UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended ~~March 30,~~September 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 ~~April 29,~~October 28, 2022: ~~43,841,092~~44,031,628 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 Thirty-Nine~~ Week Periods Ended ~~March 30,~~S ep tember 28 , 2022 and ~~March 24,~~September 29 , 2021			3
Consolidated Balance Sheets - ~~March~~30 ~~, 202~~2 September 28, 2022 (Unaudited) and June ~~30, 2021~~29, 2022			4
Consolidated Statements of Cash Flows (Unaudited) - T ~~hirty~~Thirteen -N i ne Week Periods Ended ~~March~~Septe mber 3028 , ~~202~~2 2022 and ~~March~~September 2429 , ~~202~~12021			5
Notes to Consolidated Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2419
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4230
Item 4. Controls and Procedures			4230
PART II. OTHER INFORMATION			4331
Item 1. Legal Proceedings			4331
Item 1A. Risk Factors			4331
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4432
Item 5. Other Information			4432
Item 6. Exhibits			4533
SIGNATURES			4533

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				Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended
		March 30, 2022		March 24, 2021		March 30, 2022		March 24, 2021			September 28, 2022		September 29, 2021
Revenues	Revenues									Revenues
Company sales	Company sales	$	960.6	$	813.7	$	2,724.7	$	2,288.1	Company sales	$	946.1	$	865.6
Franchise and other revenues		19.8		14.7		57.9		41.1
Franchise revenues										Franchise revenues	9.4		10.8
Total revenues	Total revenues	980.4		828.4		2,782.6		2,329.2		Total revenues	955.5		876.4
Operating costs and expenses	Operating costs and expenses									Operating costs and expenses
Food and beverage costs	Food and beverage costs	270.3		213.9		757.4		606.3		Food and beverage costs	289.5		234.3
Restaurant labor	Restaurant labor	329.1		270.8		949.4		774.6		Restaurant labor	330.6		304.9
Restaurant expenses	Restaurant expenses	244.1		216.1		712.1		629.9		Restaurant expenses	268.8		231.3
Depreciation and amortization	Depreciation and amortization	42.2		37.4		123.1		112.0		Depreciation and amortization	41.9		39.3
General and administrative	General and administrative	39.2		33.7		108.8		94.2		General and administrative	39.5		36.5
Other (gains) and charges	Other (gains) and charges	6.1		4.3		17.0		13.5		Other (gains) and charges	5.0		4.5
Total operating costs and expenses	Total operating costs and expenses	931.0		776.2		2,667.8		2,230.5		Total operating costs and expenses	975.3		850.8
Operating income		49.4		52.2		114.8		98.7
Operating (loss) income										Operating (loss) income	(19.8)		25.6
Interest expenses	Interest expenses	11.1		14.1		34.8		43.1		Interest expenses	12.3		12.5
Other income, net	Other income, net	(0.4)		(0.3)		(1.2)		(1.2)		Other income, net	(0.4)		(0.3)
Income before income taxes		38.7		38.4		81.2		56.8
Provision for income taxes		2.1		4.5		3.8		0.2
Net income		$	36.6	$	33.9	$	77.4	$	56.6
(Loss) Income before income taxes										(Loss) Income before income taxes	(31.7)		13.4
(Benefit) Provision for income taxes										(Benefit) Provision for income taxes	(1.5)		0.2
Net (loss) income										Net (loss) income	$	(30.2)	$	13.2

Basic net income per share		$	0.82	$	0.74	$	1.71	$	1.25
Basic net (loss) income per share										Basic net (loss) income per share	$	(0.69)	$	0.29

Diluted net income per share		$	0.81	$	0.73	$	1.68	$	1.22
Diluted net (loss) income per share										Diluted net (loss) income per share	$	(0.69)	$	0.28

Basic weighted average shares outstanding	Basic weighted average shares outstanding	44.4		45.5		45.2		45.3		Basic weighted average shares outstanding	43.9		45.9

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	45.1		46.7		46.0		46.2		Diluted weighted average shares outstanding	43.9		47.0

Other comprehensive income (loss)
Other comprehensive loss										Other comprehensive loss
Foreign currency translation adjustment	Foreign currency translation adjustment	$	0.4	$	0.3	$	(0.1)	$	1.1	Foreign currency translation adjustment	$	(1.0)	$	(0.4)
Other comprehensive income (loss)		0.4		0.3		(0.1)		1.1
Comprehensive income		$	37.0	$	34.2	$	77.3	$	57.7
Other comprehensive loss										Other comprehensive loss	(1.0)		(0.4)
Comprehensive (loss) income										Comprehensive (loss) income	$	(31.2)	$	12.8

See accompanying Notes to Consolidated Financial Statements (Unaudited)

Table of Contents

BRINKER INTERNATIONAL, INC.

Consolidated Balance Sheets

(In millions, except per share amounts)


		Unaudited					Unaudited
		March 30, 2022		June 30, 2021			September 28, 2022		June 29, 2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	12.9	$	23.9	Cash and cash equivalents	$	19.5	$	13.5
Accounts receivable, net	Accounts receivable, net	60.0		65.2		Accounts receivable, net	57.6		66.4
Inventories	Inventories	33.6		28.9		Inventories	36.3		35.6
Restaurant supplies	Restaurant supplies	55.5		52.6		Restaurant supplies	55.4		55.5
Prepaid expenses	Prepaid expenses	20.4		13.6		Prepaid expenses	35.4		25.7
Income taxes receivable, net	Income taxes receivable, net	5.6		23.0		Income taxes receivable, net	5.6		4.5
Total current assets	Total current assets	188.0		207.2		Total current assets	209.8		201.2
Property and equipment, at cost	Property and equipment, at cost					Property and equipment, at cost
Land	Land	43.4		33.1		Land	43.4		43.4
Buildings and leasehold improvements	Buildings and leasehold improvements	1,621.8		1,595.2		Buildings and leasehold improvements	1,612.4		1,603.9
Furniture and equipment	Furniture and equipment	795.7		818.1		Furniture and equipment	802.4		793.0
Construction-in-progress	Construction-in-progress	23.0		14.9		Construction-in-progress	48.4		33.6
		2,483.9		2,461.3			2,506.6		2,473.9
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,665.5)		(1,686.5)		Less accumulated depreciation and amortization	(1,683.5)		(1,657.2)
Net property and equipment	Net property and equipment	818.4		774.8		Net property and equipment	823.1		816.7
Other assets	Other assets					Other assets
Operating lease assets	Operating lease assets	1,152.9		1,007.4		Operating lease assets	1,152.1		1,160.5
Goodwill	Goodwill	195.1		188.2		Goodwill	194.8		195.1
Deferred income taxes, net	Deferred income taxes, net	54.4		50.9		Deferred income taxes, net	66.5		62.5
Intangibles, net	Intangibles, net	28.5		21.1		Intangibles, net	26.8		27.4
Other	Other	21.5		25.3		Other	20.7		21.0
Total other assets	Total other assets	1,452.4		1,292.9		Total other assets	1,460.9		1,466.5
Total assets	Total assets	$	2,458.8	$	2,274.9	Total assets	$	2,493.8	$	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	$	131.4	$	127.7	Accounts payable	$	146.5	$	134.3
Gift card liability	Gift card liability	104.8		106.4		Gift card liability	75.0		83.9
Accrued payroll	Accrued payroll	108.2		122.4		Accrued payroll	106.0		111.0
Operating lease liabilities	Operating lease liabilities	113.5		97.7		Operating lease liabilities	112.8		112.7
Other accrued liabilities	Other accrued liabilities	125.2		117.4		Other accrued liabilities	133.3		116.1

Total current liabilities	Total current liabilities	583.1		571.6		Total current liabilities	573.6		558.0
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	987.9		917.9		Long-term debt and finance leases, less current installments	1,020.8		989.1
Long-term operating lease liabilities, less current portion	Long-term operating lease liabilities, less current portion	1,143.3		1,006.7		Long-term operating lease liabilities, less current portion	1,141.1		1,151.1
Other liabilities	Other liabilities	55.7		82.0		Other liabilities	54.9		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 43.8 million shares outstanding at March 30, 2022, 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 September 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 September 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	687.8		685.4		Additional paid-in capital	688.0		690.9
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(4.8)		(4.7)		Accumulated other comprehensive loss	(6.3)		(5.3)
Accumulated deficit	Accumulated deficit	(188.7)		(266.1)		Accumulated deficit	(484.7)		(148.4)
Treasury stock, at cost (26.5 million shares at March 30, 2022, and 24.4 million shares at June 30, 2021)		(812.5)		(724.9)
Treasury stock, at cost (16.3 million shares at September 28, 2022, and 26.5 million shares at June 29, 2022)						Treasury stock, at cost (16.3 million shares at September 28, 2022, and 26.5 million shares at June 29, 2022)	(499.6)		(812.3)
Total shareholders’ deficit	Total shareholders’ deficit	(311.2)		(303.3)		Total shareholders’ deficit	(296.6)		(268.1)
Total liabilities and shareholders’ deficit	Total liabilities and shareholders’ deficit	$	2,458.8	$	2,274.9	Total liabilities and shareholders’ deficit	$	2,493.8	$	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)


		Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended
		March 30, 2022		March 24, 2021			September 28, 2022		September 29, 2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	77.4	$	56.6
Adjustments to reconcile Net income to Net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(30.2)	$	13.2
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	123.1		112.0		Depreciation and amortization	41.9		39.3
Stock-based compensation	Stock-based compensation	15.2		11.3		Stock-based compensation	4.7		4.3
Restructure and impairment charges	Restructure and impairment charges	8.7		6.5		Restructure and impairment charges	2.4		1.9
Net loss on disposal of assets	Net loss on disposal of assets	2.3		1.1		Net loss on disposal of assets	1.5		0.7
Other	Other	2.6		2.7		Other	0.4		1.5
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	8.0		(1.3)		Accounts receivable, net	6.1		12.7
Inventories	Inventories	(3.4)		(0.4)		Inventories	(1.1)		(0.3)
Restaurant supplies	Restaurant supplies	(1.1)		(0.4)		Restaurant supplies	0.0		(0.3)
Prepaid expenses	Prepaid expenses	(6.9)		2.3		Prepaid expenses	(9.7)		(4.6)
Operating lease assets, net of liabilities	Operating lease assets, net of liabilities	5.2		(9.1)		Operating lease assets, net of liabilities	(0.9)		8.1
Deferred income taxes, net	Deferred income taxes, net	(3.5)		(9.3)		Deferred income taxes, net	(4.1)		8.2
Other assets	Other assets	0.2		(0.2)		Other assets	0.0		0.1
Accounts payable	Accounts payable	4.9		19.0		Accounts payable	7.1		(12.7)
Gift card liability	Gift card liability	(2.6)		1.0		Gift card liability	(8.9)		(4.8)
Accrued payroll	Accrued payroll	(14.3)		46.7		Accrued payroll	(5.0)		(24.8)
Other accrued liabilities	Other accrued liabilities	3.5		10.5		Other accrued liabilities	18.7		7.7
Current income taxes	Current income taxes	19.6		6.4		Current income taxes	1.4		(9.1)
Other liabilities	Other liabilities	(27.3)		13.2		Other liabilities	0.3		(0.9)
Net cash provided by operating activities	Net cash provided by operating activities	211.6		268.6		Net cash provided by operating activities	24.6		40.2
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	(109.0)		(62.4)		Payments for property and equipment	(46.7)		(37.3)
Proceeds from note receivable						Proceeds from note receivable	1.1		—

Payments for franchise restaurant acquisitions	Payments for franchise restaurant acquisitions	(106.0)		—		Payments for franchise restaurant acquisitions	—		(47.5)
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 note receivable		1.0		1.5
Proceeds from sale of assets		0.1		1.6

Net cash used in investing activities	Net cash used in investing activities	(193.4)		(59.3)		Net cash used in investing activities	(45.6)		(64.3)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Borrowings on revolving credit facility	Borrowings on revolving credit facility	595.5		28.4		Borrowings on revolving credit facility	135.0		285.0
Payments on revolving credit facility	Payments on revolving credit facility	(502.5)		(210.0)		Payments on revolving credit facility	(100.0)		(205.0)
Payments on long-term debt						Payments on long-term debt	(5.8)		(5.5)
Purchases of treasury stock	Purchases of treasury stock	(100.8)		(4.1)		Purchases of treasury stock	(2.0)		(39.6)
Payments on long-term debt		(17.6)		(14.3)
Payments of dividends						Payments of dividends	(0.2)		(0.8)
Payments for debt issuance costs	Payments for debt issuance costs	(3.1)		(2.2)		Payments for debt issuance costs	—		(3.0)
Payments of dividends		(1.1)		(1.5)
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	0.4		14.1		Proceeds from issuance of treasury stock	0.0		0.3
Net cash used in financing activities		(29.2)		(189.6)
Net cash provided by financing activities						Net cash provided by financing activities	27.0		31.4
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(11.0)		19.7		Net change in cash and cash equivalents	6.0		7.3
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	$	12.9	$	63.6	Cash and cash equivalents at end of period	$	19.5	$	31.2

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~~Revenue Recognition

Note 3

~~Revenue Recognition~~

~~Note 4~~

Other Gains and Charges

119

Note 4

Income Taxes

Note 5

Net (Loss) Income Per Share

Note 5 6

~~Income Taxes~~Segment Information

Note 7

Fair Value Measurements

Note 6

~~Net Income Per Share~~

~~Note 7~~

~~Segment Information~~

~~Note~~ 8

~~Fair Value Measurements~~

~~Note 9~~

Leases

Debt

Accrued and Other Liabilities

2015

Note 12 11

Shareholders’ Deficit

2116

Note 13 12

Supplemental Cash Flow Information

Contingencies

Fiscal 2022 Chili’s Restaurant Acquisitions

Table of Contents

Footnote Index

1. BASIS OF PRESENTATION

References to “Brinker,” the “Company,” “we,” “us,” and “our” in this Form 10-Q refer to Brinker International, Inc. and its subsidiaries and any predecessor companies of Brinker International, Inc. Our Consolidated Financial Statements (Unaudited) as of ~~March 30,~~September 28, 2022 and June ~~30, 2021,~~29, 2022, and for the thirteen ~~and thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 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®. ~~At March 30,~~As of September 28, 2022, we owned, operated or franchised ~~1,650~~1,645 restaurants, consisting of ~~1,187~~1,182 Company-owned restaurants and 463 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

In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic and a National Public Health Emergency. The spread of COVID-19 has prompted changes in consumer behavior and social distancing preferences as well as dining room closures and dining room capacity restrictions mandated or encouraged by federal, state and local governments. The number of open dining rooms and the dining room capacity restrictions have fluctuated over the course of the COVID-19 pandemic based on state and local mandates and has resulted in significant adverse impacts to our guest traffic and sales primarily in fiscal 2021. Starting fiscal 2022, we have experienced limited product shortages and service disruptions in our supply chain, limited availability of labor to operate our restaurants due to a tight labor market and an increase in employee turnover. It is possible that supply chain and labor shortages or disruptions could continue or increase in future periods if demand for goods, transportation and labor remains high.

Table of Contents

Footnote Index

We have been carefully assessing the effect of COVID-19 on our business as conditions continue to evolve throughout the communities we serve. At this time, the ultimate impact of COVID-19 cannot be reasonably estimated due to the uncertainty about the extent and the duration of the spread of the virus and could lead to further reduced sales, capacity restrictions, restaurant closures, delays in our supply chain or impair our ability to staff accordingly which could adversely impact our financial results.

Impact of Inflation

During the first quarter of fiscal 2023, inflation did have a material impact on our operations. Increasing inflation could have a severe impact on the United States or global economies and have an adverse impact on our business, financial condition and results of operations. If commodity pricing and labor costs increase significantly, we may not be able to adjust menu prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.

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~~

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

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

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

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

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

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

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~~Footnote Index~~

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

Mid-Atlantic Region Great Lakes Region (Preliminary)
Current assets $ 1.4 $ 2.1
Property and equipment 46.2 43.9
Operating lease assets(2)
23.6 45.1
Reacquired franchise rights(1)
4.7 4.6
Goodwill(3)
— 6.9
Current liabilities (1.4) (0.3)
Finance lease liabilities, less current portion (3.7) —
Operating lease liabilities, less current portion(2)
(23.1) (45.2)
Net assets acquired(4)
$ 47.7 $ 57.1

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

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

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

~~(4)~~Net assets acquired at fair value related to the Mid-Atlantic Region acquisition are equal to the total purchase price of $48.0 million, less $0.3 million of closing adjustments. Net assets acquired at fair value related to the Great Lakes Region acquisition are equal to the total purchase price of $56.0 million, plus $1.1 million of closing adjustments.

3. REVENUE RECOGNITION

Deferred Franchise and Development Fees

Our deferred franchise and development fees consist of the unrecognized fees received from franchisees. Recognition of these fees in subsequent periods is based on satisfaction of the contractual performance obligations of 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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~~Footnote Index~~

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

Deferred Franchise and Development Fees

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

~~11.4~~10.1

Additions

~~0.8~~0.7

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

~~(0.8)~~

Amount recognized to Franchise ~~and other~~ revenues

~~(1.3)~~(0.3)

Balance as of ~~March 30,~~September 28, 2022

~~10.1~~10.5

~~(1)~~

~~The remaining deferred franchise and development fee balances associated with the 66 acquired Chili’s restaurants were recognized as~~Table 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.~~Contents

Footnote Index

The following table illustrates franchise and development fees expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of ~~March 30,~~September 28, 2022:


Fiscal Year	Fiscal Year	Franchise and Development Fees Revenue Recognition		Fiscal Year	Franchise and Development Fees Revenue Recognition
Remainder of 2022		$	0.2
2023		0.9
Remainder of 2023				Remainder of 2023	$	0.7
2024	2024	0.8		2024	0.9
2025	2025	0.8		2025	0.8
2026	2026	0.8		2026	0.8
2027				2027	0.7
Thereafter	Thereafter	6.6		Thereafter	6.6
		$	10.1		$	10.5

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 ~~March 30,~~September 28, 2022:


	Gift Card Liability

Balance as of June ~~30, 2021~~29, 2022	$	~~106.4~~83.9
Gift card sales	~~107.2~~17.1
Gift card redemptions recognized to Company sales	~~(93.0)~~(23.8)
Gift card breakage recognized to ~~Franchise and other revenues~~Company sales	~~(16.5)~~(2.8)
Other	~~0.7~~0.6
Balance as of ~~March 30,~~September 28, 2022	$	~~104.8~~75.0

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
		September 28, 2022		September 29, 2021
Restaurant closure charges		$	1.5	$	0.2
Enterprise system implementation costs		1.0		0.6
Remodel-related costs		0.8		1.5
Lease modification gain, net		(0.7)		—




Other		2.4		2.2
		$	5.0	$	4.5

Restaurant closure charges related to closure costs and leases associated with certain closed Chili’s restaurants for all periods presented.

Enterprise system implementation costs primarily consisted of consulting fees and subscription fees related to the ongoing enterprise system implementation for all periods presented.

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

Lease modification gain, net related to the lease termination of certain Chili’s operating lease liabilities.

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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 Thirty-Nine Week Periods Ended
March 30,
2022 March 24,
2021 March 30,
2022 March 24,
2021
Restaurant closure charges $ 1.2 $ 0.3 $ 1.7 $ 2.2
Remodel-related costs 0.9 0.9 4.0 1.8
COVID-19 related charges 0.7 0.9 0.2 3.1
Acquisition-related costs, net 0.6 — 1.5 —
Enterprise system implementation costs 0.5 — 1.4 —
Loss from natural disasters, net of (insurance recoveries) — 1.8 0.8 2.0
Lease contingencies — — 2.9 —
Restaurant impairment charges — — — 2.5
Other 2.2 0.4 4.5 1.9
$ 6.1 $ 4.3 $ 17.0 $ 13.5

~~Fiscal 2022~~

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

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

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

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

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

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

~~Fiscal 2021~~

•~~Restaurant closure charges in the thirty-nine week period related to closure costs and leases associated with certain closed Chili’s restaurants.~~

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

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

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

–~~conversion of certain parking lots into dining areas, and~~

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

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~~Footnote Index~~

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

•~~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.~~

5. INCOME TAXES

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


	Thirteen Week Periods Ended
		September 28, 2022		September 29, 2021
Effective income tax rate		4.7	%	1.5	%

The federal statutory tax rate for the periods presented was 21.0%. ~~A reconciliation~~Reconciliation between the ~~reported Provision for income taxes~~statutory tax rate and the ~~amount computed by applying the statutory federal income~~effective tax rate ~~to Income before income taxes~~ is as follows:


	~~Thirty-Nine~~Thirteen Week Period Ended
	~~March 30,~~September 28, 2022
~~Income~~Federal statutory tax ~~expense at statutory~~ rate ~~- 21.0%~~	$	~~17.1~~21.0		%
FICA tip tax credit	~~(16.4)~~
~~Stock-based compensation excess tax benefits~~(22.8)	~~(0.7)~~%
State income taxes, net of federal benefit	~~5.0~~5.9		%
Stock-based compensation tax shortfalls	0.7		%

Other	~~(1.2)~~(0.1)		%
~~Provision for~~Effective income ~~taxes - 4.7%~~	$tax rate	~~3.8~~4.7		%

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 Thirty-Nine Week Periods Ended
March 30,
2022 March 24,
2021 March 30,
2022 March 24,
2021
Basic weighted average shares outstanding 44.4 45.5 45.2 45.3
Dilutive stock options 0.1 0.5 0.2 0.3
Dilutive restricted shares 0.6 0.7 0.6 0.6
Total dilutive impact 0.7 1.2 0.8 0.9
Diluted weighted average shares outstanding 45.1 46.7 46.0 46.2
Awards excluded due to anti-dilutive effect 1.1 0.0 0.7 0.7


	Thirteen Week Periods Ended
		September 28, 2022	September 29, 2021
Basic weighted average shares outstanding		43.9	45.9
Dilutive stock options		—	0.4
Dilutive restricted shares		—	0.7
Total dilutive impact		—	1.1
Diluted weighted average shares outstanding		43.9	47.0

Awards excluded due to anti-dilutive effect		2.8	0.0

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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.

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Footnote Index

Company sales for each segment include revenues generated by the operation of Company-owned restaurants including ~~gift card redemptions~~food and ~~revenues from our virtual brands. Franchise and other revenues for each operating segment include royalties,~~beverage sales, net of discounts, Maggiano’s banquet service charge income, gift card breakage, delivery income, ~~Maggiano’s banquet service charge 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.

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 (loss) income as the measure for assessing performance of our segments. Operating income includes revenues and expenses directly attributable to segment-level results of operations. Restaurant expenses during the periods presented primarily included restaurant rent, ~~supplies,~~ property and equipment maintenance, utilities, delivery fees, ~~utilities,~~supplies, credit card processing fees, property taxes, supervision expenses, and worker’s comp and general liability insurance.

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~~Footnote Index~~

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

Thirteen Week Period Ended March 30, 2022
Chili’s(1)
Maggiano’s Other Consolidated
Company sales $ 863.3 $ 97.3 $ — $ 960.6
Royalties 7.8 0.1 — 7.9
Franchise fees and other revenues 8.5 3.4 — 11.9
Franchise and other revenues 16.3 3.5 — 19.8
Total revenues 879.6 100.8 — 980.4
Food and beverage costs 245.6 24.7 — 270.3
Restaurant labor 295.0 34.1 — 329.1
Restaurant expenses 215.2 28.7 0.2 244.1
Depreciation and amortization 35.9 3.4 2.9 42.2
General and administrative 9.5 2.3 27.4 39.2
Other (gains) and charges 5.2 0.0 0.9 6.1
Total operating costs and expenses 806.4 93.2 31.4 931.0
Operating income (loss) 73.2 7.6 (31.4) 49.4
Interest expenses 1.2 0.1 9.8 11.1
Other income, net — — (0.4) (0.4)
Income (loss) before income taxes $ 72.0 $ 7.5 $ (40.8) $ 38.7

Thirteen Week Period Ended March 24, 2021
Chili’s Maggiano’s Other Consolidated
Company sales $ 749.0 $ 64.7 $ — $ 813.7
Royalties 7.7 — — 7.7
Franchise fees and other revenues 6.3 0.7 — 7.0
Franchise and other revenues 14.0 0.7 — 14.7
Total revenues 763.0 65.4 — 828.4
Food and beverage costs 198.7 15.2 — 213.9
Restaurant labor 248.7 22.1 — 270.8
Restaurant expenses 194.2 21.7 0.2 216.1
Depreciation and amortization 31.0 3.4 3.0 37.4
General and administrative 7.0 1.3 25.4 33.7
Other (gains) and charges 3.1 0.3 0.9 4.3
Total operating costs and expenses 682.7 64.0 29.5 776.2
Operating income (loss) 80.3 1.4 (29.5) 52.2
Interest expenses 1.4 — 12.7 14.1
Other income, net (0.1) — (0.2) (0.3)
Income (loss) before income taxes $ 79.0 $ 1.4 $ (42.0) $ 38.4


	Thirteen Week Period Ended September 28, 2022
	Chili’s		Maggiano’s		Other		Consolidated
Company sales	$	840.6	$	105.5	$	—	$	946.1


Franchise revenues	9.3		0.1		—		9.4
Total revenues	849.9		105.6		—		955.5

Food and beverage costs	260.9		28.6		—		289.5
Restaurant labor	294.4		36.2		—		330.6
Restaurant expenses	236.9		31.7		0.2		268.8
Depreciation and amortization	36.0		3.2		2.7		41.9
General and administrative	9.5		2.5		27.5		39.5
Other (gains) and charges	3.0		0.5		1.5		5.0
Total operating costs and expenses	840.7		102.7		31.9		975.3
Operating income (loss)	9.2		2.9		(31.9)		(19.8)
Interest expenses	1.0		0.1		11.2		12.3
Other income, net	—		—		(0.4)		(0.4)
Income (loss) before income taxes	$	8.2	$	2.8	$	(42.7)	$	(31.7)

Segment assets	$	2,127.4	$	220.0	$	146.4	$	2,493.8
Segment goodwill	156.4		38.4		—		194.8
Payments for property and equipment	42.7		1.9		2.1		46.7

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Footnote Index

Thirty-Nine Week Period Ended March 30, 2022
Chili’s(1)
Maggiano’s Other Consolidated
Company sales $ 2,428.5 $ 296.2 $ — $ 2,724.7
Royalties 25.4 0.3 — 25.7
Franchise fees and other revenues 21.5 10.7 — 32.2
Franchise and other revenues 46.9 11.0 — 57.9
Total revenues 2,475.4 307.2 — 2,782.6
Food and beverage costs 683.8 73.6 — 757.4
Restaurant labor 846.1 103.3 — 949.4
Restaurant expenses 624.8 86.8 0.5 712.1
Depreciation and amortization 104.3 10.2 8.6 123.1
General and administrative 24.7 6.2 77.9 108.8
Other (gains) and charges 10.2 0.2 6.6 17.0
Total operating costs and expenses 2,293.9 280.3 93.6 2,667.8
Operating income (loss) 181.5 26.9 (93.6) 114.8
Interest expenses 4.0 0.3 30.5 34.8
Other income, net (0.3) — (0.9) (1.2)
Income (loss) before income taxes $ 177.8 $ 26.6 $ (123.2) $ 81.2
Segment assets $ 2,120.7 $ 227.6 $ 110.5 $ 2,458.8
Segment goodwill 156.7 38.4 — 195.1
Payments for property and equipment 96.7 6.8 5.5 109.0

Thirty-Nine Week Period Ended March 24, 2021
Chili’s Maggiano’s Other Consolidated
Company sales $ 2,107.0 $ 181.1 $ — $ 2,288.1
Royalties 21.9 0.1 — 22.0
Franchise fees and other revenues 17.0 2.1 — 19.1
Franchise and other revenues 38.9 2.2 — 41.1
Total revenues 2,145.9 183.3 — 2,329.2
Food and beverage costs 563.2 43.1 — 606.3
Restaurant labor 710.3 64.3 — 774.6
Restaurant expenses 564.6 64.6 0.7 629.9
Depreciation and amortization 92.4 10.4 9.2 112.0
General and administrative 17.8 3.9 72.5 94.2
Other (gains) and charges 11.1 1.2 1.2 13.5
Total operating costs and expenses 1,959.4 187.5 83.6 2,230.5
Operating income (loss) 186.5 (4.2) (83.6) 98.7
Interest expenses 4.2 0.1 38.8 43.1
Other income, net (0.4) — (0.8) (1.2)
Income (loss) before income taxes $ 182.7 $ (4.3) $ (121.6) $ 56.8
Payments for property and equipment $ 56.3 $ 1.4 $ 4.7 $ 62.4

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~~Footnote Index~~


	Thirteen Week Period Ended September 29, 2021
	Chili’s(1)		Maggiano’s		Other		Consolidated
Company sales(2)	$	776.9	$	88.7	$	—	$	865.6


Franchise revenues(2)	10.7		0.1		—		10.8
Total revenues	787.6		88.8		—		876.4

Food and beverage costs	213.4		20.9		—		234.3
Restaurant labor	273.5		31.4		—		304.9
Restaurant expenses	204.6		26.6		0.1		231.3
Depreciation and amortization	33.0		3.4		2.9		39.3
General and administrative	8.0		2.0		26.5		36.5
Other (gains) and charges	2.8		0.2		1.5		4.5
Total operating costs and expenses	735.3		84.5		31.0		850.8
Operating income (loss)	52.3		4.3		(31.0)		25.6
Interest expenses	1.4		0.1		11.0		12.5
Other income, net	(0.1)		—		(0.2)		(0.3)
Income (loss) before income taxes	$	51.0	$	4.2	$	(41.8)	$	13.4

Payments for property and equipment	$	33.7	$	1.9	$	1.7	$	37.3

(1)Chili’s segment information for fiscal 2022 includes the results of operations and the fair values of assets related to the 6668 restaurants purchased from three former franchisees subsequent to the acquisition dates. Refer to Note 214 - 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.

8.7. FAIR VALUE MEASUREMENTS

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


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

Non-Financial Assets Measured on a Non-Recurring Basis

We review the carrying amounts of long-lived property and equipment including finance lease assets, operating lease assets, reacquired franchise rights and transferable liquor licenses 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 (Loss) Income (Unaudited) for the periods presented.

Intangibles, net in the Consolidated Balance Sheets (Unaudited) includes both indefinite-lived intangible assets such as transferable liquor licenses and definite-lived intangible assets such as reacquired franchise rights and trademarks. Intangibles, net included accumulated amortization associated with definite-lived intangible assets at ~~March 30,~~September 28, 2022 and June ~~30, 2021,~~29, 2022, of ~~$11.8~~$13.2 million and ~~$9.6~~$12.6 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 thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and September 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 thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 29, 2021, 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 thirty-nine~~ week ~~periods~~period ended ~~March 30,~~September 28, 2022, management concluded that no triggering event occurred.

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~~Footnote Index~~

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

Chili’s Restaurant Acquisitions

In ~~the first three quarters of~~ fiscal 2022, we completed the acquisition of 6668 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 214 - Fiscal 2022 Chili’s Restaurant Acquisitions for further details.

Other Financial Instruments

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

Long-Term Debt

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

The ~~carrying amounts and fair values of the~~ 3.875% notes and 5.000% notes carrying amounts, which are net of unamortized debt issuance costs and discounts, and fair values are as follows:


		March 30, 2022				June 30, 2021					September 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	$	299.6	$	301.2	$	299.3	$	309.0	3.875% notes	$	299.8	$	297.0	$	299.7	$	295.4
5.000% notes	5.000% notes	348.0		352.5		347.5		369.3		5.000% notes	348.4		338.3		348.2		329.0

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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 (Loss) Income (Unaudited)

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

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

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~~Footnote Index~~


	Thirteen Week Periods Ended
		September 28, 2022		September 29, 2021
Operating lease expenses (amortization and interest)		$	45.1	$	41.4
Variable lease cost		15.6		15.1
Finance lease amortization		5.2		5.6
Finance lease interest		1.1		1.6
Short-term lease cost		0.1		0.1
Sublease income		(0.9)		(1.1)
Total lease costs, net		$	66.2	$	62.7

Pre-Commencement Leases

As of the end of the ~~third~~first quarter of fiscal ~~2022,~~2023, we have 1811 pre-commencement leases for new Chili’s locations with undiscounted fixed payments of ~~$25.5~~$15.8 million over the initial term. These leases are expected to commence in the next 12 months and are expected to have an economic lease term of 20 years. These leases will commence when the landlords make the property available to us for new restaurant construction. We will assess the reasonably certain lease term at the lease commencement date.

~~Significant Changes in Leases during the Period~~

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

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

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

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

~~Restaurant Properties Sale Leaseback Transaction~~

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

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

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~~Footnote Index~~

~~10.~~9. DEBT

Long-term debt consists of the following:


		March 30, 2022		June 30, 2021			September 28, 2022		June 29, 2022
Revolving credit facility	Revolving credit facility	$	264.3	$	171.3	Revolving credit facility	$	306.3	$	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	97.1		121.3		Finance lease obligations	84.5		90.2
Total long-term debt and finance leases	Total long-term debt and finance leases	1,011.4		942.6		Total long-term debt and finance leases	1,040.8		1,011.5
Less: unamortized debt issuance costs and discounts	Less: unamortized debt issuance costs and discounts	(2.4)		(3.2)		Less: unamortized debt issuance costs and discounts	(1.8)		(2.1)
Total long-term debt, less unamortized debt issuance costs and discounts	Total long-term debt, less unamortized debt issuance costs and discounts	1,009.0		939.4		Total long-term debt, less unamortized debt issuance costs and discounts	1,039.0		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)	(21.1)		(21.5)		Less: current installments of long-term debt and finance leases~~(1)~~(2)	(18.2)		(20.3)
Long-term debt and finance leases, less current installments	Long-term debt and finance leases, less current installments	$	987.9	$	917.9	Long-term debt and finance leases, less current installments	$	1,020.8	$	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 of finance leases and are recorded within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited). Refer to Note 1110 - Accrued and Other Liabilities for further details.

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Revolving Credit Facility

~~On August 18, 2021, we revised our existing $1.0 billion revolving credit facility to an $800.0 million revolving credit facility to extend the maturity date and provide additional flexibility.~~ In the ~~thirty-nine~~thirteen week period ended ~~March 30,~~September 28, 2022, net borrowings of ~~$93.0~~$35.0 million were drawn on ~~the~~our revolving credit facility. As of ~~March 30,~~September 28, 2022, ~~$535.7~~$493.7 million of credit was available under the ~~new~~ revolving credit facility.

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

Financial Covenants

Our debt agreements contain various financial covenants that, among other things, require the maintenance of certain leverage ratios. As of ~~March 30,~~September 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. We expect to remain in compliance with our covenants during the remainder of fiscal ~~2022.~~2023.

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~~Footnote Index~~

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

Other accrued liabilities consist of the following:


		March 30, 2022		June 30, 2021			September 28, 2022		June 29, 2022
Property tax						Property tax	$	28.6	$	23.3
Insurance	Insurance	$	21.7	$	21.7	Insurance	24.0		23.5
Current installments of long-term debt and finance leases	Current installments of long-term debt and finance leases	21.1		21.5		Current installments of long-term debt and finance leases	18.2		20.3
Property tax		19.0		22.4

Sales tax	Sales tax	18.8		23.2		Sales tax	17.4		14.4
Interest	Interest	13.6		6.9		Interest	13.9		6.5
Utilities and services	Utilities and services	9.3		8.4		Utilities and services	10.2		9.6

Other(1)	Other(1)	21.7		13.3		Other(1)	21.0		18.5
		$	125.2	$	117.4		$	133.3	$	116.1

(1)Other primarily consists of guest deposits for Maggiano’s banquets, ~~state income taxes payable,~~ contingent lease liabilities related to our lease guarantees, rent-related accruals, charitable donations, deferred franchise and development fees, ~~charitable donations~~state income taxes payable and other various accruals. Refer to Note 1413 - Contingencies for additional information about our lease guarantees.

Other liabilities consist of the following:

March 30,
2022 June 30,
2021
Insurance $ 38.6 $ 35.0
Deferred franchise and development fees 9.1 10.4
Unrecognized tax benefits 2.7 3.5
Deferred payroll taxes(1)
— 27.2
Other 5.3 5.9
$ 55.7 $ 82.0

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


	September 28, 2022		June 29, 2022
Insurance	$	37.0	$	36.9
Deferred franchise and development fees	9.6		9.2
Unrecognized tax benefits	3.0		3.0

Other	5.3		5.2
	$	54.9	$	54.3

2015

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~~12.~~11. SHAREHOLDERS’ DEFICIT

The changes in Total shareholders’ deficit during the ~~thirty-nine~~thirteen week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 29, 2021, respectively, were as follows:


		Thirty-Nine Week Period Ended March 30, 2022													Thirteen Week Period Ended September 28, 2022
		Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total			Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances at June 30, 2021		$	7.0	$	685.4	$	(266.1)	$	(724.9)	$	(4.7)	$	(303.3)
Net income		—		—		13.2		—		—		13.2
Balances at June 29, 2022														Balances at June 29, 2022	$	7.0	$	690.9	$	(148.4)	$	(812.3)	$	(5.3)	$	(268.1)
Net loss														Net loss	—		—		(30.2)		—		—		(30.2)
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(0.4)		(0.4)		Other comprehensive loss	—		—		—		—		(1.0)		(1.0)
Dividends	Dividends	—		—		0.0		—		—		0.0		Dividends	—		—		0.0		—		—		0.0
Stock-based compensation	Stock-based compensation	—		4.3		—		—		—		4.3		Stock-based compensation	—		4.7		—		—		—		4.7
Purchases of treasury stock	Purchases of treasury stock	—		(2.0)		—		(37.6)		—		(39.6)		Purchases of treasury stock	—		0.2		—		(2.2)		—		(2.0)
Issuances of treasury stock	Issuances of treasury stock	—		(8.3)		—		8.6		—		0.3		Issuances of treasury stock	—		(7.8)		—		7.8		—		—
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
Retirement of common stock														Retirement of common stock	(1.0)		—		(306.1)		307.1		—		—
Balances at September 28, 2022														Balances at September 28, 2022	$	6.0	$	688.0	$	(484.7)	$	(499.6)	$	(6.3)	$	(296.6)

Balances at December 29, 2021		$	7.0	$	683.7	$	(225.3)	$	(787.6)	$	(5.2)	$	(327.4)
Net income		—		—		36.6		—		—		36.6
Other comprehensive income		—		—		—		—		0.4		0.4
Dividends		—		—		—		—		—		—
Stock-based compensation		—		5.3		—		—		—		5.3
Purchases of treasury stock		—		—		—		(26.1)		—		(26.1)
Issuances of treasury stock		—		(1.2)		—		1.2		—		—
Balances at March 30, 2022		$	7.0	$	687.8	$	(188.7)	$	(812.5)	$	(4.8)	$	(311.2)


	Thirteen Week Period Ended September 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)

~~Table~~Retirement of ~~Contents~~Common Stock

~~Footnote Index~~

Thirty-Nine Week Period Ended March 24, 2021
Common Stock Additional
Paid-In
Capital Accumulated Deficit Treasury
Stock Accumulated
Other
Comprehensive
Loss Total
Balances at June 24, 2020 $ 7.0 $ 669.4 $ (397.5) $ (751.8) $ (6.2) $ (479.1)
Net income — — 10.7 — — 10.7
Other comprehensive income — — — — 0.3 0.3
Dividends — — 0.0 — — 0.0
Stock-based compensation — 3.9 — — — 3.9
Purchases of treasury stock — (1.1) — (2.8) — (3.9)
Issuances of treasury stock — (9.0) — 12.0 — 3.0
Balances at September 23, 2020 $ 7.0 $ 663.2 $ (386.8) $ (742.6) $ (5.9) $ (465.1)
Net income — — 12.0 — — 12.0
Other comprehensive income — — — — 0.5 0.5
Dividends — — 0.0 — — 0.0
Stock-based compensation — 3.0 — — — 3.0
Purchases of treasury stock — 0.0 — 0.0 — 0.0
Issuances of treasury stock — 1.2 — 4.3 — 5.5
Balances at December 23, 2020 $ 7.0 $ 667.4 $ (374.8) $ (738.3) $ (5.4) $ (444.1)
Net income — — 33.9 — — 33.9
Other comprehensive income — — — — 0.3 0.3
Dividends — — 0.0 — — 0.0
Stock-based compensation — 4.4 — — — 4.4
Purchases of treasury stock — (0.1) — (0.1) — (0.2)
Issuances of treasury stock — 5.7 — 9.4 — 15.1
Balances at March 24, 2021 $ 7.0 $ 677.4 $ (340.9) $ (729.0) $ (5.1) $ (390.6)
During the thirteen week period ended September 28, 2022, 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 September 28, 2022, 16.3 million shares remain in treasury.

Share Repurchases

Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings and planned investment and financing needs. Repurchased shares are reflected as an increase in Treasury stock within Shareholders’ deficit in the Consolidated Balance Sheets (Unaudited).

In ~~the fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic. In~~ August 2021, our Board of Directors reinstated ~~the~~our share repurchase program, allowing for a total available repurchase authority of $300.0 million. In the ~~thirty-nine~~thirteen week period ended ~~March 30,~~September 28, 2022, we repurchased ~~2.4~~0.1 million shares of our common stock for ~~$100.8~~$2.0 million, ~~including 2.3 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. As of ~~March 30,~~September 28, 2022, approximately $204.0 million was available under our share repurchase authorizations.

2216

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Footnote Index

Stock-based Compensation

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


		Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended
		March 30, 2022		March 24, 2021			September 28, 2022		September 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	0.5		0.4
Weighted average fair value per share	Weighted average fair value per share	$	52.89	$	40.49	Weighted average fair value per share	$	28.42	$	53.76

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 ~~thirty-nine~~thirteen week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 29, 2021, 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.

~~13.~~12. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes and interest is as follows:


		Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended
		March 30, 2022		March 24, 2021			September 28, 2022		September 29, 2021
Income taxes, net of (refunds)		$	(11.6)	$	2.8
Income taxes, net						Income taxes, net	$	1.1	$	1.9
Interest, net of amounts capitalized	Interest, net of amounts capitalized	23.5		30.8		Interest, net of amounts capitalized	3.9		3.1

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


		Thirty-Nine Week Periods Ended					Thirteen Week Periods Ended
		March 30, 2022		March 24, 2021			September 28, 2022		September 29, 2021
Operating lease additions(1)	Operating lease additions(1)	$	214.7	$	51.4	Operating lease additions(1)	$	23.6	$	60.0
Finance lease additions	Finance lease additions	12.6		6.1		Finance lease additions	0.2		8.9
Accrued capital expenditures	Accrued capital expenditures	7.6		4.3		Accrued capital expenditures	20.3		6.2
Retirement of fully depreciated assets~~(2)~~	Retirement of fully depreciated assets~~(2)~~	120.9		13.1		Retirement of fully depreciated assets~~(2)~~	10.3		7.9

(1)The ~~thirty-nine~~thirteen week period ended ~~March 30, 2022~~September 29, 2021 primarily included operating lease additions associated with the 6623 restaurants purchased from ~~three~~a former ~~franchisees and the modifications of 25 leases.~~franchisee. Refer to Note 214 - Fiscal 2022 Chili’s Restaurant Acquisitions ~~and to Note 9 - Leases~~ for further details.

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

~~14.~~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 ~~March 30,~~September 28, 2022 and June ~~30, 2021,~~29, 2022, we have outstanding lease guarantees or are secondarily liable for an estimated ~~$28.7~~$24.6 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 2032.

~~Table of Contents~~

~~Footnote Index~~

We have received notices of default and have been named a party in lawsuits pertaining to some of these leases in circumstances where the current lessee did not pay its rent obligations. In the event of default under a lease by a

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Footnote Index

franchisee or owner of a divested brand, the indemnity and default clauses in our agreements with such third parties and applicable laws govern our ability to pursue and recover amounts we may pay on behalf of such parties. As of ~~March 30,~~September 28, 2022, we have contingent liabilities of ~~$3.2~~$2.0 million for our estimated exposure of the lease defaults related to these lease guarantees. These contingent liabilities are classified within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited).

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of ~~March 30,~~September 28, 2022, we had $5.8 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 712 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.

~~Briefing~~Oral argument of our appeal ~~to the 11~~th ~~Circuit Court~~ of ~~Appeals seeking to overturn~~ the district court’s class certification ~~orders is complete. Oral argument~~order was held before the Eleventh Circuit Court of ~~the appeal is scheduled for~~Appeals on June 8, 2022 in Jacksonville, Florida. We await the 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 ~~March 30,~~September 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.

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Footnote Index

•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.

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.

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 thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 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.

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Overview

Impact of COVID-19 Pandemic

In Starting in fiscal 2022, we ~~have~~ experienced limited product shortages and service disruptions in our supply chain, limited availability of labor to operate our restaurants due to a tight labor market, and an increase in employee turnover. It is possible that supply chain and labor shortages or disruptions could continue or increase in future periods if demand for goods, transportation and labor remains high.

The future 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.

Impact of Inflation

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~~a fun atmosphere, delicious food and drinks, with quality service so that ~~they~~our guests return to our restaurants.

Guest Engagement Through Technology - We have invested in our technology and off-premise options as more guests are opting for To-Go and delivery. ~~Chili’s~~During fiscal 2022, we expanded partnerships with third-party delivery ~~service providers have been instrumental in growing our off-premise business~~companies, and ~~offering our guests continued service during the COVID-19 pandemic. We leveraged technology so that~~Chili’s, Maggiano’s, and It’s Just Wings brands are currently available on DoorDash, Uber Eats, and Grubhub. Orders to these third-party delivery ~~service provider orders~~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 provide functionality for guests to pay at the table, to order or re-order, to engage in digital entertainment, to provide guest feedback and to 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~~During fiscal 2022, we discontinued the 3 for $10.99 platform and replaced it with 3 for Me, a flexible value bundle providing guests an unbeatable everyday value, while allowing us to be more flexible in terms of pricing, in light of the 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

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~~platforms allow guests to mix and match select menu items at a discounted price as part of the every-day base menu. Additionally, we have continued our Margarita of the Month~~ promotion that features a premium-liquor margarita every month at an every-day value price. 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, are also a critical part of our strategy. In the thirty-nine week period ended March 30, 2022, Chili’s off-premise sales, including both To-go and delivery, were approximately 35% of Company sales, with approximately 52% coming from To-Go and 48% from delivery. In the thirty-nine week period ended March 24, 2021, Chili’s off-premise sales, including both To-go and delivery, were approximately 45% of Company sales, with approximately 59% coming from To-Go and 41% from delivery. We regularly evaluate our processes and menu at Chili’s to identify opportunities where we can improve our service quality and food. We continually focus on guest satisfaction by improving our operational execution and standards.

Maggiano’s - At Maggiano’s, we believe our focus on operating fundamentals and technology provide the foundation for future efficiencies and growth. For example, Maggiano’s partnerships with delivery service providers make third party delivery more sustainable and efficient for the brand to operate. In addition, 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 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 at both Chili’s and Maggiano’s. ~~We expect that our~~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.

It’s Just Wings, launched ~~on June 23,~~at the end of fiscal 2020, is an offering consisting of chicken wings available in a variety of different sauces and rubs, curly fries, ranch dressing 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.

These brands are available for purchase through our third party service providers including DoorDash, UberEats, Google Food Ordering and the brand-specific websites itsjustwings.com and maggianosclassics.com. The operating results for the virtual brands are included in the results of our Chili’s and Maggiano’s brands, based on the restaurants that prepared and processed the food orders. ~~We 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 ~~ten~~three restaurants ~~and entering into two new development agreement~~ for the ~~thirty-nine~~thirteen week period ended ~~March 30,~~September 28, 2022. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners. We are also supporting our franchise partners with opportunities to expand sales through our virtual brand offerings.

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Company Development - The following table details the number of restaurant openings during the thirteen ~~and thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 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		Full Year Projected Openings
		Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended				Total Open Restaurants at			Thirteen Week Periods Ended			Total Open Restaurants at
		March 30, 2022	March 24, 2021		March 30, 2022	March 24, 2021	Fiscal 2022	March 30, 2022	March 24, 2021			September 28, 2022	September 29, 2021	Fiscal 2023	September 28, 2022	September 29, 2021
Company-owned restaurants	Company-owned restaurants									Company-owned restaurants
Chili’s domestic	Chili’s domestic	1	2		3	6	5	1,130	1,063	Chili’s domestic		—	1	17	1,126	1,088
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	2		3	6	5	1,187	1,120	Total Company-owned		—	1	17	1,182	1,145
Franchise restaurants	Franchise restaurants									Franchise restaurants
Chili’s domestic	Chili’s domestic	—	2		1	3	1	103	172	Chili’s domestic		1	—	1-2	102	146
Chili’s international	Chili’s international	1	2		9	6	13-15	358	363	Chili’s international		2	3	16-20	359	357
Maggiano’s domestic	Maggiano’s domestic	—	—		—	1	—	2	2	Maggiano’s domestic		—	—	—	2	2
Total franchise	Total franchise	1	4		10	10	14-16	463	537	Total franchise		3	3	17-22	463	505
Total restaurants	Total restaurants									Total restaurants
Chili’s domestic	Chili’s domestic	1	4		4	9	6	1,233	1,235	Chili’s domestic		1	1	18-19	1,228	1,234
Chili’s international	Chili’s international	1	2		9	6	13-15	363	368	Chili’s international		2	3	16-20	364	362
Maggiano’s domestic	Maggiano’s domestic	—	—		—	1	—	54	54	Maggiano’s domestic		—	—	—	53	54
Total	Total	2	6		13	16	19-21	1,650	1,657	Total		3	4	34-39	1,645	1,650

~~During~~Relocations are not included in the ~~thirty-nine week period ended March 30, 2022, we acquired 66~~table above. We plan to relocate one Chili’s ~~restaurants previously owned by three former franchisees. The acquisition of these restaurants is not reflected in Openings~~domestic Company-owned restaurant during the thirty-nine week period ended March 30, 2022 or Full Year Projected Openings total as they are existing restaurant locations transitioning ownership. These acquired restaurants are included in Total Open Restaurants at March 30, 2022 within the total for Company-owned restaurants Chili’s domestic.remainder of fiscal 2023.

At ~~March 30,~~September 28, 2022, we own property for 5251 of the ~~1,187~~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 ~~$15.7~~$14.1 million.

Revenues

Thirteen ~~and Thirty-Nine~~ Week ~~Periods~~Period Ended ~~March 30,~~September 28, 2022 compared to ~~March 24,~~September 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:

•Company sales include revenues generated by the operation of Company-owned restaurants including ~~gift card redemptions~~food and ~~revenues from our virtual brands.~~

•~~Franchise and other revenues include royalties,~~beverage sales, net of discounts, Maggiano’s banquet service charge income, gift card breakage, delivery income, ~~Maggiano’s banquet service charge 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 include royalties, franchise advertising fees, franchise and development fees and gift card equalization.

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

Total Revenues
Chili’s Maggiano’s Total Revenues
Thirteen Week Period Ended March 24, 2021 $ 763.0 $ 65.4 $ 828.4
Change from:
Comparable restaurant sales 73.0 32.6 105.6
Restaurant acquisitions(1)
38.1 — 38.1
Restaurant openings 2.8 — 2.8
Restaurant closures(2)
0.4 — 0.4
Company sales 114.3 32.6 146.9
Royalties(3)
0.1 0.1 0.2
Franchise fees and other revenues 2.2 2.7 4.9
Franchise and other revenues 2.3 2.8 5.1
Thirteen Week Period Ended March 30, 2022 $ 879.6 $ 100.8 $ 980.4

Total Revenues
Chili’s Maggiano’s Total Revenues
Thirty-Nine Week Period Ended March 24, 2021 $ 2,145.9 $ 183.3 $ 2,329.2
Change from:
Comparable restaurant sales 239.2 115.1 354.3
Restaurant acquisitions(1)
69.2 — 69.2
Restaurant openings 11.4 — 11.4
Restaurant closures(2)
1.2 — 1.2
Restaurant relocations 0.5 — 0.5
Company sales 321.5 115.1 436.6
Royalties(3)
3.5 0.2 3.7
Franchise fees and other revenues 4.5 8.6 13.1
Franchise and other revenues 8.0 8.8 16.8
Thirty-Nine Week Period Ended March 30, 2022 $ 2,475.4 $ 307.2 $ 2,782.6


	Total Revenues
	Chili’s		Maggiano’s		Total Revenues
Thirteen Week Period Ended September 29, 2021	$	787.6	$	88.8	$	876.4
Change from:
Comparable restaurant sales	28.5		15.3		43.8
Restaurant acquisitions(1)	33.7		—		33.7
Restaurant openings	2.6		—		2.6
Maggiano's banquet income	—		1.1		1.1
Gift card discount costs	0.3		0.1		0.4
Gift card breakage	0.4		—		0.4
Digital entertainment revenues	0.4		—		0.4

Delivery service fee income	(0.9)		0.1		(0.8)
Restaurant closures	(1.3)		0.2		(1.1)



Company sales	63.7		16.8		80.5


Franchise revenues(2)	(1.4)		—		(1.4)
Thirteen Week Period Ended September 28, 2022	$	849.9	$	105.6	$	955.5

(1)We acquired 23 Chili’s restaurants on September 2, 2021, 37 Chili’s restaurants on October 31, 2021, ~~and~~ six Chili’s restaurants on February 1, 2022 and two Chili’s restaurants on May 5, 2022 from three franchisees. The revenues generated by these restaurants since the date of the acquisitions are included in Company sales for the thirteen ~~and thirty-nine~~ week ~~periods~~period ended ~~March 30,~~September 28, 2022.

(2)~~Restaurant closures primarily represents the increase in Company sales in fiscal 2022 related to restaurants temporarily closed in fiscal 2021 due to the pandemic.~~

~~(3)~~Our Chili’s and Maggiano’s franchisees generated sales of approximately ~~$192.3~~$203.3 million and ~~$609.7~~$2.4 million respectively for the thirteen ~~and thirty-nine~~ week ~~periods~~period ended ~~March 30,~~September 28, 2022 compared to ~~$190.8~~$211.9 million and ~~$543.7~~$1.9 million respectively in sales for the thirteen ~~and thirty-nine~~ week ~~periods~~period ended ~~March 24,~~September 29, 2021.

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The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen ~~and thirty-nine~~ week ~~periods~~period ended ~~March 30,~~September 28, 2022 compared to ~~March 24,~~September 29, 2021:


		Percentage Change in the Thirteen Week Period Ended March 30, 2022 versus March 24, 2021											Percentage Change in the Thirteen Week Period Ended September 28, 2022 versus September 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	13.5	%	4.3	%	5.7	%	3.5	%	6.2	%	Company-owned	5.3	%	7.2	%	3.0	%	(4.9)	%	5.2	%
Chili’s	Chili’s	10.3	%	4.3	%	3.9	%	2.1	%	6.5	%	Chili’s	3.8	%	7.4	%	3.0	%	(6.6)	%	5.4	%
Maggiano’s	Maggiano’s	50.5	%	4.8	%	16.8	%	28.9	%	0.0	%	Maggiano’s	18.2	%	5.8	%	3.1	%	9.3	%	0.0	%
Franchise(4)	Franchise(4)	20.3	%									Franchise(4)	6.6	%
U.S.	U.S.	9.0	%									U.S.	0.6	%
International	International	28.4	%									International	10.4	%
Chili’s domestic(5)	Chili’s domestic(5)	9.9	%									Chili’s domestic(5)	3.4	%
Maggiano’s domestic(5)		50.7	%

System-wide(6)	System-wide(6)	14.5	%									System-wide(6)	5.5	%

Percentage Change in the Thirty-Nine Week Period Ended March 30, 2022 versus March 24, 2021
Comparable Restaurant Sales(1)
Price Impact
Mix-Shift Impact(2)
Traffic Impact
Restaurant Capacity(3)
Company-owned 16.0 % 2.4 % 6.0 % 7.6 % 6.1 %
Chili’s 11.9 % 2.5 % 3.6 % 5.8 % 6.4 %
Maggiano’s 63.7 % 1.8 % 21.5 % 40.4 % 0.0 %
Franchise(4)
20.3 %
U.S. 11.2 %
International 29.5 %
Chili’s domestic(5)
11.7 %
Maggiano’s domestic(5)
63.7 %
System-wide(6)
16.6 %

(1)Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 ~~months except acquired restaurants which are included after 12 months of ownership.~~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.

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(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, 37 Chili’s restaurants in the second quarter of fiscal 2022 and six Chili’s restaurants in the third 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 Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.

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

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

Costs and Expenses

Thirteen Week Period Ended ~~March 30,~~September 28, 2022 compared to ~~March 24,~~September 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
		March 30, 2022				March 24, 2021									September 28, 2022				September 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	$	270.3	28.1	%	$	213.9	26.3	%	$	(56.4)	(1.8)	%	Food and beverage costs	$	289.5	30.7	%	$	234.3	27.1	%	$	(55.2)	(3.6)	%
Restaurant labor	Restaurant labor	329.1		34.3	%	270.8		33.3	%	(58.3)		(1.0)	%	Restaurant labor	330.6		34.9	%	304.9		35.2	%	(25.7)		0.3	%
Restaurant expenses	Restaurant expenses	244.1		25.4	%	216.1		26.5	%	(28.0)		1.1	%	Restaurant expenses	268.8		28.4	%	231.3		26.7	%	(37.5)		(1.7)	%
Depreciation and amortization	Depreciation and amortization	42.2				37.4				(4.8)				Depreciation and amortization	41.9				39.3				(2.6)
General and administrative	General and administrative	39.2				33.7				(5.5)				General and administrative	39.5				36.5				(3.0)
Other (gains) and charges	Other (gains) and charges	6.1				4.3				(1.8)				Other (gains) and charges	5.0				4.5				(0.5)
Interest expenses	Interest expenses	11.1				14.1				3.0				Interest expenses	12.3				12.5				0.2
Other income, net	Other income, net	(0.4)				(0.3)				0.1				Other income, net	(0.4)				(0.3)				0.1

As a percentage of Company sales:

•Food and beverage costs increased ~~1.8%~~3.6%, including ~~2.9%~~5.9% of higher poultry, meat ~~poultry~~ and other commodity costs due to supply chain constraints and inflationary pressures, partially offset by ~~1.1%~~2.1% of increased menu ~~pricing.~~pricing and 0.2% of favorable menu item mix.

•Restaurant labor ~~increased 1.0%~~decreased 0.3%, including ~~2.0%~~1.7% of ~~higher hourly labor expenses due to increased wage rates, training and overtime, 0.8% of higher manager expenses for merit increases and manager training due to greater than normal manager turnover,~~sales leverage, partially offset by ~~1.3%~~0.7% of ~~sales leverage~~increased manager salaries rates and ~~0.5%~~headcount and 0.7% of ~~lower other labor expenses.~~increased hourly wage rates.

•Restaurant expenses ~~decreased 1.1%~~increased 1.7%, ~~including 2.2%~~driven by 0.8% of ~~sales leverage and 0.5% of lower~~higher delivery fee expenses, ~~due to changes in sales channel mix, partially offset by 0.4%~~0.5% of higher utilities ~~0.3% of higher supervision costs, 0.3%~~expenses, 0.5% of higher repairs and maintenance expenses, 0.2% of higher rent expenses, 0.2% of higher workers’ compensation and general liability ~~expenses~~insurance, 0.2% of higher supplies and ~~0.4%~~0.5% of higher other restaurant expenses, These increases were partially offset by 1.0% of sales leverage and 0.2% of lower advertising expenses.

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Depreciation and amortization increased ~~$4.8~~$2.6 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended ~~March 24,~~September 29, 2021	$	~~37.4~~39.3
Change from:
Additions for ~~new~~existing and ~~existing~~new restaurant assets	~~5.7~~5.3
Acquisition of Chili’s restaurants(1)	~~2.0~~
~~Finance leases~~	~~1.5~~2.3
Corporate assets	~~0.6~~0.5
Retirements and fully depreciated restaurant assets	(5.0)
Finance leases	(0.5)


Thirteen Week Period Ended ~~March 30,~~September 28, 2022	$	~~42.2~~41.9

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 6668 Chili’s restaurants acquired in ~~the first three quarters of~~ fiscal 2022.

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General and administrative expe ~~expenses~~nses increased ~~$5.5~~$3.0 million as follows:


	General and Administrative
Thirteen Week Period Ended ~~March 24,~~September 29, 2021	$	~~33.7~~36.5
Change from:
~~Recruiting~~	~~1.1~~
~~Defined contribution plan employer expenses~~Performance-based compensation	1.0
Payroll-related expenses	~~1.0~~0.9
Recruiting	0.4


Professional fees	~~0.6~~ (1.1)
~~Stock-based compensation~~	~~0.5~~
~~Travel and entertainment expenses~~	~~0.5~~
~~Performance-based compensation~~	~~0.3~~
Other	~~0.5~~1.8
Thirteen Week Period Ended ~~March 30,~~September 28, 2022	$	~~39.2~~39.5

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

Thirteen Week Periods Ended
March 30,
2022 March 24,
2021
Restaurant closure charges $ 1.2 $ 0.3
Remodel-related costs 0.9 0.9
COVID-19 related charges 0.7 0.9
Enterprise system implementation costs 0.5 —
Acquisition-related costs, net 0.6 —
Loss from natural disasters, net of (insurance recoveries) — 1.8
Other 2.2 0.4
$ 6.1 $ 4.3

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

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

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance
March 30, 2022 March 24, 2021
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 757.4 27.8 % $ 606.3 26.5 % $ (151.1) (1.3) %
Restaurant labor 949.4 34.9 % 774.6 33.9 % (174.8) (1.0) %
Restaurant expenses 712.1 26.1 % 629.9 27.5 % (82.2) 1.4 %
Depreciation and amortization 123.1 112.0 (11.1)
General and administrative 108.8 94.2 (14.6)
Other (gains) and charges 17.0 13.5 (3.5)
Interest expenses 34.8 43.1 8.3
Other income, net (1.2) (1.2) —

~~As a percentage of Company sales:~~

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

•~~Restaurant labor~~ increased 1.0%, including 1.9% of higher hourly restaurant labor costs primarily including wage rates, training and overtime and 0.8% of higher manager salaries and training resulting from merit increases and greater than normal manager turnover, partially offset by 1.6% of sales leverage and 0.1% of lower other restaurant labor expenses.

•~~Restaurant expenses~~ decreased 1.4%, driven by 2.7% of sales leverage and 0.6% of lower delivery fee expenses due to changes in sales channel mix, partially offset by 0.7% of higher repairs and maintenance expenses, 0.4% of higher utilities expenses, 0.2% of higher supervision costs, 0.2% of higher workers’ compensation and general liability expenses, 0.2% of higher advertising expenses and 0.2% of higher other restaurant expenses.

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


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

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

~~Table of Contents~~

~~General and administrative expenses increased $14.6 million as follows:~~


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

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

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

Thirty-Nine Week Periods Ended
March 30,
2022 March 24,
2021
Remodel-related costs $ 4.0 $ 1.8
Lease contingencies 2.9 —
Restaurant closure charges 1.7 2.2
Acquisition-related costs, net 1.5 —
Enterprise system implementation costs 1.4 —
Loss from natural disasters, net of (insurance recoveries) 0.8 2.0
COVID-19 related charges 0.2 3.1
Restaurant impairment charges — 2.5
Other 4.5 1.9
$ 17.0 $ 13.5

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


	Thirteen Week Periods Ended
	September 28, 2022		September 29, 2021
Restaurant closure charges	$	1.5	$	0.2
Enterprise system implementation costs	1.0		0.6
Remodel-related costs	0.8		1.5
Lease modification gain, net	(0.7)		—




Other	2.4		2.2
	$	5.0	$	4.5

Income Taxes

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


	Thirteen Week Periods Ended
		September 28, 2022		September 29, 2021
Effective income tax rate		4.7	%	1.5	%

The federal statutory tax rate was 21.0% for the thirteen ~~and thirty-nine~~ week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 29, 2021.

The effective income tax rate in the thirteen week period ended ~~March 30,~~September 28, 2022 ~~decreased~~increased compared to the thirteen week period ended ~~March 24,~~September 29, 2021 creating a tax benefit due to negative Income before income taxes.

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The increase in benefit is primarily due to the more favorable impact from the FICA tip tax credit,

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partially offset by the ~~reduced favorable impact from the~~ excess tax ~~benefits associated with stock-based compensation.~~

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

Segment Results

Chili’s Segment

Thirteen Week Period Ended ~~March 30,~~September 28, 2022 compared to ~~March 24,~~September 29, 2021

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage
March 30,
2022 March 24,
2021
Company sales $ 863.3 $ 749.0 $ 114.3 15.3 %
Royalties 7.8 7.7 0.1 1.3 %
Franchise fees and other revenues 8.5 6.3 2.2 34.9 %
Franchise and other revenues 16.3 14.0 2.3 16.4 %
Total revenues $ 879.6 $ 763.0 $ 116.6 15.3 %


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as percentage
	September 28, 2022		September 29, 2021
Company sales	$	840.6	$	776.9	$	63.7	8.2	%


Franchise revenues	9.3		10.7		(1.4)		(13.1)	%
Total revenues	$	849.9	$	787.6	$	62.3	7.9	%

Chili’s Total revenues increased ~~by 15.3%~~7.9% primarily due to ~~dining room sales growth from higher traffic,~~ price increases, favorable mix, the acquisition of 6668 Chili’s restaurants ~~from three former franchisees~~in fiscal 2022 and ~~five~~four new restaurant openings, partially offset by ~~decreased To-Go 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
		March 30, 2022				March 24, 2021									September 28, 2022				September 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	$	245.6	28.4	%	$	198.7	26.6	%	$	(46.9)	(1.8)	%	Food and beverage costs	$	260.9	31.0	%	$	213.4	27.5	%	$	(47.5)	(3.5)	%
Restaurant labor	Restaurant labor	295.0		34.2	%	248.7		33.2	%	(46.3)		(1.0)	%	Restaurant labor	294.4		35.0	%	273.5		35.2	%	(20.9)		0.2	%
Restaurant expenses	Restaurant expenses	215.2		24.9	%	194.2		25.9	%	(21.0)		1.0	%	Restaurant expenses	236.9		28.2	%	204.6		26.3	%	(32.3)		(1.9)	%
Depreciation and amortization	Depreciation and amortization	35.9				31.0				(4.9)				Depreciation and amortization	36.0				33.0				(3.0)
General and administrative	General and administrative	9.5				7.0				(2.5)				General and administrative	9.5				8.0				(1.5)
Other (gains) and charges	Other (gains) and charges	5.2				3.1				(2.1)				Other (gains) and charges	3.0				2.8				(0.2)

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

•Chili’s Food and beverage costs increased ~~1.8%~~3.5%, including ~~3.0%~~5.9% of higher poultry, meat ~~poultry~~ and other commodity costs ~~due to~~resulting from supply chain constraints and inflationary pressures, partially offset by ~~1.2%~~2.1% of increased menu ~~pricing.~~pricing and 0.3% of favorable menu item mix.

•Chili’s Restaurant labor ~~increased 1.0%~~decreased 0.2%, including 1.8% of restaurant labor costs including wage rates, training and overtime, 0.7% of higher manager salaries and training due to merit increases and greater than normal manager turnover and 0.1% of higher other labor expenses, partially offset by 1.1%1.2% of sales leverage and ~~0.5%~~0.3% of lower other restaurant labor costs, partially offset by 0.9% of increased manager salary rates, headcount and bonus ~~expenses.~~and 0.4% of increased hourly wage rates.

•Chili’s Restaurant expenses ~~decreased 1.0%~~increased 1.9%, including ~~2.6% of sales leverage and 0.4% of lower delivery fee expenses due to changes in sales channel mix, partially offset by 0.7%~~0.9% of higher ~~utilities~~delivery fee expenses, 0.5% of higher ~~rent~~utilities expenses, 0.5% of higher repairs and maintenance expenses, 0.2% of higher rent expenses and ~~0.3%~~0.4% of higher other restaurant ~~expenses.~~expenses, partially offset by 0.6% of sales leverage.

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Chili’s Depreciation and amortization increased ~~$4.9~~$3.0 million as follows:


	Depreciation and Amortization
Thirteen Week Period Ended ~~March 24,~~September 29, 2021	$	~~31.0~~33.0
Change from:
Additions for ~~new~~existing and ~~existing~~new restaurant assets	~~5.3~~4.9
Acquisition of Chili’s restaurants(1)	~~2.0~~
~~Finance leases~~	~~1.4~~2.3
Retirements and fully depreciated restaurant assets	~~(3.8)~~(3.7)
Finance leases	(0.5)

Thirteen Week Period Ended ~~March 30,~~September 28, 2022	$	~~35.9~~36.0

(1)Represents the incremental depreciation and amortization of the assets and finance leases of the 6668 Chili’s restaurants acquired in ~~the first three quarters of~~ fiscal 2022.

Chili’s General and administrative increased ~~$2.5~~$1.5 million as follows:


	General and Administrative
Thirteen Week Period Ended ~~March 24,~~September 29, 2021	$	~~7.0~~8.0
Change from:
~~Recruiting~~	~~1.0~~
~~Defined contribution plan employer expenses~~	~~0.6~~

Payroll-related expenses	~~0.4~~0.5
Performance-based compensation	~~0.1~~ 0.4
Stock-based compensation	(0.2)
Other	~~0.4~~0.8
Thirteen Week Period Ended ~~March 30,~~September 28, 2022	$	9.5

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
March 30,
2022 March 24,
2021
Restaurant closure charges $ 1.2 $ 0.3
Remodel-related costs 0.9 0.9
Acquisition of franchise restaurants-related costs 0.6 —
COVID-19 related charges 0.5 0.8
Loss from natural disasters, net of (insurance recoveries) — 1.1
Other 2.0 —
$ 5.2 $ 3.1

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

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

Chili’s Total revenues increased 15.4% primarily due to dining room sales growth from higher traffic, favorable mix, price increases, the acquisition of 66 Chili’s restaurants from three former franchisees and five new restaurant openings, partially offset by decreased To-Go sales. Refer to “Revenues” section above for further details about Chili’s revenues changes.

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance
March 30, 2022 March 24, 2021
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 683.8 28.2 % $ 563.2 26.7 % $ (120.6) (1.5) %
Restaurant labor 846.1 34.8 % 710.3 33.7 % (135.8) (1.1) %
Restaurant expenses 624.8 25.7 % 564.6 26.8 % (60.2) 1.1 %
Depreciation and amortization 104.3 92.4 (11.9)
General and administrative 24.7 17.8 (6.9)
Other (gains) and charges 10.2 11.1 0.9

~~As a percentage of Company sales:~~

•Chili’s Food and beverage costs increased 1.5%, including 2.1% of higher poultry, meat and other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by 0.6% of increased menu pricing.

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

•Chili’s Restaurant expenses decreased 1.1%, including 2.1% of sales leverage and 0.6% of lower delivery fee expenses due to changes in sales channel mix, partially offset by 0.5% of higher repairs and maintenance expenses, 0.4% of higher utilities expenses, 0.4% of higher rent expenses and 0.3% of higher other restaurant expenses.

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


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

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

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


	~~General and Administrative~~
~~Thirty-Nine Week Period Ended March 24, 2021~~	$	~~17.8~~
~~Change from:~~
~~Defined contribution plan employer expenses(1)~~	~~4.9~~
~~Recruiting~~	~~1.5~~
~~Travel and entertainment expenses~~	~~0.6~~
~~Payroll-related expenses~~	~~0.5~~
~~Stock-based compensation~~	~~0.5~~
~~Performance-based compensation~~	~~(1.6)~~
~~Other~~	~~0.5~~
~~Thirty-Nine Week Period Ended March 30, 2022~~	$	~~24.7~~

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

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

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

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	Thirteen Week Periods Ended
	September 28, 2022		September 29, 2021
Restaurant closure charges	$	1.1	$	0.2
Remodel-related costs	0.8		1.4
Lease modification gain, net	(0.7)		—



Other	1.8		1.2
	$	3.0	$	2.8

Maggiano’s Segment

Thirteen Week Period Ended ~~March 30,~~September 28, 2022 compared to ~~March 24,~~September 29, 2021

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


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance		Variance as a percentage
	September 28, 2022		September 29, 2021
Company sales	$	105.5	$	88.7	$	16.8	18.9	%


Franchise revenues	0.1		0.1		—		—	%
Total revenues	$	105.6	$	88.8	$	16.8	18.9	%

Maggiano’s Total revenues increased ~~54.1%~~18.9% primarily due to higher dining 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:


		Thirteen Week Periods Ended								Favorable (Unfavorable) Variance					Thirteen Week Periods Ended								Favorable (Unfavorable) Variance
		March 30, 2022				March 24, 2021									September 28, 2022				September 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	$	24.7	25.4	%	$	15.2	23.5	%	$	(9.5)	(1.9)	%	Food and beverage costs	$	28.6	27.1	%	$	20.9	23.6	%	$	(7.7)	(3.5)	%
Restaurant labor	Restaurant labor	34.1		35.0	%	22.1		34.2	%	(12.0)		(0.8)	%	Restaurant labor	36.2		34.3	%	31.4		35.4	%	(4.8)		1.1	%
Restaurant expenses	Restaurant expenses	28.7		29.5	%	21.7		33.5	%	(7.0)		4.0	%	Restaurant expenses	31.7		30.1	%	26.6		30.0	%	(5.1)		(0.1)	%
Depreciation and amortization	Depreciation and amortization	3.4				3.4				—				Depreciation and amortization	3.2				3.4				0.2
General and administrative	General and administrative	2.3				1.3				(1.0)				General and administrative	2.5				2.0				(0.5)
Other (gains) and charges	Other (gains) and charges	0.0				0.3				0.3				Other (gains) and charges	0.5				0.2				(0.3)

As a percentage of Company sales:

•Maggiano’s Food and beverage costs increased ~~1.9%~~3.5%, including 2.7% of higher seafood, dairy and other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by 0.7% of increased menu pricing and 0.1% of favorable menu item mix.

•Maggiano’s Restaurant labor increased 0.8%, including 4.2% of higher restaurant hourly labor costs primarily including wage rates, training and overtime, 1.5% of higher manager salaries and training and 0.5% of higher manager bonus expenses, partially offset by 5.0% of sales leverage and 0.4% of lower other labor expense.

•Maggiano’s Restaurant expenses decreased 4.0%, driven by 9.8% of sales leverage, partially offset by higher expenses including 1.8% of repairs and maintenance expenses, 1.7% of supervision expenses, 1.0% of advertising expenses, 0.7% of higher rent expenses, 0.4% of credit card fees and 0.2% of other restaurant expenses.

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage
March 30,
2022 March 24,
2021
Company sales $ 296.2 $ 181.1 $ 115.1 63.6 %
Royalties 0.3 0.1 0.2 200.0 %
Franchise fees and other revenues 10.7 2.1 8.6 409.5 %
Franchise and other revenues 11.0 2.2 8.8 400.0 %
Total revenues $ 307.2 $ 183.3 $ 123.9 67.6 %

Maggiano’s Total revenues increased 67.6% primarily due to higher dining and banquet room sales and traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance
March 30, 2022 March 24, 2021
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 73.6 24.8 % $ 43.1 23.8 % $ (30.5) (1.0) %
Restaurant labor 103.3 34.9 % 64.3 35.5 % (39.0) 0.6 %
Restaurant expenses 86.8 29.3 % 64.6 35.7 % (22.2) 6.4 %
Depreciation and amortization 10.2 10.4 0.2
General and administrative 6.2 3.9 (2.3)
Other (gains) and charges 0.2 1.2 1.0

~~As a percentage of Company sales:~~

•~~Maggiano’s Food and beverage costs increased 1.0%, including 1.5%~~4.6% of higher seafood and other commodity costs resulting from supply chain constraints and inflationary pressures, partially offset by ~~0.3%~~0.9% of increased menu pricing and 0.2% of favorable menu item mix.

•Maggiano’s Restaurant labor decreased ~~0.6%~~1.1%, including ~~6.1%~~1.8% of sales leverage, ~~and~~ 0.3% of lower ~~other labor~~manager bonus expenses and 0.2% of lower manager training, partially offset by ~~3.3% of higher restaurant hourly labor costs primarily including wage rates, training and overtime, 1.3% of higher manager salaries and training and~~ 1.2% of higher manager ~~bonus expenses.~~salaries.

•Maggiano’s Restaurant expenses ~~decreased 6.4%~~increased 0.1%, driven ~~by 11.7% of sales leverage, partially offset~~ by higher expenses including ~~1.7%~~0.8% of delivery fees, 0.6% of utilities, 0.5% of repairs and maintenance expenses, ~~1.5%~~0.3% of supervision expenses ~~1.2% of higher advertising expenses, 0.7% of higher utilities~~ and ~~0.2%~~1.6% of other restaurant ~~expenses.~~expenses, partially offset by 3.7% of sales leverage.

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 or repurchase shares of our common stock when authorized. Our strategic decision to enhance our off-premise business has enabled us to conveniently serve a significantly higher volume of off-premise guests during this pandemic compared to other industry competitors.

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.

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

•~~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

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


	Thirteen Week Periods Ended				Favorable (Unfavorable) Variance
	September 28, 2022		September 29, 2021
Net cash provided by operating activities	$	24.6	$	40.2	$	(15.6)

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 an increase~~a decrease in net income, partially offset by a decrease in payments of performance based compensation and bonuses in the current ~~year, partially offset by improved operating performance in the first three quarters of fiscal 2022 compared to the prior~~ year and the timing of operational receipts and payments.

Cash Flows from Investing Activities


		Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance			Thirteen Week Periods Ended				Favorable (Unfavorable) Variance
		March 30, 2022		March 24, 2021					September 28, 2022		September 29, 2021
Cash flows from investing activities	Cash flows from investing activities							Cash flows from investing activities
Payments for property and equipment	Payments for property and equipment	$	(109.0)	$	(62.4)	$	(46.6)	Payments for property and equipment	$	(46.7)	$	(37.3)	$	(9.4)
Proceeds from note receivable								Proceeds from note receivable	1.1		—		1.1
Payments for franchise restaurant acquisitions	Payments for franchise restaurant acquisitions	(106.0)		—		(106.0)		Payments for franchise restaurant acquisitions	—		(47.5)		47.5
Proceeds from sale leaseback transactions, net of related expenses	Proceeds from sale leaseback transactions, net of related expenses	20.5		—		20.5		Proceeds from sale leaseback transactions, net of related expenses	—		20.5		(20.5)
Proceeds from note receivable		1.0		1.5		(0.5)
Proceeds from sale of assets		0.1		1.6		(1.5)

Net cash used in investing activities	Net cash used in investing activities	$	(193.4)	$	(59.3)	$	(134.1)	Net cash used in investing activities	$	(45.6)	$	(64.3)	$	18.7

Net cash used in investing activities ~~increased~~decreased primarily due to ~~$106.0~~$47.5 million of cash consideration paid in the prior year for the purchase of 6623 Chili’s restaurants purchased from ~~three franchisees,~~a former franchisee, partially offset by proceeds of ~~$20.5~~

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$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.~~

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new restaurants.

Cash Flows from Financing Activities


		Thirty-Nine Week Periods Ended				Favorable (Unfavorable) Variance			Thirteen Week Periods Ended				Favorable (Unfavorable) Variance
		March 30, 2022		March 24, 2021					September 28, 2022		September 29, 2021
Cash flows from financing activities	Cash flows from financing activities							Cash flows from financing activities
Borrowings on revolving credit facility	Borrowings on revolving credit facility	$	595.5	$	28.4	$	567.1	Borrowings on revolving credit facility	$	135.0	$	285.0	$	(150.0)
Payments on revolving credit facility	Payments on revolving credit facility	(502.5)		(210.0)		(292.5)		Payments on revolving credit facility	(100.0)		(205.0)		105.0
Payments on long-term debt								Payments on long-term debt	(5.8)		(5.5)		(0.3)
Purchases of treasury stock	Purchases of treasury stock	(100.8)		(4.1)		(96.7)		Purchases of treasury stock	(2.0)		(39.6)		37.6
Payments on long-term debt		(17.6)		(14.3)		(3.3)
Payments of dividends								Payments of dividends	(0.2)		(0.8)		0.6
Payments for debt issuance costs	Payments for debt issuance costs	(3.1)		(2.2)		(0.9)		Payments for debt issuance costs	—		(3.0)		3.0
Payments of dividends		(1.1)		(1.5)		0.4
Proceeds from issuance of treasury stock	Proceeds from issuance of treasury stock	0.4		14.1		(13.7)		Proceeds from issuance of treasury stock	0.0		0.3		(0.3)
Net cash used in financing activities		$	(29.2)	$	(189.6)	$	160.4
Net cash provided by financing activities								Net cash provided by financing activities	$	27.0	$	31.4	$	(4.4)

Net cash ~~used in~~provided by financing activities decreased primarily due to ~~$93.0~~$35.0 million of net borrowing activity in fiscal 2023 compared to $80.0 million of net borrowing activity in fiscal 2022 ~~compared to $181.6 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 ~~$93.0~~$35.0 million were drawn during the ~~thirty-nine~~thirteen week period ended ~~March 30,~~September 28, 2022 on the revolving credit facility. As of ~~March 30,~~September 28, 2022, ~~$535.7~~$493.7 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 ~~March 30,~~September 28, 2022, our interest rate was ~~2.250%~~4.875% consisting of LIBOR of ~~0.500%~~3.125% plus the applicable margin of 1.750%. In the thirty-nine week period ended March 30, 2022, we incurred and capitalized $3.1 million of debt issuance costs associated with the new revolver, which are included in Other assets in the Consolidated Balance Sheets (Unaudited).

As of ~~March 30,~~September 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. Refer to Note 109 - Debt for further information about our notes and revolving credit facility.

Share Repurchase Program

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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 ~~thirty-nine~~thirteen week periods ended ~~March 30,~~September 28, 2022 and ~~March 24,~~September 29, 2021, dividends paid were solely related to the previously accrued dividends for restricted share

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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.

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.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which the Company has: (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us. We have entered into certain pre-commencement leases as disclosed in Note 98 - Leases and have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 1413 - 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.

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 in our quantitative and qualitative market risks set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended June ~~30, 2021.~~29, 2022.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the thirteen week period ended ~~March 30,~~September 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~~the impact of 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 and our partners’ supply chains, operations, technology and assets, and our financial performance; the impact of ~~competition,~~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 ~~March 30,~~September 28, 2022, there have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June ~~30, 2021.~~29, 2022.

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

During the thirteen week period ended ~~March 30,~~September 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)
December 30, 2021 through February 2, 2022 0.0 $ 38.07 — $ 230.0
February 3, 2022 through March 2, 2022 0.0 38.64 — 230.0
March 3, 2022 through March 30, 2022 0.8 33.57 0.8 204.0
Total 0.8 33.60 0.8


	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value that May Yet be Purchased Under the Program(2)
June 30, 2022 through August 3, 2022	—	$	—	—	$	204.0
August 4, 2022 through August 31, 2022	0.1	27.47		—	204.0
September 1, 2022 through September 28, 2022	—	—		—	204.0
Total	0.1	27.47		—

(1)These amounts include shares purchased as part of our publicly announced programs and shares owned and tendered by team members to satisfy tax withholding obligations on the vesting of restricted share awards, which are not deducted from shares available to be purchased under publicly announced programs. Unless otherwise indicated, shares owned and tendered by team members to satisfy tax withholding obligations were purchased at the average of the high and low prices of the Company’s shares on the date of vesting. During the thirteen week period ended ~~March 30,~~September 28, 2022, ~~4,989~~73,354 shares were tendered by team members at an average price of $~~38.13~~27.47.

(2)The final amount shown is as of ~~March 30,~~September 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 Stock Option and Incentive Plan, as amended*
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 ~~March 30,~~September 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.

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: ~~May 4,~~November 2, 2022	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: ~~May 4,~~November 2, 2022	By:	/S/ JOSEPH G. TAYLOR
		Joseph G. Taylor,
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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	Mid-Atlantic Region		Great Lakes Region (Preliminary)

Current assets	$	1.4	$	2.1

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

Current liabilities	(1.4)		(0.3)

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

Net assets acquired(4)	$	47.7	$	57.1