What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-04-28 · 209 added, 330 removed, 375 unchanged (59% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2021 March 25,

2020 March 24,

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Company sales $ 859.6 $ 728.2

27 unchanged sentences

(In millions, except per share amounts)

September 29,

2021 June 30,

37 unchanged sentences

$ 0.10 par value;

70.3 million shares issued and 45.7 million shares outstanding at March 24, 2021, and 70.3 million shares issued and 45.0 million shares outstanding at June 24, 2020)

70.3 million shares issued;

and 45.4 million shares outstanding at September 29, 2021, and 45.9 million shares outstanding at June 30, 2021)

Additional paid-in capital 679.4 685.4

1 unchanged sentence

Accumulated deficit ( 252.9 ) ( 266.1 )

Treasury stock, at cost ( 24.6 million shares at March 24, 2021, and 25.3 million shares at June 24, 2020)

Treasury stock, at cost ( 24.9 million shares at September 29, 2021, and 24.4 million shares at June 30, 2021)

( 753.9 ) ( 724.9 )

5 unchanged sentences

(In millions)

Thirty-Nine Week Periods Ended

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Cash flows from operating activities

23 unchanged sentences

Payments for property and equipment ( 37.3 ) ( 13.6 )

Proceeds from sale of assets 1.6 1.0

Proceeds from note receivable 1.5 2.2

Payments for franchise restaurant acquisitions ( 47.5 ) —

Proceeds from sale leaseback transactions, net of related expenses 20.5 —

Proceeds from note receivable — 0.6

Net cash used in investing activities ( 64.3 ) ( 13.0 )

Cash flows from financing activities

Payments on revolving credit facility ( 210.0 ) ( 630.0 )

Borrowings on revolving credit facility 285.0 28.4

Payments on long-term debt ( 14.3 ) ( 12.4 )

Payments on revolving credit facility ( 205.0 ) ( 75.0 )

Purchases of treasury stock ( 39.6 ) ( 3.9 )

Payments on long-term debt ( 5.5 ) ( 4.6 )

Payments for debt issuance costs ( 3.0 ) ( 1.5 )

1 unchanged sentence

Proceeds from issuance of treasury stock 0.3 3.0

Net cash (used in) provided by financing activities ( 189.6 ) 89.4

Net cash provided by (used in) financing activities 31.4 ( 54.9 )

Net change in cash and cash equivalents 7.3 14.9

8 unchanged sentences

Basis of Presentation 7

Effect of New Accounting Standards 8

Chili’s Restaurant Acquisition 8

Revenue Recognition 9

8 unchanged sentences

Contingencies 19

Fiscal 2020 Chili’s Restaurant Acquisition 23

Subsequent Events 20

3 unchanged sentences

and its subsidiaries and any predecessor companies of Brinker International, Inc.

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

We are principally engaged in the ownership, operation, development, and franchising of the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands.

At March 24, 2021, we owned, operated or franchised 1,657 restaurants, consisting of 1,120 Company-owned restaurants and 537 franchised restaurants, located in the United States, 27 countries and two United States territories.

Our Consolidated Financial Statements (Unaudited) as of September 29, 2021 and June 30, 2021, and for the thirteen week periods ended September 29, 2021 and September 23, 2020, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

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™.

At September 29, 2021, we owned, operated or franchised 1,650 restaurants, consisting of 1,145 Company-owned restaurants and 505 franchised restaurants, located in the United States, 28 countries and two United States territories.

We have a 52 or 53 week fiscal year ending on the last Wednesday in June.

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Fiscal year 2022 contains 52 weeks and will end on June 29, 2022.

Fiscal year 2020, which ended on June 24, 2020, contained 52 weeks.

Fiscal year 2021 ended on June 30, 2021 and contained 53 weeks.

Use of Estimates

The preparation of the consolidated financial statements is in conformity with generally accepted accounting principles in the United States (“GAAP”) and requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and costs and expenses in the reporting periods.

The preparation of the Consolidated Financial Statements is in conformity with generally accepted accounting principles in the United States (“GAAP”) and requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements (Unaudited), and the reported amounts of revenues and costs and expenses in the reporting periods.

Actual results could differ from those estimates.

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Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been omitted pursuant to SEC rules and regulations.

The Notes to Consolidated Financial Statements (Unaudited) should be read in conjunction with the Notes to the Consolidated Financial Statements contained in our June 24, 2020 Form 10-K.

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 Form 10-K.

We believe the disclosures are sufficient for interim financial reporting purposes.

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The related Accumulated other comprehensive loss is presented in the Consolidated Balance Sheets (Unaudited).

Risks and Uncertainties

In January 2020, the Secretary of Health and Human Services declared the novel strain of coronavirus (“COVID-19”) a public health emergency.

Subsequently in March 2020, the World Health Organization declared COVID-19 a global pandemic that resulted in a significant reduction in sales at our restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments.

In response to COVID-19, the Company temporarily closed all Company-owned restaurant dining and banquet rooms at the end of the third quarter of fiscal 2020 resulting in a

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 pandemic based on state and local mandates, which has resulted in significant

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transition to an off-premise business model.

In May 2020, we began to reopen certain dining room locations as permitted by state and local governments.

In March 2021, certain state and local governments started easing, and in some cases lifting, the dining room capacity restrictions.

We are currently operating substantially all of our dining rooms in some capacity in accordance with state and local mandates in order to ensure the safety of our guests and team members.

As of March 24, 2021, substantially all of our restaurant dining rooms and patios were opened with limited seating capacity.

The capacity limitations and personal safety preferences have resulted in reduced traffic in the Company’s restaurants.

At this time, the ultimate impact of COVID-19 cannot be reasonably estimated due to the uncertainty about the extent and the duration of the spread of the virus.

A lack of containment could lead to further capacity restrictions, restaurant closures, disruptions in our supply chain and restaurant staffing which could adversely impact our financial results.

EFFECT OF NEW ACCOUNTING STANDARDS

impacts to our guest traffic and sales.

At the end of the first quarter of fiscal 2022, all of our Company-owned restaurant dining rooms or patios were open in some capacity.

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.

New Accounting Standards Implemented in Fiscal 2022

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

• Measurement of Credit Losses on Financial Instruments, ASU No.

• Fair Value Measurement (Topic 820):

Disclosure Framework, ASU No.

• Simplifying the Accounting for Income Taxes, ASU No.

The adoption of these new accounting standards did not have a material impact on our Consolidated Financial Statements.

There were no new accounting standards implemented in the third quarter of fiscal 2021.

New Accounting Standards That Will Be Implemented In Future Periods

We reviewed all recently issued accounting pronouncements and determined that they were either not applicable or are not expected to have a material impact on the Consolidated Financial Statements.

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

CHILI’S RESTAURANT ACQUISITION

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

Pro-forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited).

The total purchase price of $ 48.0 million, excluding post-closing adjustments, was funded with borrowings from our existing credit facility and proceeds from a sale leaseback transaction completed simultaneously with the acquisition (refer to Note 9 - Leases for further details on the sale leaseback transaction).

We accounted for this acquisition as a business combination.

The assets and liabilities of these restaurants were recorded at their preliminary fair values and are subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

The final purchase price allocation is expected to be completed during the second quarter of fiscal 2022.

The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the date of acquisition.

The fair value of tangible and intangible assets acquired was 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 preliminary amounts recorded for the fair value of acquired assets and liabilities at the acquisition date are as follows:

Fair Value September 2, 2021

Current assets $ 1.4

Property and equipment (2)

Operating lease assets (2)

Reacquired franchise rights (1)

Current liabilities ( 1.4 )

Finance lease liabilities, less current portion ( 3.7 )

Operating lease liabilities, less current portion (2)

Net assets acquired (3)

(1) Reacquired franchise rights have a weighted average amortization period of approximately 15 years.

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

(3) Net assets acquired at fair value are equal to the total purchase price of $ 48.0 million, less $ 0.3 million of closing adjustments.

Footnote Index

REVENUE RECOGNITION

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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).

Footnote Index

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

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

Deferred Franchise and Development Fees

1 unchanged sentence

Additions 0.5

Amount recognized for Chili's restaurant acquisition (1)

Amount recognized to Franchise and other revenues ( 0.4 )

Balance as of March 24, 2021 $ 11.8

The following table illustrates franchise and development fees expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of March 24, 2021:

Balance as of September 29, 2021 $ 11.2

(1) The remaining deferred franchise and development fee balances associated with the 23 acquired Chili’s restaurants were recognized as of the acquisition date in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited).

Refer to Note 2 - Chili’s Restaurant Acquisition for further details.

Fiscal Year Franchise and Development Fees Revenue Recognition

1 unchanged sentence

Thereafter 7.0

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Deferred Gift Card Revenues

Total deferred revenues related to our gift cards include the full value of unredeemed gift card balances less recognized breakage and the unamortized portion of third party fees.

The following table reflects the changes in the Gift card liability between June 24, 2020 and March 24, 2021:

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 and September 29, 2021:

Gift Card Liability

3 unchanged sentences

Gift card breakage recognized to Franchise and other revenues ( 2.4 )

Balance as of March 24, 2021

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Balance as of September 29, 2021

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

2021 March 25,

2020 March 24,

2021 March 25,

Loss from natural disasters, net of (insurance recoveries) $ 1.8 $ ( 0.9 ) $ 2.0 $ ( 0.6 )

Thirteen Week Periods Ended

September 29,

2021 September 23,

Remodel-related costs $ 1.5 $ 0.2

Loss from natural disasters, net of (insurance recoveries) 0.6 —

Enterprise system implementation 0.6 —

COVID-19 related charges 0.3 1.2

Restaurant closure charges 0.2 1.5

Foreign currency transaction (gain) loss 0.1 2.3 ( 0.3 ) 2.2

Restaurant impairment charges — — 2.5 4.6

Lease modification gain, net — — ( 0.5 ) ( 3.1 )

Acquisition of franchise restaurants costs, net — 1.1 — 2.6

Other 1.3 0.9

$ 4.3 $ 19.3 $ 13.5 $ 30.7

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

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

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

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

• Loss from natural disasters, net of (insurance recoveries) primarily consisted of team member relief pay and inventory spoilage related to Hurricane Ida.

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

• COVID-19 related charges primarily consisted of charges for employee assistance and related payroll taxes for certain team members, partially offset by credits received as part of the 2021 New Mexico Senate Bill 1.

• COVID-19 related charges consisted of the following costs related to both Chili’s and Maggiano’s:

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

– conversion of certain parking lots into dining areas, and

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

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

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

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

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

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

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

• Restaurant closure charges primarily related to closure costs associated with certain Chili’s restaurants closed in the first quarter of fiscal 2021.

Footnote Index

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

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

– inventory spoilage - $ 0.6 million due to the unexpected decline in traffic and dining room closures.

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

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

• Lease modification gain, net during the thirty-nine week period ended March 25, 2020 included the first quarter of fiscal 2020 gain related to the lease termination of a previously impaired Chili’s operating lease.

• Acquisition of franchise restaurants costs, net during the thirteen and thirty-nine week periods ended March 25, 2020 related to the 116 restaurants acquired from a franchisee.

Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2021 March 25,

2020 March 24,

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Effective income tax rate 1.5 % ( 4.9 ) %

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

Our effective income tax rate for the thirteen and thirty-nine week periods ended March 24, 2021 was lower than the federal statutory rate primarily due to the favorable impact from the FICA tip tax credit.

The thirty-nine week period ended March 24, 2021 also included the favorable impact of excess tax benefits associated with stock-based compensation.

Our effective income tax rate for the thirteen week period ended September 29, 2021 was lower than the federal statutory rate primarily due to the favorable impact from the FICA tip tax credit and excess tax windfalls associated with stock-based compensation.

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

Thirty-Nine Week Period Ended

Thirteen Week Period Ended

September 29,

Income tax expense at statutory rate - 21.0% $ 2.8

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Provision (benefit) for income taxes - 1.5% $ 0.2

Our effective income tax rate for the thirteen and thirty-nine week periods ended March 25, 2020 was lower than the federal statutory rate due to reduced profitability related to the COVID-19 pandemic that resulted in the closure of all dining and banquet rooms by the end of the third quarter of fiscal 2020, and the favorable impact of the FICA tip tax credit.

The Provision (benefit) for income taxes included a significant reduction for the thirteen week period ended March 25, 2020 necessary to align the year-to-date Provision (benefit) for income taxes to the year-to-date Income before income taxes.

Our effective income tax rate for the thirteen week period ended September 23, 2020 was lower than the federal statutory rate due to the favorable impact from the FICA tip tax credit and excess tax windfalls associated with stock-based compensation.

NET INCOME PER SHARE

Basic net income per share is computed by dividing Net income by the Basic weighted average shares outstanding for the reporting period.

Diluted net income per share reflects the potential dilution that could occur if securities or

Footnote Index

other contracts to issue common stock were exercised or converted into common stock.

Diluted net 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 income per share, the Basic weighted average shares outstanding is increased by the dilutive effect of stock options and restricted share awards.

1 unchanged sentence

Basic weighted average shares outstanding are reconciled to Diluted weighted average shares outstanding as follows:

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2021 March 25,

2020 March 24,

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Basic weighted average shares outstanding 45.9 45.1

7 unchanged sentences

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, 27 countries and two United States territories.

The Chili’s segment also has Company-owned restaurants in Canada, and franchised

Footnote Index

locations in the United States, 28 countries and two 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.

1 unchanged sentence

The Other segment also includes costs related to the common and shared infrastructure, including accounting, information technology, purchasing, guest relations, legal and restaurant development.

Company sales for each segment inclu de revenues generated by the operation of Company-owned restaurants including gift card redemptions and virtual brand revenues.

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

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

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

We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our operating segments are predominantly located in the United States.

2 unchanged sentences

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, delivery fees, repairs and maintenance, utilities, property taxes, credit card processing fees and advertising .

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Restaurant expenses during the periods presented primarily included restaurant rent, supplies, property and equipment maintenance, utilities, delivery fees, credit card processing fees, property taxes and advertising.

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

Thirteen Week Period Ended March 24, 2021

Chili’s Maggiano’s Other Consolidated

Company sales $ 749.0 $ 64.7 $ — $ 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 March 25, 2020

Chili’s Maggiano’s Other Consolidated

Company sales $ 748.7 $ 91.7 $ — $ 840.4

Royalties 9.0 — — 9.0

Franchise fees and other revenues 6.7 3.9 — 10.6

Franchise and other revenues 15.7 3.9 — 19.6

Total revenues 764.4 95.6 — 860.0

Food and beverage costs 204.1 22.6 — 226.7

Restaurant labor 251.1 34.8 — 285.9

Restaurant expenses 193.2 26.9 0.1 220.2

Depreciation and amortization 36.5 3.8 3.2 43.5

General and administrative 5.9 1.1 16.3 23.3

Other (gains) and charges 14.9 2.4 2.0 19.3

Total operating costs and expenses 705.7 91.6 21.6 818.9

Operating income (loss) 58.7 4.0 ( 21.6 ) 41.1

Interest expenses 1.1 — 13.2 14.3

Other income, net ( 0.1 ) — ( 0.3 ) ( 0.4 )

Income (loss) before income taxes $ 57.7 $ 4.0 $ ( 34.5 ) $ 27.2

Footnote Index

Thirty-Nine Week Period Ended March 24, 2021

Chili’s Maggiano’s Other Consolidated

Thirteen Week Period Ended September 29, 2021

Maggiano’s Other Consolidated

Company sales $ 773.3 $ 86.3 $ — $ 859.6

17 unchanged sentences

Payments for property and equipment 33.7 1.9 1.7 37.3

Thirty-Nine Week Period Ended March 25, 2020

Maggiano’s Other Consolidated

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Thirteen Week Period Ended September 23, 2020

Chili’s Maggiano’s Other Consolidated

Company sales $ 675.0 $ 53.2 $ — $ 728.2

15 unchanged sentences

Payments for property and equipment $ 11.6 $ 0.5 $ 1.5 $ 13.6

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

Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

Footnote Index

(1) Chili’s segment information for fiscal 2022 includes the results of operations and the preliminary fair value of assets related to the 23 restaurants purchased from a former franchisee subsequent to the acquisition date.

Refer to Note 2 - Chili’s Restaurant Acquisition for details.

FAIR VALUE MEASUREMENTS

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Non-Financial Assets Measured on a Non-Recurring Basis

We review the carrying amounts of long-lived property and equipment, operating lease assets, reacquired franchise rights and transferable liquor licenses semi-annually or when events or circumstances indicate that the fair value may not substantially exceed the carrying amount.

We review the carrying amounts of long-lived property and equipment including finance lease assets, operating lease assets, reacquired franchise rights and transferable liquor licenses semi-annually or when events or circumstances indicate that the fair value may not substantially exceed the carrying amount.

We record an impairment charge for the excess of the carrying amount over the fair value.

All impairment charges were included in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited) for the periods presented.

Intangibles, net in the Consolidated Balance Sheets (Unaudited) includes both indefinite-lived intangible assets such as transferable liquor licenses and definite-lived intangible assets such as reacquired franchise rights and trademarks.

Intangibles, net included accumulated amortization associated with definite-lived intangible assets at March 24, 2021 and June 24, 2020, of $ 9.2 million and $ 7.5 million, respectively.

Intangibles, net included accumulated amortization associated with definite-lived intangible assets at September 29, 2021 and June 30, 2021, of $ 10.1 million and $ 9.6 million, respectively.

Footnote Index

Definite Lived Assets Impairment

Definite lived assets include property, equipment, operating lease assets and reacquired franchise rights.

During the thirty-nine week period ended March 24, 2021, we impaired certain long-lived assets and operating lease assets primarily related to 10 underperforming Chili’s and three underperforming Maggiano’s restaurants.

During the thirty-nine week period ended March 25, 2020, we impaired certain long-lived assets primarily related to 10 underperforming Chili’s restaurants.

Additionally, we impaired certain finance and operating lease assets related to previously closed Chili’s restaurants.

We determined the fair value of these assets based on Level 3 fair value measurements.

The table below presents the carrying values and related impairment expenses recorded on these impaired restaurants for the periods presented.

Impairment Charges

Pre-Impairment Carrying Value Thirty-Nine Week Periods Ended

2021 March 25,

2020 March 24,

2021 March 25,

Underperforming restaurants

Long-lived assets $ 2.2 $ 4.5 $ 2.2 $ 4.5

Reacquired franchise rights assets 0.1 — 0.1 —

Operating lease assets 1.1 — 0.2 —

Finance lease assets — 0.1 — 0.1

Total underperforming restaurants $ 3.4 $ 4.6 $ 2.5 $ 4.6

Closed restaurants

Operating lease assets $ — $ 6.4 $ — $ 1.8

Finance lease assets — 5.8 — 1.4

Total closed restaurants $ — $ 12.2 $ — $ 3.2

Definite lived assets include property and equipment, including finance lease assets, operating lease assets and reacquired franchise rights.

During the thirteen week periods ended September 29, 2021 and September 23, 2020, 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 24, 2021 and March 25, 2020, no indicators of impairment were identified.

Footnote Index

During the thirteen week periods ended September 29, 2021 and September 23, 2020, no indicators of impairment were identified.

We review the carrying amounts of goodwill annually or when events or circumstances indicate that the carrying amount may not be recoverable.

We may elect to perform a qualitative assessment for our reporting units to determine whether it is more likely than not that the fair value of the reporting unit is greater than its carrying value.

If a qualitative assessment is not performed, or if the result of the qualitative assessment indicates a potential impairment, then the fair value of the reporting unit is compared to its carrying value.

If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the implied fair value of the goodwill.

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

We performed a detailed quantitative assessment in the third quarter of fiscal 2020 of our goodwill balances associated with both reporting units.

This assessment was performed in response to observed declines in operating cash flows and market capitalization that were primarily driven by the impact of the COVID-19 pandemic on our business.

Based on this assessment, we concluded that our goodwill and indefinite-lived intangible assets were not impaired at that time.

We updated this assessment in the fourth quarter of fiscal 2020 and again concluded no impairment triggering event existed based on improved market capitalization and operating results compared to projections in the quantitative assessment prepared in the third quarter of fiscal 2020.

Our operating results and operating cash flows for the thirteen and thirty-nine week periods ended March 24, 2021 have continued to outperform our initial quantitative assessment.

Our stock price and market capitalization have also increased to levels greater than before the COVID-19 pandemic began in the United States.

We performed our annual goodwill impairment analysis in the second quarter of fiscal 2021 using a qualitative approach based on these factors and no indicators of impairment were identified.

During the thirteen and thirty-nine week periods ended March 25, 2020, no indicators of impairment were identified based on our assessments.

During the thirteen week period ended September 29, 2021, management concluded that no triggering event occurred.

Our ability to operate dining and banquet rooms and generate off-premise sales at our restaurants is critical to avoiding a future triggering event as the impact of the COVID-19 pandemic continues.

1 unchanged sentence

We will continue to monitor and evaluate our results in future periods to determine if a more detailed assessment is necessary.

Chili’s Restaurant Acquisition

In the first quarter of fiscal 2022, we completed the acquisition of 23 Chili’s restaurants from a former franchisee.

The preliminary fair value of assets acquired and liabilities assumed for these restaurants utilized Level 3 inputs.

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

Refer to Note 2 - Chili’s Restaurant Acquisition for further details.

Other Financial Instruments

2 unchanged sentences

Long-Term Debt

The carrying amount of debt outstanding related to the amended revolving credit facility approximates fair value as the interest rate on this instrument approximates current market rates (Level 2).

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

March 24, 2021 June 24, 2020

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

September 29, 2021 June 30, 2021

Carrying Amount Fair Value Carrying Amount Fair Value

3 unchanged sentences

347.6 369.3 347.5 369.3

Footnote Index

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.

Footnote Index

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

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

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2021 March 25,

2020 March 24,

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Operating lease cost $ 41.4 $ 41.7

5 unchanged sentences

Total lease costs, net $ 62.7 $ 60.3

Pre-Commencement Leases

In the first quarter of fiscal 2022, we executed 16 leases for new Chili’s locations with undiscounted fixed payments over the initial term of $ 24.7 million.

These leases are expected to commence in the next 12 months and are expected to have an economic lease term of 20 years.

These leases will commence when the landlords make the property available to us for new restaurant construction.

We will assess the reasonably certain lease term at the lease commencement date.

Significant Changes in Leases during the Period

In the first quarter of fiscal 2022, as part of the Chili’s restaurant acquisition, we assumed 11 new real estate operating leases included in the balances at September 29, 2021.

The leases were recorded net of prepaid rent at the date of acquisition.

At September 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 23.6 million, Operating lease liabilities of $ 0.6 million, and Long-term operating lease liabilities, less current portion of $ 23.0 million.

The leases were recorded net of purchase price accounting adjustments and prepaid rent.

Refer to Note 2 - Chili’s Restaurant Acquisition for further details.

Restaurant Properties Sale Leaseback Transaction

In the first quarter of fiscal 2022, simultaneous with the acquisition of the 23 Chili’s restaurants, we completed sale leaseback transactions on six 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 September 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 18.2 million, Operating lease liabilities of $ 0.4 million, and Long-term operating lease liabilities, less current portion of $ 17.8 million.

Footnote Index

Long-term debt consists of the following:

September 29,

2021 June 30,

12 unchanged sentences

Revolving Credit Facility

In the thirty-nine week period ended March 24, 2021, net repayments of $ 181.6 million were made on the $ 1.0 billion revolving credit facility.

As of March 24, 2021, $ 708.7 million of credit was available under the revolving credit facility.

Amended Revolving Credit Agreement

In the first quarter of fiscal 2021, we executed the seventh amendment to our revolving credit facility, extending the maturity date to December 12, 2022 .

This amendment included a capacity reduction to $ 900.0 million from $ 1.0 billion which will occur on September 12, 2021 .

The issuance of certain debt or preferred equity interests will result in an immediate capacity reduction, an interest rate reduction of 0.250 % on the spread and 0.100 % reduction on the undrawn fee if the issuance exceeds $250.0 million pursuant to the terms of the agreement.

Footnote Index

The revolving credit facility bears interest of LIBOR plus an applicable margin of 2.250 % to 3.000 % and an undrawn commitment fee of 0.350 % to 0.500 %, both based on a function of our debt-to-cash-flow ratio.

As of March 24, 2021, our interest rate was 3.750 % consisting of the LIBOR floor of 0.750 % plus the applicable margin of 3.000 %.

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

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 thirteen week period ended September 29, 2021, net borrowings of $ 80.0 million were drawn on the revolving credit facility.

As of September 29, 2021, $ 548.7 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 September 29, 2021, our interest rate was 1.875 % consisting of LIBOR of 0.125 % plus the applicable margin of 1.750 %.

In the thirteen week period ended September 29, 2021, we incurred and capitalized $ 3.0 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 and fixed charge coverage ratios.

As of March 24, 2021, we were in compliance with our covenants pursuant to the amended revolving credit facility and under the terms of the indentures governing our 3.875% notes and 5.000% notes .

As of September 29, 2021, 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.

Footnote Index

ACCRUED AND OTHER LIABILITIES

Other accrued liabilities consist of the following:

September 29,

2021 June 30,

Insurance $ 22.6 $ 20.7

Property tax $ 27.7 $ 22.4

Sales tax 19.5 13.3

Current installments of finance leases 23.4 21.5

Insurance 21.4 21.7

Sales tax 17.2 23.2

Interest 13.5 6.9

Utilities and services 8.7 8.4

Cyber security incident 3.4 3.4

State income tax payable 0.4 —

$ 125.7 $ 117.4

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

(1) Other primarily consists of guest deposits for Maggiano’s banquets, rent-related accruals, certain exit-related lease accruals, deferred franchise and development fees, charitable donations and other various accruals.

Other liabilities consist of the following:

September 29,

2021 June 30,

1 unchanged sentence

Deferred payroll taxes (1)

Deferred franchise fees 10.8 11.6

Deferred franchise and development fees 10.2 10.4

Unrecognized tax benefits 2.7 3.5

1 unchanged sentence

$ 80.8 $ 82.0

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

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

The first installment of $ 27.2 million, which is due on December 31, 2021, is recorded within Accrued payroll in the Consolidated Balance Sheets (Unaudited).

Footnote Index

SHAREHOLDERS’ DEFICIT

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

Thirty-Nine Week Period Ended March 24, 2021

The changes in Total shareholders’ deficit during the thirteen week periods ended September 29, 2021 and September 23, 2020, respectively, were as follows:

Thirteen Week Period Ended September 29, 2021

Common Stock Additional

4 unchanged sentences

Net income — — 13.2 — — 13.2

Other comprehensive income — — — — 0.3 0.3

Other comprehensive loss — — — — ( 0.4 ) ( 0.4 )

Dividends — — 0.0 — — 0.0

1 unchanged sentence

Purchases of treasury stock — ( 2.0 ) — ( 37.6 ) — ( 39.6 )

Issuances of common stock — ( 9.0 ) — 12.0 — 3.0

Issuances of treasury stock — ( 8.3 ) — 8.6 — 0.3

Balance at September 29, 2021 $ 7.0 $ 679.4 $ ( 252.9 ) $ ( 753.9 ) $ ( 5.1 ) $ ( 325.5 )

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 common stock — 1.2 — 4.3 — 5.5

Balance 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 common stock — 5.7 — 9.4 — 15.1

Balance at March 24, 2021 $ 7.0 $ 677.4 $ ( 340.9 ) $ ( 729.0 ) $ ( 5.1 ) $ ( 390.6 )

Footnote Index

Thirty-Nine Week Period Ended March 25, 2020

Thirteen Week Period Ended September 23, 2020

Common Stock Additional

Capital Retained

Earnings (Accumulated Deficit) Treasury

Capital Accumulated Deficit Treasury

Stock Accumulated

1 unchanged sentence

Balance at June 24, 2020 $ 7.0 $ 669.4 $ ( 397.5 ) $ ( 751.8 ) $ ( 6.2 ) $ ( 479.1 )

Effect of ASC 842 adoption — — 195.9 — — 195.9

Net income — — 10.7 — — 10.7

Other comprehensive loss — — — — ( 0.2 ) ( 0.2 )

Dividends ($0.38 per share) — — ( 14.6 ) — — ( 14.6 )

Stock-based compensation — 7.1 — — — 7.1

Purchases of treasury stock — ( 0.3 ) — ( 11.0 ) — ( 11.3 )

Issuances of common stock — ( 3.7 ) — 5.0 — 1.3

Balance at September 25, 2019 $ 17.6 $ 525.1 $ 2,967.4 $ ( 4,089.4 ) $ ( 5.8 ) $ ( 585.1 )

Net income — — 27.9 — — 27.9

Other comprehensive income — — — — 0.3 0.3

Dividends ($0.38 per share) — — ( 14.6 ) — — ( 14.6 )

Stock-based compensation — 2.6 — — — 2.6

Purchases of treasury stock — 0.0 — 0.0 — 0.0

Issuances of common stock — ( 0.4 ) — 0.6 — 0.2

Retirement of treasury stock ( 11.4 ) — ( 3,345.4 ) 3,356.8 — —

Balance at December 25, 2019 $ 6.2 $ 527.3 $ ( 364.7 ) $ ( 732.0 ) $ ( 5.7 ) $ ( 568.9 )

Net income — — 30.8 — — 30.8

Other comprehensive loss — — — — ( 1.0 ) ( 1.0 )

Dividends ($0.38 per share) — — ( 14.0 ) — — ( 14.0 )

Dividends — — 0.0 — — 0.0

Stock-based compensation — 3.9 — — — 3.9

Purchases of treasury stock — ( 1.1 ) — ( 2.8 ) — ( 3.9 )

Issuances of common stock — ( 0.5 ) — 0.6 — 0.1

Balance at March 25, 2020 $ 6.2 $ 526.1 $ ( 347.9 ) $ ( 752.4 ) $ ( 6.7 ) $ ( 574.7 )

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend in response to liquidity needs created by the COVID-19 pandemic.

Before this suspension, we paid dividends of $ 0.38 per share quarterly.

In the thirty-nine week period ended March 24, 2021, dividends paid were solely related to the previously accrued dividends for restricted share awards that vested in the period.

Restricted share award dividends are accrued in Other accrued liabilities for the current portion to vest within 12 months, and Other liabilities for the portion that will vest after one year.

I n the thirty-nine week period ended March 25, 2020, we paid dividends of $ 43.3 million to common stock shareholders.

Footnote Index

Issuances of treasury stock — ( 9.0 ) — 12.0 — 3.0

Balance at September 23, 2020 $ 7.0 $ 663.2 $ ( 386.8 ) $ ( 742.6 ) $ ( 5.9 ) $ ( 465.1 )

Share Repurchases

Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards.

We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings, and planned investment and financing needs.

Repurchased shares are reflected as an increase in Treasury stock within Shareholders’ deficit in the Consolidated Balance Sheets (Unaudited).

In the fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic.

In August 2021, our Board of Directors reinstated the share repurchase program, allowing for a total available repurchase authority of $ 300.0 million.

In the thirteen week period ended September 29, 2021, we repurchased 0.8 million shares of our common stock for $ 39.6 million, including 0.7 million shares purchased as part of our share repurchase program and 0.1 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares.

As of September 29, 2021, approximately $ 265.0 million was available under our share repurchase authorizations.

Stock-based Compensation

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

Thirty-Nine Week Periods Ended

2021 March 25,

Stock options

Stock options granted — 0.3

Weighted average exercise price per share $ — $ 38.51

Weighted average fair value per share $ — $ 6.83

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

Thirteen Week Periods Ended

September 29,

2021 September 23,

Restricted share awards

1 unchanged sentence

Weighted average fair value per share $ 53.76 $ 39.76

Share Repurchases

In the fourth quarter of fiscal 2020, our share repurchase program was suspended in response to the business downturn caused by the COVID-19 pandemic.

Prior to the suspension, our share repurchase program was used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards.

We evaluated potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings, and planned investment and financing needs.

Repurchased shares are reflected as an increase in Treasury stock within Shareholders’ deficit in the Consolidated Balance Sheets (Unaudited) .

In the thirty-nine week period ended March 24, 2021, we repurchased 0.1 million shares from team members to satisfy tax withholding obligations on the vesting of restricted shares.

Before the suspension of our repurchase program, i n the thirty-nine week period ended March 25, 2020, we repurchased 0.8 million shares of our common stock for $ 32.3 million.

Effect of Adoption of ASC 842

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

Retirement of Treasury Stock

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

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 thirteen week periods ended September 29, 2021 and September 23, 2020, dividends paid were solely related to the accrued dividends for restricted share awards that were granted prior to the suspension and vested in the period.

Restricted share award dividends are accrued in Other accrued liabilities for the current portion to vest within 12 months, and Other liabilities for the portion that will vest after one year.

Footnote Index

1 unchanged sentence

Cash paid for income taxes and interest is as follows:

Thirty-Nine Week Periods Ended

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Income taxes, net of (refunds)

$ 1.9 $ ( 2.1 )

Interest, net of amounts capitalized 3.1 5.5

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

Thirty-Nine Week Periods Ended

2021 March 25,

Thirteen Week Periods Ended

September 29,

2021 September 23,

Operating lease additions (1)

$ 60.0 $ 14.5

Finance lease additions 8.9 3.5

Accrued capital expenditures 6.2 6.4

Retirement of fully depreciated assets 7.9 2.5

Dividends declared but not paid 0.0 14.8

(1) Operating lease additions include new operating lease assets obtained in exchange for new operating lease liabilities.

The thirty-nine week period ended March 25, 2020 primarily included operating lease additions associated with the 116 restaurants purchased from a former franchisee on September 5, 2019 acquisition date.

Refer to Note 15 - Fiscal 2020 Chili’s Restaurant Acquisition for details.

(1) The thirteen week period ended September 29, 2021 primarily included operating lease additions associated with the 23 restaurants purchased from a former franchisee.

Refer to Note 2 - Chili’s Restaurant Acquisition and to Note 9 - Leases for details.

CONTINGENCIES

1 unchanged sentence

We have, in certain cases, divested brands or sold restaurants to franchisees and have not been released from lease guarantees for the related restaurants.

As of March 24, 2021 and June 24, 2020, we have outstanding lease guarantees or are secondarily liable for an estimated $ 33.8 million and $ 39.7 million, respectively.

As of September 29, 2021 and June 30, 2021, we have outstanding lease guarantees or are secondarily liable for an estimated $ 28.4 million and $ 29.2 million, respectively.

These amounts represent the known potential liability of future rent payments under the leases.

1 unchanged sentence

In the event of default under a lease by a franchisee or owner of a divested brand, the indemnity and default clauses in our agreements with such third parties and applicable laws govern our ability to pursue and recover amounts we may pay on behalf of such parties.

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.

These lessees are in communication with the landlords to defer or resolve payments.

We will continue to closely monitor this situation.

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims.

As of March 24, 2021, we had $ 29.5 million in undrawn standby letters of credit outstanding.

All standby letters of credit are renewable within the next 1 to 13 months.

Cyber Security Incident

As of September 29, 2021, we had $ 5.9 million in undrawn standby letters of credit outstanding.

All standby letters of credit are renewable within the next 12 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.

Cyber Security Related Charges

To limit our exposure to cyber security events, we maintain cyber liability insurance coverage.

Our cyber liability insurance policy contains a $ 2.0 million insurance retention that was fully accrued during fiscal 2018.

Since the incident, through March 24, 2021, we have incurred total cumulative costs of $ 8.9 million related to the cyber security incident.

This includes the $ 2.0 million retention recorded, $ 2.6 million in costs that have been reimbursed by our insurance carriers, $ 3.8 million of receivables for costs incurred that we believe are reimbursable and probable of recovery under our insurance coverage and $ 0.5 million of costs not reimbursable by our insurance

We settled all claims from payment card companies related to this incident and do not expect material claims in the future.

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.

Footnote Index

We have settled claims from three payment card companies, and the settlement amounts are included in these costs.

We do not expect material claims from payment card companies in the future.

Cyber Security Litigation

The Company was named as a defendant in a putative class action lawsuit in the United States District Court for the Middle District of Florida styled In re:

Brinker Data Incident Litigation, Case No.

18-cv-00686-TJC-MCR (the “Litigation”) relating to the cyber security incident described above.

In the Litigation, plaintiffs assert various claims stemming from the cyber security incident at the Company’s Chili’s restaurants involving customer payment card information and seek monetary damages in excess of $ 5.0 million, injunctive and declaratory relief, and attorney’s fees and costs.

Mediation was held on November 18, 2020 but was unsuccessful.

On April 14, 2021, the district court issued an order granting in part and deferring in part the plaintiffs’ motion for class certification.

On April 14, 2021, the district court issued an order granting in part and deferring in part Plaintiffs’ motion for class certification.

The court certified a class on Plaintiffs’ negligence claim and a separate class on Plaintiffs’ California state Unfair Competition Law claims.

On September 16, 2021, the Eleventh Circuit Court of Appeals granted Brinker’s petition seeking immediate discretionary review of the district court’s certification orders.

We believe we have defenses and intend to continue defending the Litigation.

As such, as of March 24, 2021, 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.

As such, as of September 29, 2021, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded a liability related to the Litigation.

We will continue to evaluate this matter based on new information as it becomes available.

Legal Proceedings

Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis.

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.

2 unchanged sentences

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.

FISCAL 2020 CHILI’S RESTAURANT ACQUISITION

In the first quarter of fiscal 2020, on September 5, 2019, we completed the acquisition of certain assets and liabilities related to 116 previously franchised Chili’s restaurants located in the Midwest United States.

Total cash consideration of $ 96.0 million, including post-closing adjustments, was funded with borrowings from our existing credit facility.

We accounted for this acquisition as a business combination.

The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the date of acquisition.

The assets and liabilities of these restaurants were recorded at their fair values.

Net acquisition-related charges of $ 1.1 million and $ 2.6 million were recorded during the thirteen and thirty-nine week periods ended March 25, 2020, respectively, to Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited).

In the thirteen week period ended March 25, 2020, the net charges consisted of $ 1.1 million for professional services, transaction and transition related costs.

In the thirty-nine week period ended March 25, 2020, the net charges consisted of $ 4.1 million for professional services, transaction and transition related costs and $ 1.1 million of related franchise straight-line rent balances, net of market leasehold improvement adjustments that were fully recognized at the date of the acquisition.

These charges were partially offset by $ 2.6 million of franchise deferred revenue balances that were fully recognized at the date of the acquisition.

Footnote Index

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

Fair Value September 5, 2019

Current assets (1)

Property and equipment 60.3

Operating lease assets 163.5

Reacquired franchise rights (2)

Total assets acquired 260.4

Current liabilities (4)

Operating lease liabilities, less current portion 158.3

Total liabilities assumed 167.4

Net assets acquired (5)

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

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

(3) Goodwill is expected to be deductible for tax purposes.

The portion of the purchase price attributable to goodwill represents the benefits expected as a result of the acquisition, including sales and unit growth opportunities, and the benefit of the assembled workforce of the acquired restaurants.

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

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

SUBSEQUENT EVENTS

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

Chili’s Restaurant Acquisition

On October 31, 2021, we acquired 36 Chili’s restaurants located in the Great Lakes and Northeast region of the United States that were owned by a franchisee.

The purchase price of $ 55 million, excluding post-closing adjustments, was funded with availability under our existing revolving credit facility.

The results of operations of these restaurants will be included in the consolidated financial statements from the date of acquisition beginning in the second quarter of fiscal 2022.

We will evaluate the fair value of the assets and liabilities of the acquired restaurants through internal studies and third-party valuations, and we expect to complete a preliminary purchase price allocation in the second quarter of fiscal 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements