BRINKER INTERNATIONAL, INC 10-Q

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 week periods ended September 29, 2021 and September 23, 2020, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified. Overview 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. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units. 20 Table of Contents 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 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. Chili’s and Maggiano’s ability to continue serving guests during the COVID-19 pandemic is the result of our strategic decision to invest in technology, virtual brands, and off-premise capabilities including online ordering, mobile app ordering, curbside service and third-party delivery. We have experienced limited material shortages and service disruptions in our supply chain and in the availability of labor to operate our restaurants. We also experienced an increase in employee turnover in the first quarter of fiscal 2022. We recognize there is significant demand for talent and are actively working to safeguard, engage, attract and retain our employees. It is possible that shortages or disruptions could increase during fiscal 2022 as demand for goods, transportation and labor increases. Impact on Financial Outlook The ultimate impact of the COVID-19 pandemic cannot be reasonably estimated due to the uncertainty about the extent and duration of the spread of the virus, the availability, acceptance and efficacy of preventative vaccines, the emergence and impact of new COVID-19 variants and changing government restrictions. Additional impacts to the business may arise that we are not aware of currently. We will continue to closely monitor and adapt to the evolving situation. Operations Strategy We are committed to strategies and a Company culture that we believe will improve guest traffic, grow sales and profits, and engage team members. Our strategies and culture are intended to differentiate our brands from the competition and to focus on the guest experience. We are effectively and efficiently managing our restaurants to establish a lasting presence for our brands in key markets around the world. Our primary strategy is to make our guests feel special through great food and quality service so that they 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 partnership with DoorDash has been instrumental in growing off-premise business and offering our guests continued service during the COVID-19 pandemic. We leveraged technology so that DoorDash orders are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. We believe that guests will continue to prefer convenience and off-premise options. We plan to continue investments in our technology systems to support our To-Go and delivery capabilities. In dining rooms, we use tabletop devices to engage our guests at the table. These devices allow guests to pay at the table, reordering, digital entertainment, guest feedback and interaction 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. Chili’s - Chili’s strategy is to differentiate from our competitors with a flexible platform of value offerings at both lunch and dinner and to connect with our guests through our My Chili’s Rewards loyalty program. We are committed to offering consistent, quality products at a price point that is compelling to our guests. Our value 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 21 Table of Contents every month at an every-day value price of $5.00. Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise. Chili’s off-premise dining options, including our virtual brands It’s Just Wings and Maggiano’s Italian Classics, are also a critical part of our strategy. In the first quarter of fiscal 2022, Chili’s off-premise sales, including both to-go and delivery, were approximately 35% of Company sales, with approximately 55% coming from To-Go and 45% from delivery. We regularly evaluate our processes and menu at Chili’s to identify opportunities where we can improve our service quality and food. We continue to focus on our core equities and improving guest satisfaction with our food and service by improving execution of our operations standards. Maggiano’s - At Maggiano’s, we believe our focus on operating fundamentals and technology provide the foundation for future efficiencies and growth. For example, Maggiano’s delivery partnership with DoorDash makes third party delivery more sustainable and efficient for the brand to operate. In addition to the DoorDash platform, our guests have the ability to order delivery directly through the Maggiano’s website. During the pandemic, Maggiano’s has leveraged off-premise dining options, including It’s Just Wings, to sustain revenues. Maggiano’s historically hosts a significant portion of its banquets in the holiday season during the second and third quarters of the fiscal year. Virtual Brands - We are investing in virtual brands, restaurant-like menu offerings that are only available for purchase digitally, to drive restaurant traffic and sales growth. We expect that our virtual brands will enable us to capitalize on the growth in off-premise dining and to leverage excess kitchen capacity in our existing restaurant infrastructure, while adding minimal complexity in our restaurants’ kitchens. It’s Just Wings, launched on June 23, 2020, is a no-frills offering that consists of chicken wings available in a variety of different sauces and rubs, curly fries, ranch dressing, fried Oreos and hand pies for a value price. Maggiano’s Italian Classics offers a select group of items from the full menu of Maggiano’s Little Italy including several appetizers, salads, pastas, entrées, mac & cheese and hand pies. They are available for purchase through DoorDash, Google Food Ordering and their respective 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 three restaurants and entering into one new development agreement for the thirteen week period ended September 29, 2021. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners. We are also supporting our franchise partners with opportunities to expand sales through our virtual brand offerings. 22 Table of Contents Company Development - The following table details the number of restaurant openings during the thirteen week periods ended September 29, 2021 and September 23, 2020, respectively, total full year projected openings in fiscal 2022, and the total restaurants open at each period end: Openings During the Full Year Projected Openings Thirteen Week Periods Ended Total Open Restaurants at September 29, 2021 September 23, 2020 Fiscal 2022 September 29, 2021 September 23, 2020 Company-owned restaurants Chili’s domestic 1 3 8 1,088 1,059 Chili’s international — — — 5 5 Maggiano’s domestic — — — 52 52 Total Company-owned 1 3 8 1,145 1,116 Franchise restaurants Chili’s domestic — 1 3 146 172 Chili’s international 3 3 9-12 357 371 Maggiano’s domestic — — — 2 1 Total franchise 3 4 12-15 505 544 Total restaurants Chili’s domestic 1 4 11 1,234 1,231 Chili’s international 3 3 9-12 362 376 Maggiano’s domestic — — — 54 53 Total 4 7 20-23 1,650 1,660 During the thirteen week period ended September 29, 2021, we acquired 23 Chili’s restaurants located in the Mid-Atlantic region of the United States owned by a franchisee. The acquisition of these restaurants is not reflected in Openings during the thirteen week period ended September 29, 2021 or Full Year Projected Openings total as they are existing restaurant locations transitioning ownership. These acquired restaurants are included in Total Open Restaurants at September 29, 2021 within the total for Company-owned restaurants Chili’s domestic. At September 29, 2021, we own property for 46 of the 1,145 Company-owned restaurants. The net book values associated with these restaurants included land of $38.3 million and buildings of $13.2 million. Revenues Thirteen Week Period Ended September 29, 2021 compared to September 23, 2020 Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends: • Company sales include 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 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. 23 Table of Contents The following is a summary of the change in Total revenues: Total Revenues Chili’s Maggiano’s Total Revenues Thirteen Week Period Ended September 23, 2020 $ 686.5 $ 53.6 $ 740.1 Change from: Comparable restaurant sales 87.7 33.1 120.8 Restaurant openings 5.4 — 5.4 Restaurant acquisitions (1) 4.1 — 4.1 Restaurant closures (2) 0.6 — 0.6 Restaurant relocations 0.5 — 0.5 Company sales 98.3 33.1 131.4 Royalties (3) 2.4 0.1 2.5 Franchise fees and other revenues 0.4 2.0 2.4 Franchise and other revenues 2.8 2.1 4.9 Thirteen Week Period Ended September 29, 2021 $ 787.6 $ 88.8 $ 876.4 (1) We acquired 23 Chili’s restaurants from a franchisee on September 2, 2021. The revenues generated by these restaurants since the date of the acquisition are included in Company sales for the thirteen week period ended September 29, 2021. (2) Restaurant closures include the change in Company sales resulting from temporary closures longer than 14 consecutive days that occurred in the previous 18 months, partially offset by permanently closed locations. (3) Our franchisees generated sales of approximately $211.9 million for the thirteen week period ended September 29, 2021 compared to $163.5 million in sales for the thirteen week period ended September 23, 2020. The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen week period ended September 29, 2021 compared to September 23, 2020: Percentage Change in the Thirteen Week Period Ended September 29, 2021 versus September 23, 2020 Comparable Restaurant Sales (1) Price Impact Mix-Shift Impact (2) Traffic Impact Restaurant Capacity (3) Company-owned 17.0 % 0.6 % 5.6 % 10.8 % 2.1 % Chili’s 13.4 % 0.6 % 3.4 % 9.4 % 2.2 % Maggiano’s 62.6 % 0.2 % 23.3 % 39.1 % 0.0 % Chili’s Franchise (4) 23.1 % U.S. 17.8 % International 32.0 % Chili’s Domestic (5) 13.8 % System-wide (6) 17.8 % (1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 months except acquired restaurants which are included after 12 months of ownership. Restaurants temporarily closed 14 days or more are excluded from Comparable Restaurant Sales. Percentage amounts are calculated based on the comparable periods year-over-year. (2) Mix-Shift is calculated as the year-over-year percentage change in Company sales resulting from the change in menu items ordered by guests. (3) Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year, including the effect of the acquisition of 23 Chili’s restaurants in the first quarter of fiscal 2022. 24 Table of Contents (4) Chili’s franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Unaudited); however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe presenting Chili’s franchise comparable restaurant sales provides investors relevant information regarding total brand performance. (5) Chili’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s restaurants in the United States. (6) System-wide Comparable Restaurant Sales are derived from sales generated by Company-owned Chili’s and Maggiano’s restaurants and sales generated at franchise-operated Chili’s restaurants. Costs and Expenses Thirteen Week Period Ended September 29, 2021 compared to September 23, 2020 The following is a summary of the changes in Costs and Expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 234.3 27.2 % $ 193.5 26.6 % $ (40.8) (0.6) % Restaurant labor 304.9 35.5 % 248.0 34.0 % (56.9) (1.5) % Restaurant expenses 231.3 26.9 % 202.5 27.8 % (28.8) 0.9 % Depreciation and amortization 39.3 37.4 (1.9) General and administrative 36.5 30.5 (6.0) Other (gains) and charges 4.5 3.8 (0.7) Interest expenses 12.5 14.6 2.1 Other income, net (0.3) (0.4) (0.1) As a percentage of Company sales: • Food and beverage costs increased 0.6%, including 1.0% of unfavorable commodity pricing due to supply chain constraints and inflationary pressures resulting in higher poultry and other commodity costs, partially offset by 0.2% of favorable menu pricing and 0.2% of favorable menu item mix. • Restaurant labor increased 1.5%, including 4.0% of higher restaurant labor costs primarily including wage rates, training and overtime and 0.3% of higher other labor expenses, partially offset by 2.8% of sales leverage. • Restaurant expenses decreased 0.9%, including 3.2% of sales leverage and 0.8% of lower delivery fees and To-Go supplies, partially offset by 1.4% of higher repairs and maintenance expenses, 0.6% of higher utilities expenses, 0.3% of higher advertising expenses, 0.3% of higher restaurant supplies and 0.5% of higher other restaurant expenses. 25 Table of Contents Depreciation and amortization increased $1.9 million as follows: Depreciation and Amortization Thirteen Week Period Ended September 23, 2020 $ 37.4 Change from: Retirements and fully depreciated restaurant assets (4.1) Finance leases 1.5 Additions for existing and new restaurant assets 3.9 Acquisition of Chili’s restaurants (1) 0.2 Corporate assets 0.4 Thirteen Week Period Ended September 29, 2021 $ 39.3 (1) Represents the incremental depreciation and amortization of the assets and finance leases of the 23 Chili’s restaurants acquired on September 2, 2021. General and administrative expen ses increased $6.0 million as follows: General and Administrative Thirteen Week Period Ended September 23, 2020 $ 30.5 Change from: Defined contribution plan employer expenses (1) 2.9 Professional fees 1.5 Payroll-related expenses 1.0 Travel and entertainment expenses 0.4 Stock-based compensation 0.2 Performance-based compensation (1.0) Other 1.0 Thirteen Week Period Ended September 29, 2021 $ 36.5 (1) Defined contribution plan employer expenses increased due to the temporary suspension of employer matching contributions related to the Company’s 401(k) plan from May 2020 through December 2020. Employer matching contributions were reinstated beginning January 1, 2021. Other (gains) and charges consisted of the following (for further details, refer to Note 4 - Other Gains and Charges): Thirteen Week Periods Ended September 29, 2021 September 23, 2020 Remodel-related costs $ 1.5 $ 0.2 Enterprise system implementation 0.6 — Loss from natural disasters, net of (insurance recoveries) 0.6 — COVID-19 related charges 0.3 1.2 Restaurant closure charges 0.2 1.5 Other 1.3 0.9 $ 4.5 $ 3.8 Interest expenses decreased $2.1 million due to lower interest rates and average borrowing balances on our revolving credit facility in fiscal 2022. 26 Table of Contents Income Taxes Thirteen Week Periods Ended September 29, 2021 September 23, 2020 Favorable / (Unfavorable) Variance Effective income tax rate 1.5 % (4.9) % (6.4) % The federal statutory tax rate was 21.0% for the thirteen week periods ended September 29, 2021 and September 23, 2020. The effective income tax rate in the thirteen week period ended September 29, 2021 increased compared to the thirteen week period ended September 23, 2020 primarily due to a reduced favorable impact from the FICA tip tax credit and the excess tax benefits associated with stock-based compensation in the first quarter of fiscal 2022. Segment Results Chili’s Segment Thirteen Week Period Ended September 29, 2021 compared to September 23, 2020 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage September 29, 2021 September 23, 2020 Company sales $ 773.3 $ 675.0 $ 98.3 14.6 % Royalties 9.0 6.6 2.4 36.4 % Franchise fees and other revenues 5.3 4.9 0.4 8.2 % Franchise and other revenues 14.3 11.5 2.8 24.3 % Total revenues $ 787.6 $ 686.5 $ 101.1 14.7 % Chili’s Total revenues increased 14.7% primarily due to higher dining room guest sales and traffic, six restaurant openings and the acquisition of 23 Chili’s restaurants on September 2, 2021, partially offset by decreased off-premise sales. Refer to “Revenues” section above for further details about Chili’s revenues changes. The following is a summary of the changes in Chili’s operating costs and expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 213.4 27.6 % $ 180.8 26.8 % $ (32.6) (0.8) % Restaurant labor 273.5 35.3 % 228.2 33.8 % (45.3) (1.5) % Restaurant expenses 204.6 26.5 % 181.4 26.9 % (23.2) 0.4 % Depreciation and amortization 33.0 30.6 (2.4) General and administrative 8.0 5.4 (2.6) Other (gains) and charges 2.8 3.6 0.8 As a percentage of Company sales: • Chili’s Food and beverage costs increased 0.8%, including 0.9% of unfavorable commodity pricing due to supply chain constraints and inflationary pressures resulting in higher poultry and other commodity costs and 0.1% of unfavorable menu item mix, partially offset by 0.2% of increased menu pricing. • Chili’s Restaurant labor increased 1.5%, including 3.6% of higher restaurant labor costs primarily including wage rates, training and overtime and 0.2% of higher other labor expenses, partially offset by 2.3% of sales leverage. 27 Table of Contents • Chili’s Restaurant expenses decreased 0.4%, including 2.5% of sales leverage and 0.6% of lower delivery fees and To-Go supplies, partially offset by 1.3% of higher repairs and maintenance expenses, 0.6% of higher utilities expenses and 0.8% of higher other restaurant expenses. Chili’s Depreciation and amortization increased $2.4 million as follows: Depreciation and Amortization Thirteen Week Period Ended September 23, 2020 $ 30.6 Change from: Additions for existing and new restaurant assets 3.8 Finance leases 1.4 Acquisition of Chili’s restaurants (1) 0.2 Retirements and fully depreciated restaurant assets (3.0) Thirteen Week Period Ended September 29, 2021 $ 33.0 (1) Represents the incremental depreciation and amortization of the assets and finance leases of the 23 Chili’s restaurants acquired on September 2, 2021. Chili’s General and administrative increased $2.6 million as follows: General and Administrative Thirteen Week Period Ended September 23, 2020 $ 5.4 Change from: Defined contribution plan employer expenses (1) 2.1 Professional fees 0.3 Stock-based compensation 0.3 Travel and entertainment expenses 0.1 Performance-based compensation (0.3) Other 0.1 Thirteen Week Period Ended September 29, 2021 $ 8.0 (1) Defined contribution plan employer expenses increased due to the temporary suspension of employer matching contributions related to the Company’s 401(k) plan from May 2020 through December 2020. Employer matching contributions were reinstated beginning January 1, 2021. Maggiano’s Segment Thirteen Week Period Ended September 29, 2021 compared to September 23, 2020 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage September 29, 2021 September 23, 2020 Company sales $ 86.3 $ 53.2 $ 33.1 62.2 % Royalties 0.1 0.0 0.1 100.0 % Franchise fees and other revenues 2.4 0.4 2.0 500.0 % Franchise and other revenues 2.5 0.4 2.1 525.0 % Total revenues $ 88.8 $ 53.6 $ 35.2 65.7 % Maggiano’s Total revenues increased 65.7% primarily due to higher dining and banquet room sales and traffic, and higher delivery sales, including virtual brands, partially offset by a decrease in To-Go sales. Refer to “Revenues” section above for further details about Maggiano’s revenues changes. 28 Table of Contents The following is a summary of the changes in Maggiano’s operating costs and expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 20.9 24.2 % $ 12.7 23.9 % $ (8.2) (0.3) % Restaurant labor 31.4 36.4 % 19.8 37.2 % (11.6) 0.8 % Restaurant expenses 26.6 30.8 % 20.8 39.1 % (5.8) 8.3 % Depreciation and amortization 3.4 3.6 0.2 General and administrative 2.0 1.3 (0.7) Other (gains) and charges 0.2 0.1 (0.1) As a percentage of Company sales: • Maggiano’s Food and beverage costs increased 0.3%, including 0.6% of unfavorable commodity pricing due to supply chain constraints and inflationary pressures resulting in higher seafood and other commodity costs, partially offset by 0.3% of favorable menu item mix. • Maggiano’s Restaurant labor decreased 0.8%, including 9.0% of sales leverage, partially offset by 7.0% of higher restaurant labor costs primarily including wage rates, training and overtime, 1.1% of higher manager bonus expenses and 0.1% of higher other labor expenses. • Maggiano’s Restaurant expenses decreased 8.3%, including 12.5% of sales leverage and 0.9% lower delivery fees and To-Go supplies, partially offset by 2.2% of higher repairs and maintenance expenses, 1.4% of higher advertising expenses, 1.4% of higher supervision expenses and 0.1% of higher other restaurant expenses. Liquidity and Capital Resources COVID-19 Impact on Liquidity Cash flows generated from operating activities are our principal source of liquidity, which we use to finance capital expenditures, such as remodels, maintaining existing restaurants and constructing new restaurants, to pay dividends and to repurchase shares of our common stock when authorized. Our strategic decision to enhance our off-premise business has enabled us to conveniently serve a significantly higher volume of off-premise guests during this pandemic compared to other industry competitors. At the outset of the COVID-19 pandemic in fiscal 2020 and into early fiscal 2021, we took proactive precautionary measures to preserve liquidity, reduce costs and pause non-critical projects that did not significantly impact our current operations. In the second half of fiscal 2021, our operational results and liquidity returned to pre-pandemic levels. Beginning in the first quarter of fiscal 2022, we took or plan to take the following actions: • 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 and restaurant expenses • Reinstated the share repurchase program; and • Will repay $54.5 million of payroll taxes deferred in accordance with the CARES Act in two equal installments on December 31, 2021 and December 31, 2022. 29 Table of Contents Cash Flows Cash Flows from Operating Activities Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Net cash provided by operating activities $ 40.2 $ 82.8 $ (42.6) Net cash provided by operating activities decreased primarily due to an increase in payments of performance based compensation and bonuses in the current year and to the impact of the deferral of payroll tax payments as allowed under the CARES Act in the prior year. Cash Flows from Investing Activities Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Cash flows from investing activities Payments for property and equipment $ (37.3) $ (13.6) $ (23.7) Payments for franchise restaurant acquisitions (47.5) — (47.5) Proceeds from sale leaseback transactions, net of related expenses 20.5 — 20.5 Proceeds from note receivable — 0.6 (0.6) Net cash used in investing activities $ (64.3) $ (13.0) $ (51.3) Net cash used in investing activities increased primarily due to $47.5 million of cash consideration paid for the purchase of 23 Chili’s restaurants from a franchisee. Simultaneous with the acquisition, we completed sale leaseback transactions on six of the acquired restaurants resulting in $20.5 million in proceeds received. Additionally, capital expenditures increased in fiscal 2022 primarily for equipment purchases and an increase in the pace of the Chili’s remodel initiative. Subsequent to the end of the first quarter of fiscal 2022, 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. Cash Flows from Financing Activities Thirteen Week Periods Ended Favorable (Unfavorable) Variance September 29, 2021 September 23, 2020 Cash flows from financing activities Borrowings on revolving credit facility $ 285.0 $ 28.4 $ 256.6 Payments on revolving credit facility (205.0) (75.0) (130.0) Purchases of treasury stock (39.6) (3.9) (35.7) Payments on long-term debt (5.5) (4.6) (0.9) Payments for debt issuance costs (3.0) (1.5) (1.5) Payments of dividends (0.8) (1.3) 0.5 Proceeds from issuance of treasury stock 0.3 3.0 (2.7) Net cash provided by (used in) financing activities $ 31.4 $ (54.9) $ 86.3 Net cash from financing activities increased primarily due to $80.0 million of net borrowing activity in fiscal 2022 compared to $46.6 million of net repayment activity in fiscal 2021 on the revolving credit facility, partially offset by an increase in share repurchases following the reinstatement of the share repurchase program in August 2021. 30 Table of Contents 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 $80.0 million were drawn during the thirteen week period ended September 29, 2021 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). 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. Refer to Note 10 - Debt for further information about our notes and revolving credit facility. Share Repurchase Program 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. 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 thirteen week periods ended September 29, 2021 and September 23, 2020, dividends paid related to the previously accrued dividends for restricted share awards that were granted prior to the suspension and vested in the period. Restricted share award dividends are accrued in Other accrued liabilities for the current portion to vest within 12 months, and Other liabilities for the portion that will vest after one year. 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. 31 Table of Contents Off-Balance Sheet Arrangements An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which the Company has: (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us. We have entered into certain pre-commencement leases as disclosed in Note 9 - Leases and have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 14 - Contingencies, in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report. Other than these items, we do not have any off-balance sheet arrangements. Recent Accounting Pronouncements The impact of recent accounting pronouncements can be found at Note 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.