What changed in this filing

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Item 1. Financial Statements

2022-02-02 compared with 2021-11-03 · 215 added, 145 removed, 439 unchanged (45% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Thirteen Week Periods Ended

September 29,

2021 September 23,

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2021 December 23,

2020 December 29,

2021 December 23,

Company sales $ 904.5 $ 746.2 $ 1,764.1 $ 1,474.4

27 unchanged sentences

(In millions, except per share amounts)

September 29,

2021 June 30,

38 unchanged sentences

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)

and 44.6 million shares outstanding at December 29, 2021, and 45.9 million shares outstanding at June 30, 2021)

Additional paid-in capital 683.7 685.4

1 unchanged sentence

Accumulated deficit ( 225.3 ) ( 266.1 )

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

Treasury stock, at cost ( 25.7 million shares at December 29, 2021, and 24.4 million shares at June 30, 2021)

( 787.6 ) ( 724.9 )

5 unchanged sentences

(In millions)

Thirteen Week Periods Ended

September 29,

2021 September 23,

Twenty-Six Week Periods Ended

2021 December 23,

Cash flows from operating activities

6 unchanged sentences

Other 2.1 1.7

Changes in assets and liabilities:

Changes in assets and liabilities, net of the impact of acquisitions:

Accounts receivable, net ( 24.6 ) ( 23.1 )

16 unchanged sentences

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

Proceeds from sale of assets 0.0 1.3

Proceeds from note receivable — 1.3

19 unchanged sentences

Basis of Presentation 7

Chili’s Restaurant Acquisition 8

Chili’s Restaurant Acquisitions 8

Revenue Recognition 9

8 unchanged sentences

Contingencies 22

Subsequent Events 20

Footnote Index

2 unchanged sentences

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

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”).

Our Consolidated Financial Statements (Unaudited) as of December 29, 2021 and June 30, 2021, and for the thirteen and twenty-six week periods ended December 29, 2021 and December 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.

At December 29, 2021, we owned, operated or franchised 1,653 restaurants, consisting of 1,182 Company-owned restaurants and 471 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.

18 unchanged sentences

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

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 primarily in fiscal 2021.

Footnote Index

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.

1 unchanged sentence

New Accounting Standards Implemented in Fiscal 2022

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).

We reviewed all accounting pronouncements that became effective for our fiscal 2022 and determined that either they were not applicable or they did not have a material impact on the Consolidated Financial Statements (Unaudited).

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

CHILI’S RESTAURANT ACQUISITIONS

On October 31, 2021, we completed the acquisition of certain assets and liabilities related to 37 previously franchised Chili’s restaurants located in the Great Lakes and Northeast region of the United States, the “Great Lakes Region Acquisition.” Pro-forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited).

The total purchase price of $ 56.0 million, excluding post-closing adjustments, was funded with borrowings from our existing credit facility.

We accounted for this acquisition as a business combination.

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

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

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

On September 2, 2021, we completed the acquisition of certain assets and liabilities related to 23 previously franchised Chili’s restaurants located in the Mid-Atlantic region of the United States, the “Mid-Atlantic Region Acquisition.” Pro-forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited).

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

1 unchanged sentence

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

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

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

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

Footnote Index

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

Mid-Atlantic Region Great Lakes Region

Fair Value September 2, 2021 Fair Value October 31, 2021

Current assets $ 1.4 $ 2.1

5 unchanged sentences

Operating lease liabilities, less current portion (2)

( 23.1 ) ( 45.2 )

Net assets acquired (4)

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

$ 47.7 $ 57.1

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

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

(3) 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

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

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

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

Net assets acquired at fair value related to the Great Lakes Region acquisition are equal to the total purchase price of $ 56.0 million, plus $ 1.1 million of closing adjustments.

REVENUE RECOGNITION

1 unchanged sentence

Our deferred franchise and development fees consist of the unrecognized fees received from franchisees.

Recognition of these fees in subsequent periods is based on satisfaction of the contractual performance obligations of the active contracts with franchisees.

Recognition of these fees in subsequent periods is based on satisfaction of the contractual performance obligations of our active contracts with franchisees.

We also expect to earn subsequent period royalties and advertising fees related to our franchise contracts;

1 unchanged sentence

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).

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

Footnote Index

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

Deferred Franchise and Development Fees

1 unchanged sentence

Additions 0.7

Amount recognized for Chili's restaurant acquisition (1)

Amount recognized for Chili's restaurant acquisitions (1)

Amount recognized to Franchise and other revenues ( 0.8 )

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.

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 September 29, 2021:

Balance as of December 29, 2021 $ 10.6

(1) The remaining deferred franchise and development fee balances associated with the 60 acquired Chili’s restaurants were recognized as of the acquisition dates in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited).

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

Fiscal Year Franchise and Development Fees Revenue Recognition

1 unchanged sentence

Thereafter 6.7

Footnote Index

Deferred Gift Card Revenues

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

The following table reflects the changes in the Gift card liability between June 30, 2021 and September 29, 2021:

The following table reflects the changes in the Gift card liability between June 30, 2021 and December 29, 2021:

Gift Card Liability

3 unchanged sentences

Gift card breakage recognized to Franchise and other revenues ( 12.2 )

Balance as of September 29, 2021

Balance as of December 29, 2021

Footnote Index

OTHER GAINS AND CHARGES

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

Thirteen Week Periods Ended

September 29,

2021 September 23,

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2021 December 23,

2020 December 29,

2021 December 23,

Lease contingencies $ 2.9 $ — $ 2.9 $ —

Remodel-related costs 1.6 0.7 3.1 0.9

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

Enterprise system implementation 0.6 —

COVID-19 related charges 0.3 1.2

Acquisition-related costs, net 0.9 — 0.9 —

Enterprise system implementation costs 0.3 — 0.9 —

Restaurant closure charges 0.3 0.4 0.5 1.9

COVID-19 related charges ( 0.8 ) 1.0 ( 0.5 ) 2.2

Restaurant impairment charges — 2.5 — 2.5

Other 1.2 0.8 3.1 1.7

$ 6.4 $ 5.4 $ 10.9 $ 9.2

• Lease contingencies were recorded for potential lease defaults on certain lease guarantees and subleases.

Refer to Note 14 - Contingencies for additional information about our secondarily liable lease guarantees.

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

• 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,

– 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.

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

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

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

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

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

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

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

• Restaurant impairment charges primarily related to the long-lived and operating lease assets of 10 underperforming Chili’s restaurants and three underperforming Maggiano’s restaurants that we continue to operate.

Footnote Index

Thirteen Week Periods Ended

September 29,

2021 September 23,

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2021 December 23,

2020 December 29,

2021 December 23,

Effective income tax rate 5.2 % ( 46.3 ) % 4.0 % ( 23.4 ) %

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

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.

Our effective income tax rate for the thirteen and twenty-six week periods ended December 29, 2021 was lower than the federal statutory rate primarily due to the favorable impact from the FICA tip tax credit.

The twenty-six week period ended December 29, 2021 also included the favorable impact of excess tax benefits associated with stock-based compensation.

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

Thirteen Week Period Ended

September 29,

Twenty-Six Week Period Ended

Income tax expense at statutory rate - 21.0 %

4 unchanged sentences

Provision (benefit) for income taxes - 4.0 %

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.

Our effective income tax rate for the thirteen and twenty-six week periods ended December 23, 2020 was lower than the federal statutory rate due to the favorable impact from the FICA tip tax credit.

The twenty-six week period ended December 23, 2020 also included the favorable impact of excess tax benefits associated with stock-based compensation.

NET INCOME PER SHARE

4 unchanged sentences

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

Thirteen Week Periods Ended

September 29,

2021 September 23,

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2021 December 23,

2020 December 29,

2021 December 23,

Basic weighted average shares outstanding 45.1 45.3 45.5 45.2

4 unchanged sentences

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

Footnote Index

SEGMENT INFORMATION

1 unchanged sentence

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

Footnote Index

locations in the United States, 28 countries and two United States territories.

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

2 unchanged sentences

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.

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

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

Restaurant expenses during the periods presented primarily included restaurant rent, supplies, utilities, property and equipment maintenance, delivery fees, credit card processing fees, property taxes and worker’s comp and general liability insurance.

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

Thirteen Week Period Ended September 29, 2021

Thirteen Week Period Ended December 29, 2021

Maggiano’s Other Consolidated

15 unchanged sentences

Income (loss) before income taxes $ 54.8 $ 14.9 $ ( 40.6 ) $ 29.1

Footnote Index

Thirteen Week Period Ended December 23, 2020

Chili’s Maggiano’s Other Consolidated

Company sales $ 683.0 $ 63.2 $ — $ 746.2

Royalties 7.6 0.1 — 7.7

Franchise fees and other revenues 5.8 1.0 — 6.8

Franchise and other revenues 13.4 1.1 — 14.5

Total revenues 696.4 64.3 — 760.7

Food and beverage costs 183.7 15.2 — 198.9

Restaurant labor 233.4 22.4 — 255.8

Restaurant expenses 188.7 22.1 0.5 211.3

Depreciation and amortization 30.8 3.4 3.0 37.2

General and administrative 5.4 1.3 23.3 30.0

Other (gains) and charges 4.4 0.8 0.2 5.4

Total operating costs and expenses 646.4 65.2 27.0 738.6

Operating income (loss) 50.0 ( 0.9 ) ( 27.0 ) 22.1

Interest expenses 1.4 0.1 12.9 14.4

Other income, net ( 0.2 ) — ( 0.3 ) ( 0.5 )

Income (loss) before income taxes $ 48.8 $ ( 1.0 ) $ ( 39.6 ) $ 8.2

Twenty-Six Week Period Ended December 29, 2021

Maggiano’s Other Consolidated

Company sales $ 1,565.2 $ 198.9 $ — $ 1,764.1

Royalties 17.6 0.2 — 17.8

Franchise fees and other revenues 13.0 7.3 — 20.3

Franchise and other revenues 30.6 7.5 — 38.1

Total revenues 1,595.8 206.4 — 1,802.2

Food and beverage costs 438.2 48.9 — 487.1

Restaurant labor 551.1 69.2 — 620.3

Restaurant expenses 409.6 58.1 0.3 468.0

Depreciation and amortization 68.4 6.8 5.7 80.9

General and administrative 15.2 3.9 50.5 69.6

Other (gains) and charges 5.0 0.2 5.7 10.9

Total operating costs and expenses 1,487.5 187.1 62.2 1,736.8

Operating income (loss) 108.3 19.3 ( 62.2 ) 65.4

Interest expenses 2.8 0.2 20.7 23.7

Other income, net ( 0.3 ) — ( 0.5 ) ( 0.8 )

Income (loss) before income taxes $ 105.8 $ 19.1 $ ( 82.4 ) $ 42.5

Segment assets $ 2,073.4 $ 235.9 $ 148.0 $ 2,457.3

2 unchanged sentences

Footnote Index

Thirteen Week Period Ended September 23, 2020

Twenty-Six Week Period Ended December 23, 2020

Chili’s Maggiano’s Other Consolidated

16 unchanged sentences

Payments for property and equipment $ 32.8 $ 1.0 $ 3.3 $ 37.1

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

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

(1) Chili’s segment information for fiscal 2022 includes the results of operations and the preliminary fair value of assets related to the 60 restaurants purchased from two former franchisees subsequent to the acquisition dates.

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

FAIR VALUE MEASUREMENTS

5 unchanged sentences

Non-Financial Assets Measured on a Non-Recurring Basis

We review the carrying amounts of long-lived property and equipment including finance lease assets, operating lease assets, reacquired franchise rights and transferable liquor licenses semi-annually 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 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 September 29, 2021 and June 30, 2021, of $ 10.1 million and $ 9.6 million, respectively.

Intangibles, net included accumulated amortization associated with definite-lived intangible assets at December 29, 2021 and June 30, 2021, of $ 10.8 million and $ 9.6 million, respectively.

Footnote Index

1 unchanged sentence

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.

During the thirteen and twenty-six week periods ended December 29, 2021, no indicators of impairment were identified.

Indefinite Lived Assets Impairment

The fair values of transferable liquor licenses are based on prices in the open market for licenses in the same or similar jurisdictions, and are categorized as Level 2.

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

During the thirteen and twenty-six week periods ended December 29, 2021 and December 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.

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

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

We performed our annual goodwill impairment analysis in the second quarter of fiscal 2022 using a qualitative approach based on these factors and no indicators of impairment were identified.

During the thirteen and twenty-six week periods ended December 29, 2021, management concluded that no triggering event occurred.

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

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.

Chili’s Restaurant Acquisitions

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

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

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

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

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

Other Financial Instruments

1 unchanged sentence

The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying amounts because of the short maturity of these items.

Footnote Index

Long-Term Debt

2 unchanged sentences

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

December 29, 2021 June 30, 2021

Carrying Amount Fair Value Carrying Amount Fair Value

5 unchanged sentences

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

September 29,

2021 September 23,

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2021 December 23,

2020 December 29,

2021 December 23,

Operating lease cost $ 43.2 $ 42.0 $ 84.6 $ 83.7

6 unchanged sentences

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.

As of the end of the second quarter of fiscal 2022, we have 17 pre-commencement leases for new Chili’s locations with undiscounted fixed payments over the initial term of $ 25.4 million.

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

2 unchanged sentences

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.

In the first quarter of fiscal 2022, as part of the Chili’s Mid-Atlantic Region Acquisition, we assumed 11 new real estate operating leases included in the balances at December 29, 2021.

At December 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 23.3 million, Operating lease liabilities of $ 0.6 million, and Long-term operating lease liabilities, less current portion of $ 22.9 million.

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

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.

In the second quarter of fiscal 2022, as part of the Chili’s Great Lakes Region Acquisition, we assumed 26 new real estate operating leases included in the balances at December 29, 2021.

At December 29, 2021, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 47.7 million, Operating lease liabilities of $ 1.5 million, and Long-term operating lease liabilities, less current

Footnote Index

portion of $ 46.7 million.

The leases were recorded net of purchase price accounting adjustments and prepaid rent at the date of acquisition.

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

Restaurant Properties Sale Leaseback Transaction

In the first quarter of fiscal 2022, simultaneous with the acquisition of the 23 Chili’s restaurants, we completed sale leaseback transactions on six of the acquired restaurants.

In the first quarter of fiscal 2022, simultaneous with the Mid-Atlantic Region Acquisition, 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.

2 unchanged sentences

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

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

Long-term debt consists of the following:

September 29,

2021 June 30,

6 unchanged sentences

Total long-term debt, less unamortized debt issuance costs and discounts 1,071.2 939.4

current installments of long-term debt (1)

current installments of long-term debt and finance leases (1)

( 23.9 ) ( 21.5 )

4 unchanged sentences

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.

In the twenty-six week period ended December 29, 2021, net borrowings of $ 132.5 million were drawn on the revolving credit facility.

As of December 29, 2021, $ 496.2 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 December 29, 2021, our interest rate was 1.875 % consisting of LIBOR of 0.125 % plus the applicable margin of 1.750 %.

In the twenty-six week period ended December 29, 2021, we incurred and capitalized $ 3.1 million of debt issuance costs associated with the new revolver, which are included in Other assets in the Consolidated Balance Sheets (Unaudited).

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 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.

Our debt agreements contain various financial covenants that, among other things, require the maintenance of certain leverage ratios.

As of December 29, 2021, we were in compliance with our covenants pursuant to the $800.0

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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.

ACCRUED AND OTHER LIABILITIES

Other accrued liabilities consist of the following:

September 29,

2021 June 30,

6 unchanged sentences

$ 128.8 $ 117.4

(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.

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

Refer to Note 14 - Contingencies for additional information about our secondarily liable lease guarantees.

Other liabilities consist of the following:

September 29,

2021 June 30,

6 unchanged sentences

(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 thirteen week periods ended September 29, 2021 and September 23, 2020, respectively, were as follows:

Thirteen Week Period Ended September 29, 2021

The changes in Total shareholders’ deficit during the twenty-six week periods ended December 29, 2021 and December 23, 2020, respectively, were as follows:

Twenty-Six Week Period Ended December 29, 2021

Common Stock Additional

2 unchanged sentences

Comprehensive

Balance at June 30, 2021 $ 7.0 $ 685.4 $ ( 266.1 ) $ ( 724.9 ) $ ( 4.7 ) $ ( 303.3 )

Balances at June 30, 2021 $ 7.0 $ 685.4 $ ( 266.1 ) $ ( 724.9 ) $ ( 4.7 ) $ ( 303.3 )

Net income — — 13.2 — — 13.2

4 unchanged sentences

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 )

Footnote Index

Thirteen Week Period Ended September 23, 2020

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

Net income — — 27.6 — — 27.6

Other comprehensive loss — — — — ( 0.1 ) ( 0.1 )

Dividends — — 0.0 — — 0.0

Stock-based compensation — 5.6 — — — 5.6

Purchases of treasury stock — 0.0 — ( 35.1 ) — ( 35.1 )

Issuances of treasury stock — ( 1.3 ) — 1.4 — 0.1

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

Twenty-Six Week Period Ended December 23, 2020

Common Stock Additional

2 unchanged sentences

Comprehensive

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

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

Net income — — 10.7 — — 10.7

4 unchanged sentences

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 )

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

Net income — — 12.0 — — 12.0

Other comprehensive income — — — — 0.5 0.5

Dividends — — 0.0 — — 0.0

Stock-based compensation — 3.0 — — — 3.0

Purchases of treasury stock — 0.0 — 0.0 — 0.0

Issuances of treasury stock — 1.2 — 4.3 — 5.5

Balances at December 23, 2020 $ 7.0 $ 667.4 $ ( 374.8 ) $ ( 738.3 ) $ ( 5.4 ) $ ( 444.1 )

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.

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

Footnote Index

planned investment and financing needs.

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

1 unchanged sentence

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.

In the twenty-six week period ended December 29, 2021, we repurchased 1.6 million shares of our common stock for $ 74.7 million, including 1.5 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 December 29, 2021, approximately $ 230.0 million was available under our share repurchase authorizations.

Stock-based Compensation

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,

Twenty-Six Week Periods Ended

2021 December 23,

Restricted share awards

2 unchanged sentences

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.

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

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

Footnote Index

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes and interest is as follows:

Thirteen Week Periods Ended

September 29,

2021 September 23,

Twenty-Six Week Periods Ended

2021 December 23,

Income taxes, net of (refunds)

2 unchanged sentences

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

Thirteen Week Periods Ended

September 29,

2021 September 23,

Twenty-Six Week Periods Ended

2021 December 23,

Operating lease additions (1)

3 unchanged sentences

Retirement of fully depreciated assets 14.5 7.7

(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.

(1) The twenty-six week period ended December 29, 2021 primarily included operating lease additions associated with the 60 restaurants purchased from two former franchisees.

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

Footnote Index

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 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.

As of December 29, 2021 and June 30, 2021, we have outstanding lease guarantees or are secondarily liable for an estimated $ 31.9 million and $ 29.2 million, respectively.

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

These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2022 through fiscal 2027.

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.

As of December 29, 2021, we have recorded contingent liabilities of $ 4.0 million for our estimated exposure of the lease defaults related to these lease guarantees.

These contingent liabilities are classified within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited).

Letters of Credit

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

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

As of December 29, 2021, we had $ 5.8 million in undrawn standby letters of credit outstanding.

All standby letters of credit are renewable within the next 10 months.

4 unchanged sentences

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

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.

On November 16, 2021, we submitted our appellate brief to the 11 th Circuit Court of Appeals seeking to overturn the district court’s class certification orders.

The US Chamber of Commerce and the Restaurant Law Center/Retail Litigation Center/National Retail Federation filed respective amicus briefs in support of our position two weeks later.

Plaintiffs filed their response brief on January 6, 2022.

Our reply brief is due on February 28, 2022.

We believe we have defenses and intend to continue defending 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.

As such, as of December 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.

5 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.

SUBSEQUENT EVENTS

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