaurant openings, partially offset by ~~decreased off-premise sales.~~lower traffic. 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
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	224.8	28.4	%	$	183.7	26.9	%	$	(41.1)	(1.5)	%	Food and beverage costs	$	253.7	29.2	%	$	224.8	28.2	%	$	(28.9)	(1.0)	%
Restaurant labor	Restaurant labor	277.6		35.0	%	233.4		34.2	%	(44.2)		(0.8)	%	Restaurant labor	292.3		33.6	%	277.6		34.8	%	(14.7)		1.2	%
Restaurant expenses	Restaurant expenses	205.0		25.9	%	188.7		27.6	%	(16.3)		1.7	%	Restaurant expenses	234.1		26.9	%	205.0		25.6	%	(29.1)		(1.3)	%
Depreciation and amortization	Depreciation and amortization	35.4				30.8				(4.6)				Depreciation and amortization	36.0				35.4				(0.6)
General and administrative	General and administrative	7.2				5.4				(1.8)				General and administrative	8.5				7.2				(1.3)
Other (gains) and charges	Other (gains) and charges	2.2				4.4				2.2				Other (gains) and charges	5.7				2.2				(3.5)

As a percentage of Company sales

•Chili’s Food and beverage costs increased ~~1.5%~~1.0%, including ~~1.9%~~4.9% of higher poultry, meat, ~~poultry~~produce and other commodity costs due to ~~supply chain constraints and~~ inflationary pressures, ~~and 0.3% of unfavorable menu item mix,~~ partially offset by ~~0.7%~~2.8% of increased menu ~~pricing.~~pricing and 1.1% of favorable menu item mix.

•Chili’s Restaurant labor ~~increased 0.8%~~decreased 1.2%, including ~~1.5%~~2.4% of ~~restaurant~~sales leverage, 0.3% of lower health insurance expenses and 0.1% of other labor ~~costs including wage rates, training and overtime, 1.2% of higher manager salaries and training due to merit increases and greater than normal manager turnover,~~expenses, partially offset by ~~1.3%~~0.8% of ~~sales leverage, 0.4%~~increased manager salary rates, headcount and bonus and 0.8% of ~~lower manager bonus expenses due to lower operational performance metrics~~higher hourly labor driven by increased hourly wage rates and ~~0.2% of lower other labor expenses.~~staffing levels.

•Chili’s Restaurant expenses ~~decreased 1.7%~~increased 1.3%, including ~~2.7%~~1.1% of ~~sales leverage~~higher repairs and ~~0.6%~~maintenance expenses, 0.5% of ~~lower~~higher rent expenses, 0.4% of higher delivery fee expenses, ~~partially offset by 0.6%~~0.4% of higher utilities expenses, ~~0.3%~~0.2% of higher workers’ compensation and general liability expenses, ~~resulting from unfavorable claims experience, 0.2% of higher rent expenses and 0.5%~~0.7% of higher other restaurant ~~expenses.~~expenses, partially offset by 2.0% of sales leverage.

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Chili’s Depreciation and amortization increased ~~$4.6~~$0.6 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended December ~~23, 2020~~29, 2021	$	~~30.8~~35.4
Change from:
Additions for new and existing restaurant assets	~~4.8~~
~~Finance leases~~	~~1.7~~4.7
Acquisition of Chili’s restaurants(1)	~~1.5~~ 0.8
Finance leases	(1.2)
Retirements and fully depreciated restaurant assets	~~(3.5)~~(3.6)
Other	~~0.1~~ (0.1)
Thirteen Week Period Ended December ~~29, 2021~~28, 2022	$	~~35.4~~36.0

Chili’s General and administrative increased ~~$1.8~~$1.3 million as follows:


	General and Administrative
Thirteen Week Period Ended December ~~23, 2020~~29, 2021	$	~~5.4~~7.2
Change from:
Performance-based compensation	1.6
Payroll expenses	0.3
Defined contribution plan employer expenses~~(1)~~	~~2.2~~0.1
Stock-based compensation	~~0.2~~ (0.6)
~~Payroll-related expenses~~	~~0.1~~
~~Performance-based compensation(2)~~	~~(1.4)~~



Other	~~0.7~~ (0.1)
Thirteen Week Period Ended December ~~29, 2021~~28, 2022	$	~~7.2~~8.5

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

~~(2)Performance-based compensation decreased due to adjustment in the expected bonus payout for fiscal 2022 resulting from lower business performance metrics compared to the targets.~~

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 43 - Other Gains and Charges):


		Thirteen Week Periods Ended					Thirteen Week Periods Ended
		December 29, 2021		December 23, 2020			December 28, 2022		December 29, 2021
Remodel-related costs		$	1.6	$	0.7
Acquisition of franchise restaurants-related costs		0.9		—
Restaurant closure charges	Restaurant closure charges	0.3		0.3		Restaurant closure charges	$	3.1	$	0.3
Loss from natural disasters, net of (insurance recoveries)	Loss from natural disasters, net of (insurance recoveries)	0.2		0.2		Loss from natural disasters, net of (insurance recoveries)	1.1		0.2
COVID-19 related charges		(0.8)		1.0
Restaurant impairment charges		—		2.1
Severance and other benefit charges						Severance and other benefit charges	1.0		—
Remodel-related costs						Remodel-related costs	0.2		1.6

Other	Other	—		0.1		Other	0.3		0.1
		$	2.2	$	4.4		$	5.7	$	2.2

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Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage
December 29,
2021 December 23,
2020
Company sales $ 1,565.2 $ 1,358.0 $ 207.2 15.3 %
Royalties 17.6 14.2 3.4 23.9 %
Franchise fees and other revenues 13.0 10.7 2.3 21.5 %
Franchise and other revenues 30.6 24.9 5.7 22.9 %
Total revenues $ 1,595.8 $ 1,382.9 $ 212.9 15.4 %


	Twenty-Six Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	December 28, 2022		December 29, 2021
Company sales	$	1,709.9	$	1,575.3	$	134.6	8.5	%
Franchise revenues	18.7		20.5		(1.8)		(8.8)	%
Total revenues	$	1,728.6	$	1,595.8	$	132.8	8.3	%

Chili’s Total revenues increased ~~15.4%~~8.3% primarily due to ~~higher dining room guest sales and traffic,~~price increases, favorable menu item mix, the acquisition of 6068 Chili’s restaurants ~~from two former franchisees~~in fiscal 2022 and ~~six new~~seven restaurant openings, partially offset by ~~decreased off-premise sales.~~lower traffic. 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:


		Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance					Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	438.2	28.0	%	$	364.5	26.8	%	$	(73.7)	(1.2)	%	Food and beverage costs	$	514.6	30.1	%	$	438.2	27.8	%	$	(76.4)	(2.3)	%
Restaurant labor	Restaurant labor	551.1		35.2	%	461.6		34.0	%	(89.5)		(1.2)	%	Restaurant labor	586.7		34.3	%	551.1		35.0	%	(35.6)		0.7	%
Restaurant expenses	Restaurant expenses	409.6		26.2	%	370.1		27.3	%	(39.5)		1.1	%	Restaurant expenses	471.0		27.6	%	409.6		26.0	%	(61.4)		(1.6)	%
Depreciation and amortization	Depreciation and amortization	68.4				61.4				(7.0)				Depreciation and amortization	72.0				68.4				(3.6)
General and administrative	General and administrative	15.2				10.8				(4.4)				General and administrative	18.0				15.2				(2.8)
Other (gains) and charges	Other (gains) and charges	5.0				8.0				3.0				Other (gains) and charges	8.7				5.0				(3.7)

As a percentage of Company sales:

•Chili’s Food and beverage costs increased ~~1.2%~~2.3%, including ~~1.5%~~5.8% of higher poultry, meat, poultry and other commodity costs resulting from ~~supply chain constraints and~~ inflationary pressures, ~~and 0.2% of unfavorable menu item mix,~~ partially offset by ~~0.5%~~2.4% of increased menu ~~pricing.~~pricing and 1.1% of favorable menu item mix.

•Chili’s Restaurant labor ~~increased 1.2%~~decreased 0.7%, including 2.0% of higher restaurant hourly labor costs primarily including wage rates, training and overtime and 0.8% of higher manager salaries and training due to merit increases and greater than normal manager turnover, partially offset by 1.4%1.7% of sales leverage and ~~0.2%~~0.3% of lower other restaurant labor costs, partially offset by 0.8% of increased manager salaries, headcount and bonus and 0.5% of higher hourly labor expenses primarily due to ~~lower operational performance metrics.~~increased wage rates and staffing levels.

•Chili’s Restaurant expenses ~~decreased 1.1%~~increased 1.6%, including ~~2.4%~~0.7% of ~~sales leverage~~higher repairs and ~~0.6%~~maintenance expenses, 0.7% of ~~lower~~higher delivery fee expenses, 0.4% of higher utilities expenses, 0.2% of higher rent expenses, and 0.4% of higher other restaurant expenses, partially offset by 0.8% of higher repairs and maintenance expenses, 0.4% of higher utilities expenses, 0.3% of higher workers’ compensation and general liability expenses resulting from unfavorable claims experience and 0.4% of higher other restaurant expenses.sales leverage.

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Chili’s Depreciation and amortization increased ~~$7.0~~$3.6 million as follows:


	Depreciation and Amortization
Twenty-Six Week Period Ended December ~~23, 2020~~29, 2021	$	~~61.4~~68.4
Change from:
Additions for existing and new restaurant assets	~~8.6~~
~~Finance leases~~	~~3.1~~9.6
Acquisition of Chili’s restaurants(1)	~~1.7~~3.1
Retirements and fully depreciated restaurant assets	~~(6.5)~~(7.3)
Finance leases	(1.7)
Other	~~0.1~~ (0.1)
Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022	$	~~68.4~~72.0

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 6068 Chili’s restaurants acquired in ~~the first two quarters of~~ fiscal 2022.

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Chili’s General and administrative increased ~~$4.4~~$2.8 million as follows:


	General and Administrative
Twenty-Six Week Period Ended December ~~23, 2020~~29, 2021	$	~~10.8~~15.2
Change from:

~~Defined contribution plan employer~~Performance-based compensation	2.0
Payroll expenses~~(1)~~	~~4.3~~0.8
Recruiting	0.5
Stock-based compensation	~~0.5~~
~~Travel and entertainment expenses~~	~~0.4~~
~~Professional fees~~	~~0.2~~
~~Payroll-related expenses~~	~~0.1~~
~~Performance-based compensation(2)~~	~~(1.7)~~(0.8)
Other	~~0.6~~0.3
Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022	$	~~15.2~~18.0

~~(1)Defined contribution plan employer expenses increased due~~Chili’s Other (gains) and charges consisted of the following (for further details, refer to the temporary suspension of employer matching contributions related to the Company’s 401(k) plan from May 2020 through December 2020. Employer matching contributions were reinstated beginning January 1, 2021.Note 3 - Other Gains and Charges):

~~(2)Performance-based compensation decreased due to adjustment in the expected bonus payout for fiscal 2022 resulting from lower business performance metrics compared to the targets.~~


	Twenty-Six Week Periods Ended
	December 28, 2022		December 29, 2021
Restaurant closure charges	$	4.2	$	0.5
Loss from natural disasters, net of (insurance recoveries)	0.9		0.8
Severance and other benefit charges	1.4		—
Remodel-related costs	1.0		3.0


Other	1.2		0.7
	$	8.7	$	5.0

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Maggiano’s Segment

Thirteen Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage
December 29,
2021 December 23,
2020
Company sales $ 112.6 $ 63.2 $ 49.4 78.2 %
Royalties 0.1 0.1 0.0 — %
Franchise fees and other revenues 4.9 1.0 3.9 390.0 %
Franchise and other revenues 5.0 1.1 3.9 354.5 %
Total revenues $ 117.6 $ 64.3 $ 53.3 82.9 %


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as a percentage
	December 28, 2022		December 29, 2021
Company sales	$	140.1	$	117.4	$	22.7	19.3	%
Franchise revenues	0.2		0.2		—		—	%
Total revenues	$	140.3	$	117.6	$	22.7	19.3	%

Maggiano’s Total revenues increased ~~82.9%~~19.3% primarily due to higher dining room and banquet ~~room sales~~traffic and ~~traffic.~~increased menu pricing. 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
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	28.0	24.9	%	$	15.2	24.1	%	$	(12.8)	(0.8)	%	Food and beverage costs	$	35.7	25.5	%	$	28.0	23.9	%	$	(7.7)	(1.6)	%
Restaurant labor	Restaurant labor	37.8		33.5	%	22.4		35.4	%	(15.4)		1.9	%	Restaurant labor	42.3		30.2	%	37.8		32.2	%	(4.5)		2.0	%
Restaurant expenses	Restaurant expenses	31.5		28.0	%	22.1		35.0	%	(9.4)		7.0	%	Restaurant expenses	34.2		24.4	%	31.5		26.8	%	(2.7)		2.4	%
Depreciation and amortization	Depreciation and amortization	3.4				3.4				—				Depreciation and amortization	3.3				3.4				0.1
General and administrative	General and administrative	1.9				1.3				(0.6)				General and administrative	1.5				1.9				0.4
Other (gains) and charges	Other (gains) and charges	—				0.8				0.8				Other (gains) and charges	0.3				—				(0.3)

As a percentage of Company sales:

•Maggiano’s Food and beverage costs increased ~~0.8%~~1.6%, including ~~1.1%~~2.6% of higher ~~seafood, meat~~dairy, poultry and ~~produce~~other commodity costs resulting from ~~supply chain constraints~~inflationary pressures and ~~inflationary pressures,~~0.9% of unfavorable menu item mix, partially offset by ~~0.2% of favorable menu item mix and 0.1%~~1.7% of increased menu pricing.

•Maggiano’s Restaurant labor decreased ~~1.9%~~2.0%, including ~~6.9%~~5.0% of sales leverage, 0.3% of lower manager training, and 0.2% of lower manager bonus, partially offset by 2.8% of higher hourly labor costs due primarily to an increase in hourly wage rates, and 0.7% of ~~lower other labor expense, partially offset by 2.3% of higher restaurant hourly labor costs primarily including wage rates, training and overtime, 1.9% of~~ higher manager ~~bonus expenses and 1.5% of higher manager salaries and training.~~salaries.

•Maggiano’s Restaurant expenses decreased ~~7.0%~~2.4%, ~~driven by 12.9%~~including 2.7% of sales leverage, 0.3% of lower rent expenses, and 0.3% of lower other restaurant expenses, partially offset by 0.5% of higher ~~expenses including 1.6%~~delivery fees and 0.4% of ~~supervision expenses, 1.3% of~~higher repairs and maintenance ~~expenses, 1.2% of advertising expenses, 0.8% of utilities, 0.5% of delivery fees and supplies and 0.5% of other restaurant~~ expenses.

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Twenty-Six Week Period Ended December ~~29, 2021~~28, 2022 compared to December ~~23, 2020~~29, 2021

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage
December 29,
2021 December 23,
2020
Company sales $ 198.9 $ 116.4 $ 82.5 70.9 %
Royalties 0.2 0.1 0.1 100.0 %
Franchise fees and other revenues 7.3 1.4 5.9 421.4 %
Franchise and other revenues 7.5 1.5 6.0 400.0 %
Total revenues $ 206.4 $ 117.9 $ 88.5 75.1 %


	Twenty-Six Week Periods Ended				Favorable (Unfavorable) Variance		Variance as a percentage
	December 28, 2022		December 29, 2021
Company sales	$	245.6	$	206.1	$	39.5	19.2	%
Franchise revenues	0.3		0.3		—		—	%
Total revenues	$	245.9	$	206.4	$	39.5	19.1	%

Maggiano’s Total revenues increased ~~75.1%~~19.1% primarily due to higher dining room and banquet ~~room sales~~traffic and ~~traffic.~~increased menu pricing. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

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


		Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance					Twenty-Six Week Periods Ended								Favorable (Unfavorable) Variance
		December 29, 2021				December 23, 2020									December 28, 2022				December 29, 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	$	48.9	24.6	%	$	27.9	24.0	%	$	(21.0)	(0.6)	%	Food and beverage costs	$	64.3	26.2	%	$	48.9	23.7	%	$	(15.4)	(2.5)	%
Restaurant labor	Restaurant labor	69.2		34.8	%	42.2		36.2	%	(27.0)		1.4	%	Restaurant labor	78.5		32.0	%	69.2		33.6	%	(9.3)		1.6	%
Restaurant expenses	Restaurant expenses	58.1		29.2	%	42.9		36.9	%	(15.2)		7.7	%	Restaurant expenses	65.9		26.8	%	58.1		28.2	%	(7.8)		1.4	%
Depreciation and amortization	Depreciation and amortization	6.8				7.0				0.2				Depreciation and amortization	6.5				6.8				0.3
General and administrative	General and administrative	3.9				2.6				(1.3)				General and administrative	4.0				3.9				(0.1)
Other (gains) and charges	Other (gains) and charges	0.2				0.9				0.7				Other (gains) and charges	0.8				0.2				(0.6)

As a percentage of Company sales:

•Maggiano’s Food and beverage costs increased ~~0.6%~~2.5%, including ~~0.7%~~3.4% of higher ~~seafood~~poultry, dairy and other commodity costs resulting from ~~supply chain constraints and~~ inflationary pressures, 0.6% of unfavorable menu item mix, partially offset by ~~0.1%~~1.3% of increased menu pricing.

•Maggiano’s Restaurant labor decreased ~~1.4%~~1.6%, including ~~6.7%~~5.3% of sales leverage, 0.3% of lower manager bonus, and 0.3% of lower ~~other labor expenses,~~manager training, partially offset by ~~2.8%~~3.2% of higher ~~restaurant~~ hourly labor costs due primarily ~~including~~to an increase in hourly wage rates, ~~training and overtime, 1.5% of higher manager bonus expenses and 1.3%~~0.9% of higher manager salaries, and ~~training.~~0.2% of higher other labor expenses.

•Maggiano’s Restaurant expenses decreased ~~7.7%~~1.4%, ~~driven by 12.8%~~including 3.0% of sales leverage, partially offset by 0.7% of higher ~~expenses including 1.7%~~delivery fees, 0.4% of higher repairs and maintenance expenses, ~~1.4% of supervision expenses, 1.2%~~0.3% of higher ~~advertising~~utilities expenses, and ~~0.8%~~0.2% of higher other restaurant expenses.

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 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.

At the outset of the COVID-19 pandemic in fiscal 2020 and into early fiscal 2021, we took proactive precautionary measures to preserve liquidity, reduce costs and pause non-critical projects that did not significantly impact our current operations. In the second half of fiscal 2021, our operational results and liquidity returned to pre-pandemic levels. Beginning in the first quarter of fiscal 2022, we took or plan to take the following actions:

~~Table of Contents~~

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

•~~Resumed the Chili’s and Maggiano’s remodel program and construction of new restaurants;~~

•~~Selectively increased marketing spend;~~

•~~Reinstated the share repurchase program; and~~

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

Cash Flows

Cash Flows from Operating Activities

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance
December 29,
2021 December 23,
2020
Net cash provided by operating activities $ 107.4 $ 130.0 $ (22.6)


	Twenty-Six Week Periods Ended				Favorable (Unfavorable) Variance
	December 28, 2022		December 29, 2021
Net cash provided by operating activities	$	68.0	$	107.4	$	(39.4)

Net cash provided by operating activities decreased ~~primarily~~ due to ~~the repayment of the first installment of $27.2 million of payroll taxes that were previously deferred under the CARES Act, as well as~~a decrease in net income and an increase in income tax payments, net of refunds received, partially offset by a decrease in payments of ~~performance based~~performance-based compensation and manager bonuses in the current ~~year, partially offset by improved operating performance in the first two quarters of fiscal 2022 compared to the prior~~ year and the timing of operational receipts and payments.

Cash Flows from Investing Activities

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance
December 29,
2021 December 23,
2020
Cash flows from investing activities
Payments for property and equipment $ (74.1) $ (37.1) $ (37.0)
Payments for franchise restaurant acquisitions (104.5) — (104.5)
Proceeds from sale leaseback transactions, net of related expenses 20.5 — 20.5
Proceeds from sale of assets 0.0 1.3 (1.3)
Proceeds from note receivable — 1.3 (1.3)
Net cash used in investing activities $ (158.1) $ (34.5) $ (123.6)


	Twenty-Six Week Periods Ended				Favorable (Unfavorable) Variance
	December 28, 2022		December 29, 2021






Net cash used in investing activities	$	(93.2)	$	(158.1)	$	64.9

Net cash used in investing activities ~~increased~~decreased primarily due to $104.5 million of cash consideration paid for the purchase of 60 Chili’s restaurants ~~from two franchisees,~~in the first and second quarters of fiscal 2022, 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~~2023 primarily for ~~equipment purchases and an increase in~~ the ~~pace~~construction of ~~the Chili’s remodel initiative.~~new restaurants.

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Cash Flows from Financing Activities

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance
December 29,
2021 December 23,
2020
Cash flows from financing activities
Borrowings on revolving credit facility $ 487.5 $ 28.4 $ 459.1
Payments on revolving credit facility (355.0) (95.0) (260.0)
Purchases of treasury stock (74.7) (3.9) (70.8)
Payments on long-term debt (11.7) (9.8) (1.9)
Payments for debt issuance costs (3.1) (2.2) (0.9)
Payments of dividends (1.0) (1.3) 0.3
Proceeds from issuance of treasury stock 0.4 8.5 (8.1)
Net cash provided by (used in) financing activities $ 42.4 $ (75.3) $ 117.7


	Twenty-Six Week Periods Ended				Favorable (Unfavorable) Variance
	December 28, 2022		December 29, 2021








Net cash provided by financing activities	$	26.4	$	42.4	$	(16.0)

Net cash provided by financing activities ~~increased~~decreased primarily due to $40.0 million of net borrowing activity in fiscal 2023 compared to $132.5 million of net borrowing activity in fiscal 2022 ~~compared to $66.6 million of net repayment activity in fiscal 2021~~ on the revolving credit facility, partially offset by ~~an increase~~a decrease in share repurchases ~~following the reinstatement of the share repurchase program~~ in ~~August 2021.~~fiscal 2023.

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 borrowings of ~~$132.5~~$40.0 million were drawn during the twenty-six week period ended December ~~29, 2021~~28, 2022 on the revolving credit facility. As of December ~~29, 2021, $496.2~~28, 2022, $488.7 million of credit was available under 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 December ~~29, 2021,~~28, 2022, our interest rate was ~~1.875%~~6.438% consisting of LIBOR of ~~0.125%~~4.438% plus the applicable margin of 1.750%. In the twenty-six week period ended December 29, 2021, 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)2.000%.

As of December ~~29, 2021,~~28, 2022, we were in compliance with our covenants pursuant to the $800.0 million revolving credit facility and under the terms of the indentures governing our 3.875% notes and 5.000% notes.

Our $300.0 million 3.875% notes mature in May 2023 and are expected to be paid using availability under the revolving credit facility. As a result of our intent and ability to refinance these notes through our existing revolving credit facility, the notes are classified as long-term debt in the Consolidated Balance Sheets (Unaudited) on December 28, 2022. Refer to Note 109 - Debt for further information about our notes and revolving credit facility.

Share Repurchase Program

Our Board of Directors approved a $300.0 million share repurchase program during fiscal 2022. 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).~~

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~~Dividend Program~~

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend in response to the liquidity needs created by the COVID-19 pandemic. In the twenty-six week periods ended December 29, 2021 and December 23, 2020, 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 forauthorization remains under the current ~~portion to vest within 12 months, and Other liabilities for the portion that will vest after one year.~~share repurchase program.

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 guests at all of our locations through our dining rooms and off-premise 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.

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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)~~We are not 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 supportparty 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.~~arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, sales, costs or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended June 29, 2022.

Recent Accounting Pronouncements

The impact of recent accounting pronouncements can be found at Note 1 - Basis of 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~~Interest Rate Risk

The terms of our revolving credit facility require us to pay interest on outstanding borrowings at LIBOR plus a margin of 1.500% to 2.250% and pay a commitment fee of 0.250% to 0.350% per year on any unused portion of the revolving credit facility, in each case depending on our debt-to-cash flow ratio. Our revolving credit facility agreement includes transition language to an alternate base rate, SOFR, when LIBOR rates are discontinued at the end of fiscal 2023. As of December 28, 2022, we had $311.3 million outstanding on our revolving credit facility, and our interest rate was 6.438% consisting of LIBOR of 4.438% plus the applicable margin of 2.000%. A hypothetical increase in our ~~quantitative~~variable interest rate of one percentage point would increase our estimated annual interest expense by $3.1 million.

Commodity Price Risk

We purchase food and ~~qualitative market risks set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”~~other commodities for use in our ~~Annual Report~~operations based on ~~Form 10-K for~~market prices established with our suppliers. While our purchasing commitments partially mitigate the ~~fiscal year ended June 30, 2021.~~risk of such fluctuations, there is no assurance that supply and demand factors such as disease, inclement weather, ongoing impacts of the COVID-19 pandemic, or recent geopolitical unrest, will not cause the prices of the commodities used in our restaurant operations to fluctuate. The aggregate impact of these and other factors have contributed to significant cost inflation. Additionally, if there is a time lag between the increasing commodity prices and our ability to increase menu prices or if we believe the commodity price increase to be short in duration and we choose not to pass on the cost increases, our short-term financial results could be negatively affected.

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 December ~~29, 2021~~28, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 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 ~~30, 2021,~~29, 2022, 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,~~general economic conditions, including inflation, on economic activity and on our operations; the impact of the COVID-19 pandemic; the crisis in Ukraine and related disruptions on our business including consumer demand, costs, product mix, our strategic initiatives, our partners’ supply chains, operations, technology and assets, and our financial performance; the impact of competition; changes in consumer ~~preferences,~~preferences; consumer perception of food ~~safety,~~safety; reduced ~~disposable income,~~consumer discretionary spending; unfavorable ~~publicity, increased minimum wages,~~publicity; governmental ~~regulations,~~regulations; the ~~Company’s~~Company's ability to meet its business strategy ~~plan, third party delivery risks,~~plan; loss of key management ~~personnel,~~personnel; failure to hire and retain high-quality restaurant management and team members; the impact of social media or other unfavorable publicity; reliance on technology and third party delivery providers; failure to protect the security of data of our guests and team ~~members,~~members; product availability and supply chain disruptions; regional business and economic ~~conditions, litigation,~~conditions; volatility in consumer, commodity, transportation, labor, currency and capital markets; litigation; franchisee ~~success, changes in interest rates due to phase out of LIBOR, downgrades in our credit ratings, inflation, changes in the retail industry,~~success; technology ~~failures,~~failures; failure to protect our intellectual ~~property, outsourcing,~~property; outsourcing; impairment of goodwill or ~~assets,~~assets; failure to maintain effective internal control over financial ~~reporting,~~reporting; downgrades in credit ratings; changes in estimates regarding our assets; actions of activist ~~shareholders,~~shareholders; failure to comply with new environmental, social and governance (ESG) requirements; failure to achieve any goals, targets or objectives with respect to ESG matters; adverse weather ~~conditions,~~conditions; terrorist ~~acts,~~acts; health epidemics or pandemics (such as COVID-19),; tax ~~reform, changes in financial and credit markets,~~reform; 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. Lack of continued public acceptance of the COVID-19 vaccines and boosters, their on-going efficacy and emergence of new variants of 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.agreements

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings is incorporated by reference from Note 1413 - Contingencies toin 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 ~~30, 2021,~~29, 2022, 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.

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~~During the thirteen week period ended December 29, 2021, there~~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 ~~30, 2021.~~29, 2022.

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

~~In the fourth quarter~~Our Board of ~~fiscal 2020, our~~Directors approved a $300.0 million 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.during fiscal 2022.

During the thirteen week period ended December ~~29, 2021,~~28, 2022, we repurchased sharesas 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)
September 30, 2021 through November 3, 2021 0.0 $ 59.03 — $ 265.0
November 4, 2021 through December 1, 2021 0.4 43.80 0.4 245.0
December 2, 2021 through December 29, 2021 0.4 35.62 0.4 230.0
Total 0.8 39.89 0.8


	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)
September 29, 2022 through November 2, 2022	0.0	$	28.20	—	$	204.0
November 3, 2022 through November 30, 2022	0.0	30.67		—	204.0
December 1, 2022 through December 28, 2022	0.0	31.09		—	204.0
Total	0.0	30.34		—

(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 December ~~29, 2021,~~ ~~919~~ 28, 2022, 3,450 shares were tendered by team members at an average price of ~~$59.03~~.$30.34.

(2)The final amount shown is as of December ~~29, 2021.~~28, 2022.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit						Description
3.1						Certificate of Incorporation of Registrant, as amended(1)
3.2						Bylaws of Registrant(2)
10(a)						Registrant’s 1999 Stock Option and Incentive Plan for Non-Employee Directors and Consultants, as amended*
10(b)						Registrant’s Fiscal 2023 Performance Share Plan(3)
31(a)						Certification by ~~Wyman T. Roberts,~~Kevin D. Hochman, 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,~~Kevin D. Hochman, 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 December ~~29, 2021~~28, 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.

(3)Filed as an exhibit to Form 8-K filed on November 3, 2022 and incorporated herein by reference.

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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: February ~~2, 2022~~1, 2023	By:	/S/ ~~WYMAN T. ROBERTS~~KEVIN D. HOCHMAN
		~~Wyman T. Roberts,~~Kevin D. Hochman,
		President and Chief Executive Officer
		of Brinker International, Inc.
		and President of Chili’s Grill & Bar
		(Principal Executive Officer)

Date: February ~~2, 2022~~1, 2023	By:	/S/ JOSEPH G. TAYLOR
		Joseph G. Taylor,
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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