What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-05-04 · 194 added, 306 removed, 369 unchanged (58% of the section changed)

1 unchanged sentence

BRINKER INTERNATIONAL, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In millions, except per share amounts)

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2022 March 24,

2021 March 30,

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

Company sales $ 946.1 $ 865.6

Franchise and other revenues 19.8 14.7 57.9 41.1

Franchise revenues 9.4 10.8

Total revenues 955.5 876.4

7 unchanged sentences

Total operating costs and expenses 975.3 850.8

Operating income 49.4 52.2 114.8 98.7

Operating (loss) income ( 19.8 ) 25.6

Interest expenses 12.3 12.5

Other income, net ( 0.4 ) ( 0.3 )

Income before income taxes 38.7 38.4 81.2 56.8

Provision for income taxes 2.1 4.5 3.8 0.2

Net income $ 36.6 $ 33.9 $ 77.4 $ 56.6

Basic net income per share $ 0.82 $ 0.74 $ 1.71 $ 1.25

Diluted net income per share $ 0.81 $ 0.73 $ 1.68 $ 1.22

(Loss) Income before income taxes ( 31.7 ) 13.4

(Benefit) Provision for income taxes ( 1.5 ) 0.2

Net (loss) income $ ( 30.2 ) $ 13.2

Basic net (loss) income per share $ ( 0.69 ) $ 0.29

Diluted net (loss) income per share $ ( 0.69 ) $ 0.28

Basic weighted average shares outstanding 43.9 45.9

Diluted weighted average shares outstanding 43.9 47.0

Other comprehensive income (loss)

Other comprehensive loss

Foreign currency translation adjustment $ ( 1.0 ) $ ( 0.4 )

Other comprehensive income (loss) 0.4 0.3 ( 0.1 ) 1.1

Comprehensive income $ 37.0 $ 34.2 $ 77.3 $ 57.7

Other comprehensive loss ( 1.0 ) ( 0.4 )

Comprehensive (loss) income $ ( 31.2 ) $ 12.8

See accompanying Notes to Consolidated Financial Statements (Unaudited)

2 unchanged sentences

(In millions, except per share amounts)

September 28,

2022 June 29,

37 unchanged sentences

$ 0.10 par value;

70.3 million shares issued;

and 43.8 million shares outstanding at March 30, 2022, and 45.9 million shares outstanding at June 30, 2021)

60.3 million shares issued and 44.0 million shares outstanding at September 28, 2022, and 70.3 million shares issued and 43.8 million shares outstanding at June 29, 2022)

Additional paid-in capital 688.0 690.9

1 unchanged sentence

Accumulated deficit ( 484.7 ) ( 148.4 )

Treasury stock, at cost ( 26.5 million shares at March 30, 2022, and 24.4 million shares at June 30, 2021)

Treasury stock, at cost ( 16.3 million shares at September 28, 2022, and 26.5 million shares at June 29, 2022)

( 499.6 ) ( 812.3 )

5 unchanged sentences

(In millions)

Thirty-Nine Week Periods Ended

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

Cash flows from operating activities

Net income $ 77.4 $ 56.6

Adjustments to reconcile Net income to Net cash provided by operating activities:

Net (loss) income $ ( 30.2 ) $ 13.2

Adjustments to reconcile Net (loss) income to Net cash provided by operating activities:

Depreciation and amortization 41.9 39.3

20 unchanged sentences

Payments for property and equipment ( 46.7 ) ( 37.3 )

Proceeds from note receivable 1.1 —

Payments for franchise restaurant acquisitions — ( 47.5 )

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

Proceeds from note receivable 1.0 1.5

Proceeds from sale of assets 0.1 1.6

Net cash used in investing activities ( 45.6 ) ( 64.3 )

2 unchanged sentences

Payments on revolving credit facility ( 100.0 ) ( 205.0 )

Purchases of treasury stock ( 100.8 ) ( 4.1 )

Payments on long-term debt ( 5.8 ) ( 5.5 )

Payments for debt issuance costs ( 3.1 ) ( 2.2 )

Purchases of treasury stock ( 2.0 ) ( 39.6 )

Payments of dividends ( 0.2 ) ( 0.8 )

Payments for debt issuance costs — ( 3.0 )

Proceeds from issuance of treasury stock 0.0 0.3

Net cash used in financing activities ( 29.2 ) ( 189.6 )

Net cash provided by financing activities 27.0 31.4

Net change in cash and cash equivalents 6.0 7.3

8 unchanged sentences

Basis of Presentation 7

Chili’s Restaurant Acquisitions 8

Revenue Recognition 8

1 unchanged sentence

Income Taxes 10

Net Income Per Share 12

Net (Loss) Income Per Share 10

Segment Information 10

4 unchanged sentences

Contingencies 17

Fiscal 2022 Chili’s Restaurant Acquisitions 18

Footnote Index

2 unchanged sentences

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

Our Consolidated Financial Statements (Unaudited) as of March 30, 2022 and June 30, 2021, and for the thirteen and thirty-nine week periods ended March 30, 2022 and March 24, 2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Our Consolidated Financial Statements (Unaudited) as of September 28, 2022 and June 29, 2022, and for the thirteen week periods ended September 28, 2022 and September 29, 2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Effective for the first quarter of fiscal 2023, we are presenting certain revenue streams related to gift cards, digital entertainment, Maggiano’s banquet service charges and delivery fees within Company sales to better align with the presentation used within the casual dining industry.

Our presentation of Franchise revenues will now include only revenues related to the ongoing franchise-operated restaurants.

Comparative figures in prior years have been adjusted to conform to the current year’s presentation.

These reclassifications have no effect on Total revenues or Net income previously reported.

We are principally engaged in the ownership, operation, development and franchising of the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands, as well as virtual brands including It’s Just Wings ® and Maggiano’s Italian Classics ® .

At March 30, 2022, we owned, operated or franchised 1,650 restaurants, consisting of 1,187 Company-owned restaurants and 463 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.

We utilize a 13 week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter contains 14 weeks.

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

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

As of September 28, 2022, we owned, operated or franchised 1,645 restaurants, consisting of 1,182 Company-owned restaurants and 463 franchised restaurants, located in the United States, 28 countries and two United States territories.

Use of Estimates

8 unchanged sentences

Foreign Currency Translation

The foreign currency translation adjustment included in Comprehensive income in the Consolidated Statements of Comprehensive Income (Unaudited) represents the unrealized impact of translating the financial statements of our Canadian restaurants from Canadian dollars to United States dollars.

This amount is not included in Net income and would only be realized upon disposition of our Canadian restaurants.

The foreign currency translation adjustment included in Comprehensive (loss) income in the Consolidated Statements of Comprehensive (Loss) Income (Unaudited) represents the unrealized impact of translating the financial statements of our Canadian restaurants from Canadian dollars to United States dollars.

This amount is not included in Net (loss) income and would only be realized upon disposition of our Canadian restaurants.

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

Impact of COVID-19 Pandemic

In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic and a National Public Health Emergency.

The spread of COVID-19 has prompted changes in consumer behavior and social distancing preferences as well as dining room closures and dining room capacity restrictions mandated or encouraged by federal, state and local governments.

The number of open dining rooms and the dining room capacity restrictions have fluctuated over the course of the pandemic based on state and local mandates, and has resulted in significant adverse impacts to our guest traffic and sales primarily in fiscal 2021.

The number of open dining rooms and the dining room capacity restrictions have fluctuated over the course of the COVID-19 pandemic based on state and local mandates and has resulted in significant adverse impacts to our guest traffic and sales primarily in fiscal 2021.

Starting fiscal 2022, we have experienced limited product shortages and service disruptions in our supply chain, limited availability of labor to operate our restaurants due to a tight labor market and an increase in employee turnover.

It is possible that supply chain and labor shortages or disruptions could continue or increase in future periods if demand for goods, transportation and labor remains high.

Footnote Index

1 unchanged sentence

At this time, the ultimate impact of COVID-19 cannot be reasonably estimated due to the uncertainty about the extent and the duration of the spread of the virus and could lead to further reduced sales, capacity restrictions, restaurant closures, delays in our supply chain or impair our ability to staff accordingly which could adversely impact our financial results.

Impact of Inflation

During the first quarter of fiscal 2023, inflation did have a material impact on our operations.

Increasing inflation could have a severe impact on the United States or global economies and have an adverse impact on our business, financial condition and results of operations.

If commodity pricing and labor costs increase significantly, we may not be able to adjust menu prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.

New Accounting Standards Implemented in Fiscal 2023

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

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

• Mid-Atlantic Region Acquisition - On September 2, 2021, we acquired 23 previously franchised Chili’s restaurants located in the Mid-Atlantic region of the United States for a total purchase price of $ 47.7 million, including post-closing adjustments.

The acquisition was funded with borrowings from our existing credit facility and proceeds from a sale leaseback transaction completed simultaneously with the acquisition (refer to Note 9 - Leases for further details on the sale leaseback transaction).

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

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

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

We accounted for each of these acquisitions as a business combination.

The assets and liabilities of the Mid-Atlantic Region Acquisition restaurants were recorded at their fair values.

The assets and liabilities of the Great Lakes Region Acquisition and Northwest Region Acquisition restaurants were recorded based on preliminary estimates of their fair values and are subject to revision.

The final purchase price allocations are expected to be completed during the fourth quarter of fiscal 2022.

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

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 amounts recorded for the fair value of acquired assets and liabilities at the acquisition dates are as follows:

Mid-Atlantic Region Great Lakes Region (Preliminary)

Current assets $ 1.4 $ 2.1

Property and equipment 46.2 43.9

Operating lease assets (2)

Reacquired franchise rights (1)

Current liabilities ( 1.4 ) ( 0.3 )

Finance lease liabilities, less current portion ( 3.7 ) —

Operating lease liabilities, less current portion (2)

( 23.1 ) ( 45.2 )

Net assets acquired (4)

$ 47.7 $ 57.1

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

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

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

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

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

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

We reviewed accounting pronouncements that became effective for our fiscal 2023 and determined that either they were not applicable or they did not have a material impact on the Consolidated Financial Statements (Unaudited).

We also reviewed 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).

REVENUE RECOGNITION

5 unchanged sentences

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 30, 2021 and March 30, 2022:

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

Deferred Franchise and Development Fees

1 unchanged sentence

Additions 0.7

Amount recognized for Chili's restaurant acquisitions (1)

Amount recognized to Franchise and other revenues ( 1.3 )

Balance as of March 30, 2022 $ 10.1

(1) The remaining deferred franchise and development fee balances associated with the 66 acquired Chili’s restaurants were recognized as of the acquisition dates in Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited).

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

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

Amount recognized to Franchise revenues ( 0.3 )

Balance as of September 28, 2022 $ 10.5

Footnote Index

Fiscal Year Franchise and Development Fees Revenue Recognition

3 unchanged sentences

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 March 30, 2022:

The following table reflects the changes in the Gift card liability between June 29, 2022 and September 28, 2022:

Gift Card Liability

2 unchanged sentences

Gift card redemptions recognized to Company sales ( 23.8 )

Gift card breakage recognized to Franchise and other revenues ( 16.5 )

Balance as of March 30, 2022

Footnote Index

Gift card breakage recognized to Company sales ( 2.8 )

Balance as of September 28, 2022

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

2022 March 24,

2021 March 30,

2022 March 24,

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

Thirteen Week Periods Ended

September 28,

2022 September 29,

Restaurant closure charges $ 1.5 $ 0.2

Remodel-related costs 0.9 0.9 4.0 1.8

COVID-19 related charges 0.7 0.9 0.2 3.1

Acquisition-related costs, net 0.6 — 1.5 —

Enterprise system implementation costs 1.0 0.6

Loss from natural disasters, net of (insurance recoveries) — 1.8 0.8 2.0

Lease contingencies — — 2.9 —

Restaurant impairment charges — — — 2.5

Remodel-related costs 0.8 1.5

Lease modification gain, net ( 0.7 ) —

Other 2.4 2.2

$ 6.1 $ 4.3 $ 17.0 $ 13.5

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

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

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

• Acquisition-related costs, net primarily related to the 66 restaurants acquired from franchisees during the first three quarters.

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

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

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

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

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

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

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

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

– conversion of certain parking lots into dining areas, and

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

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

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

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

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

Footnote Index

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

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

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2022 March 24,

2021 March 30,

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

Effective income tax rate 4.7 % 1.5 %

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

A reconciliation between the reported Provision 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

Income tax expense at statutory rate - 21.0 %

Reconciliation between the statutory tax rate and the effective tax rate is as follows:

Thirteen Week Period Ended

September 28,

Federal statutory tax rate 21.0 %

FICA tip tax credit ( 22.8 ) %

Stock-based compensation excess tax benefits ( 0.7 )

State income taxes, net of federal benefit 5.9 %

Stock-based compensation tax shortfalls 0.7 %

Other ( 0.1 ) %

Provision for income taxes - 4.7 %

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 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.

Stock options and restricted share awards with an anti-dilutive effect are not included in the Diluted net income per share calculation.

Effective income tax rate 4.7 %

NET (LOSS) INCOME PER SHARE

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

Diluted net (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

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

Stock options and restricted share awards with an anti-dilutive effect are not included in the Diluted net (loss) income per share calculation.

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

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2022 March 24,

2021 March 30,

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

Basic weighted average shares outstanding 43.9 45.9

4 unchanged sentences

Awards excluded due to anti-dilutive effect 2.8 0.0

Footnote Index

SEGMENT INFORMATION

5 unchanged sentences

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

Company sales for each segment include revenues generated by the operation of Company-owned restaurants including gift card redemptions and revenues from our virtual brands.

Franchise and other revenues for each operating segment include royalties, gift card breakage, delivery income, Maggiano’s banquet service charge 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.

Footnote Index

Company sales for each segment include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, Maggiano’s banquet service charge income, gift card breakage, delivery income, digital entertainment revenues, merchandise income and gift card discount costs from third-party gift card sales.

Franchise revenues for each operating segment include royalties, franchise advertising fees, franchise and development fees and gift card equalization.

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

There were no material transactions amongst our operating segments.

Our chief operating decision maker uses Operating income as the measure for assessing performance of our segments.

Our chief operating decision maker uses Operating (loss) income as the measure for assessing performance of our segments.

Operating income includes revenues and expenses directly attributable to segment-level results of operations.

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

Footnote Index

Restaurant expenses during the periods presented primarily included restaurant rent, property and equipment maintenance, utilities, delivery fees, supplies, credit card processing fees, property taxes, supervision expenses, 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 March 30, 2022

Maggiano’s Other Consolidated

Company sales $ 863.3 $ 97.3 $ — $ 960.6

Royalties 7.8 0.1 — 7.9

Franchise fees and other revenues 8.5 3.4 — 11.9

Franchise and other revenues 16.3 3.5 — 19.8

Total revenues 879.6 100.8 — 980.4

Food and beverage costs 245.6 24.7 — 270.3

Restaurant labor 295.0 34.1 — 329.1

Restaurant expenses 215.2 28.7 0.2 244.1

Depreciation and amortization 35.9 3.4 2.9 42.2

General and administrative 9.5 2.3 27.4 39.2

Other (gains) and charges 5.2 0.0 0.9 6.1

Total operating costs and expenses 806.4 93.2 31.4 931.0

Operating income (loss) 73.2 7.6 ( 31.4 ) 49.4

Interest expenses 1.2 0.1 9.8 11.1

Other income, net — — ( 0.4 ) ( 0.4 )

Income (loss) before income taxes $ 72.0 $ 7.5 $ ( 40.8 ) $ 38.7

Thirteen Week Period Ended March 24, 2021

Thirteen Week Period Ended September 28, 2022

Chili’s Maggiano’s Other Consolidated

Company sales $ 840.6 $ 105.5 $ — $ 946.1

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

Footnote Index

Thirty-Nine Week Period Ended March 30, 2022

Maggiano’s Other Consolidated

Company sales $ 2,428.5 $ 296.2 $ — $ 2,724.7

Royalties 25.4 0.3 — 25.7

Franchise fees and other revenues 21.5 10.7 — 32.2

Franchise and other revenues 46.9 11.0 — 57.9

Franchise revenues 9.3 0.1 — 9.4

Total revenues 849.9 105.6 — 955.5

13 unchanged sentences

Payments for property and equipment 42.7 1.9 2.1 46.7

Thirty-Nine Week Period Ended March 24, 2021

Chili’s Maggiano’s Other Consolidated

Footnote Index

Thirteen Week Period Ended September 29, 2021

Maggiano’s Other Consolidated

Company sales (2)

Royalties 21.9 0.1 — 22.0

Franchise fees and other revenues 17.0 2.1 — 19.1

Franchise and other revenues 38.9 2.2 — 41.1

$ 776.9 $ 88.7 $ — $ 865.6

Franchise revenues (2)

10.7 0.1 — 10.8

Total revenues 787.6 88.8 — 876.4

11 unchanged sentences

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

Footnote Index

(1) Chili’s segment information for fiscal 2022 includes the results of operations and the fair values of assets related to the 68 restaurants purchased from three former franchisees subsequent to the acquisition dates.

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

Refer to Note 14 - Fiscal 2022 Chili’s Restaurant Acquisitions for further details.

(2) Certain changes in presentation have been made to fiscal 2022 revenue amounts to enhance comparability to the fiscal 2023 presentation.

These reclassifications have no effect on Total revenues or Net income previously reported.

Refer to Note 1 - Basis of Presentation for further details.

FAIR VALUE MEASUREMENTS

7 unchanged sentences

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.

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

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

Intangibles, net included accumulated amortization associated with definite-lived intangible assets at March 30, 2022 and June 30, 2021, of $ 11.8 million and $ 9.6 million, respectively.

Intangibles, net included accumulated amortization associated with definite-lived intangible assets at September 28, 2022 and June 29, 2022, of $ 13.2 million and $ 12.6 million, respectively.

Footnote Index

Definite Lived Assets Impairment

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

During the thirteen and thirty-nine week periods ended March 30, 2022, no indicators of impairment were identified.

During the thirteen week periods ended September 28, 2022 and September 29, 2021, no indicators of impairment were identified.

Indefinite Lived Assets Impairment

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

During the thirteen and thirty-nine week periods ended March 30, 2022 and March 24, 2021, no indicators of impairment were identified.

During the thirteen week periods ended September 28, 2022 and September 29, 2021, 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.

4 unchanged sentences

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

During the thirteen and thirty-nine week periods ended March 30, 2022, management concluded that no triggering event occurred.

Footnote Index

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

Management’s judgments about the impact of the pandemic could change as additional developments occur.

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

During the thirteen week period ended September 28, 2022, management concluded that no triggering event occurred.

Chili’s Restaurant Acquisitions

In the first three quarters of fiscal 2022, we completed the acquisition of 66 Chili’s restaurants from three former franchisees.

In fiscal 2022, we completed the acquisition of 68 Chili’s restaurants from three former franchisees.

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

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

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

Refer to Note 14 - Fiscal 2022 Chili’s Restaurant Acquisitions for further details.

Other Financial Instruments

4 unchanged sentences

The fair values of the 3.875 % and 5.000 % notes are based on quoted market prices and are considered Level 2 fair value measurements.

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

March 30, 2022 June 30, 2021

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:

September 28, 2022 June 29, 2022

Carrying Amount Fair Value Carrying Amount Fair Value

3 unchanged sentences

348.4 338.3 348.2 329.0

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.

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

2022 March 24,

2021 March 30,

2022 March 24,

Operating lease cost $ 44.1 $ 41.9 $ 128.7 $ 125.6

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

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

Thirteen Week Periods Ended

September 28,

2022 September 29,

Operating lease expenses (amortization and interest) $ 45.1 $ 41.4

Variable lease cost 15.6 15.1

4 unchanged sentences

Total lease costs, net $ 66.2 $ 62.7

Footnote Index

Pre-Commencement Leases

As of the end of the third quarter of fiscal 2022, we have 18 pre-commencement leases for new Chili’s locations with undiscounted fixed payments of $ 25.5 million over the initial term.

As of the end of the first quarter of fiscal 2023, we have 11 pre-commencement leases for new Chili’s locations with undiscounted fixed payments of $ 15.8 million over the initial term.

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

1 unchanged sentence

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

Significant Changes in Leases during the Period

In the first quarter of fiscal 2022, as part of the Chili’s Mid-Atlantic Region Acquisition, we assumed 11 new real estate operating leases.

At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 23.1 million, Operating lease liabilities of $ 0.6 million, and Long-term operating lease liabilities, less current portion of $ 22.7 million.

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

In the second quarter of fiscal 2022, as part of the Chili’s Great Lakes Region Acquisition, we assumed 26 new real estate operating leases.

At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 46.6 million, Operating lease liabilities of $ 1.6 million, and Long-term operating lease liabilities, less current portion of $ 45.8 million.

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

In the third quarter of fiscal 2022, as part of the Chili’s Northwest Region Acquisition, we assumed 3 new real estate operating leases.

At March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 5.5 million, Operating lease liabilities of $ 0.1 million, and Long-term operating lease liabilities, less current portion of $ 5.4 million.

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

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

In the third quarter of fiscal 2022, we completed lease modifications related to 25 real estate leases that were previously classified as finance leases.

As a result of the modifications, the lease terms are for 20 years and the leases were reassessed as operating leases.

At March 30, 2022, the balances associated with these leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 48.3 million, Operating lease liabilities of $ 1.0 million, and Long-term operating lease liabilities, less current portion of $ 47.6 million.

Also, as a result of these modifications, the finance lease asset and lease liability balances decreased in the Consolidated Balance Sheets (Unaudited) including decreases to Buildings and leasehold improvements of $ 17.4 million, Other accrued liabilities of $ 2.8 million and Long-term debt and finance leases, less current installments of $ 15.0 million.

Restaurant Properties Sale Leaseback Transaction

In the first quarter of fiscal 2022, simultaneous with the Mid-Atlantic Region Acquisition, we completed sale leaseback transactions on 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 March 30, 2022, the balances associated with these new leases in the Consolidated Balance Sheets (Unaudited) include Operating lease assets of $ 17.9 million, Operating lease liabilities of $ 0.4 million, and Long-term operating lease liabilities, less current portion of $ 17.6 million.

Footnote Index

Long-term debt consists of the following:

September 28,

2022 June 29,

9 unchanged sentences

Long-term debt and finance leases, less current installments $ 1,020.8 $ 989.1

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

(2) Current installments of long-term debt consist of finance leases and are recorded within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited).

Refer to Note 10 - Accrued and Other Liabilities for further details.

Footnote Index

Revolving Credit Facility

On August 18, 2021, we revised our existing $ 1.0 billion revolving credit facility to an $ 800.0 million revolving credit facility to extend the maturity date and provide additional flexibility.

In the thirty-nine week period ended March 30, 2022, net borrowings of $ 93.0 million were drawn on the revolving credit facility.

As of March 30, 2022, $ 535.7 million of credit was available under the new revolving credit facility.

In the thirteen week period ended September 28, 2022, net borrowings of $ 35.0 million were drawn on our revolving credit facility.

As of September 28, 2022, $ 493.7 million of credit was available under the revolving credit facility.

The $ 800.0 million revolving credit facility matures on August 18, 2026 and bears interest of LIBOR plus an applicable margin of 1.500 % to 2.250 % and an undrawn commitment fee of 0.250 % to 0.350 %, both based on a function of our debt-to-cash-flow ratio.

As of March 30, 2022, our interest rate was 2.250 % consisting of LIBOR of 0.500 % plus the applicable margin of 1.750 %.

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

As of September 28, 2022, our interest rate was 4.875 % consisting of LIBOR of 3.125 % plus the applicable margin of 1.750 %.

Financial Covenants

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

As of March 30, 2022, we were in compliance with our covenants pursuant to the $800.0 million revolving credit facility and under the terms of the indentures governing our 3.875% notes and 5.000% notes .

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

We expect to remain in compliance with our covenants during the remainder of fiscal 2023.

Footnote Index

ACCRUED AND OTHER LIABILITIES

Other accrued liabilities consist of the following:

September 28,

2022 June 29,

Property tax $ 28.6 $ 23.3

Insurance 24.0 23.5

Current installments of long-term debt and finance leases 18.2 20.3

Property tax 19.0 22.4

Sales tax 17.4 14.4

2 unchanged sentences

$ 133.3 $ 116.1

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

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

Refer to Note 13 - Contingencies for additional information about our lease guarantees.

Other liabilities consist of the following:

September 28,

2022 June 29,

2 unchanged sentences

Unrecognized tax benefits 3.0 3.0

Deferred payroll taxes (1)

Other 5.3 5.2

$ 54.9 $ 54.3

(1) Deferred payroll taxes consisted of the employer portion of certain payroll related taxes that were deferred as allowed under the CARES Act.

The first installment, due on December 31, 2021, was paid during the second quarter of fiscal 2022.

The second installment, due on December 31, 2022, is classified within Accrued payroll in the Consolidated Balance Sheets (Unaudited).

Footnote Index

SHAREHOLDERS’ DEFICIT

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

Thirty-Nine Week Period Ended March 30, 2022

The changes in Total shareholders’ deficit during the thirteen week periods ended September 28, 2022 and September 29, 2021, respectively, were as follows:

Thirteen Week Period Ended September 28, 2022

Common Stock Additional

3 unchanged sentences

Balances at June 29, 2022 $ 7.0 $ 690.9 $ ( 148.4 ) $ ( 812.3 ) $ ( 5.3 ) $ ( 268.1 )

Net income — — 13.2 — — 13.2

Net loss — — ( 30.2 ) — — ( 30.2 )

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

3 unchanged sentences

Issuances of treasury stock — ( 7.8 ) — 7.8 — —

Retirement of common stock ( 1.0 ) — ( 306.1 ) 307.1 — —

Balances at September 28, 2022 $ 6.0 $ 688.0 $ ( 484.7 ) $ ( 499.6 ) $ ( 6.3 ) $ ( 296.6 )

Net income — — 27.6 — — 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 )

Net income — — 36.6 — — 36.6

Other comprehensive income — — — — 0.4 0.4

Dividends — — — — — —

Stock-based compensation — 5.3 — — — 5.3

Purchases of treasury stock — — — ( 26.1 ) — ( 26.1 )

Issuances of treasury stock — ( 1.2 ) — 1.2 — —

Balances at March 30, 2022 $ 7.0 $ 687.8 $ ( 188.7 ) $ ( 812.5 ) $ ( 4.8 ) $ ( 311.2 )

Footnote Index

Thirty-Nine Week Period Ended March 24, 2021

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

3 unchanged sentences

Balances 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 treasury stock — 1.2 — 4.3 — 5.5

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

Net income — — 33.9 — — 33.9

Other comprehensive income — — — — 0.3 0.3

Dividends — — 0.0 — — 0.0

Stock-based compensation — 4.4 — — — 4.4

Purchases of treasury stock — ( 0.1 ) — ( 0.1 ) — ( 0.2 )

Issuances of treasury stock — 5.7 — 9.4 — 15.1

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

Retirement of Common Stock

During the thirteen week period ended September 28, 2022, the Board of Directors approved the retirement of 10.0 million shares of Treasury stock for a weighted average price per share of $ 30.71 .

As of September 28, 2022, 16.3 million shares remain in treasury.

Share Repurchases

2 unchanged sentences

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 thirty-nine week period ended March 30, 2022, we repurchased 2.4 million shares of our common stock for $ 100.8 million, including 2.3 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 March 30, 2022, approximately $ 204.0 million was available under our share repurchase authorizations.

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

In the thirteen week period ended September 28, 2022, we repurchased 0.1 million shares of our common stock for $ 2.0 million, all of which were purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares.

As of September 28, 2022, approximately $ 204.0 million was available under our share repurchase authorizations.

Footnote Index

1 unchanged sentence

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

Thirty-Nine Week Periods Ended

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

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 thirty-nine week periods ended March 30, 2022 and March 24, 2021, dividends paid were solely related to the accrued dividends for restricted share awards that were granted prior to the suspension and vested in the period.

In the thirteen week periods ended September 28, 2022 and September 29, 2021, dividends paid were solely related to the accrued dividends for restricted share awards that were granted prior to the suspension and vested in the period.

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

1 unchanged sentence

Cash paid for income taxes and interest is as follows:

Thirty-Nine Week Periods Ended

2022 March 24,

Income taxes, net of (refunds)

$ ( 11.6 ) $ 2.8

Thirteen Week Periods Ended

September 28,

2022 September 29,

Income taxes, net

Interest, net of amounts capitalized 3.9 3.1

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

Thirty-Nine Week Periods Ended

2022 March 24,

Thirteen Week Periods Ended

September 28,

2022 September 29,

Operating lease additions (1)

3 unchanged sentences

Retirement of fully depreciated assets 10.3 7.9

(1) The thirty-nine week period ended March 30, 2022 primarily included operating lease additions associated with the 66 restaurants purchased from three former franchisees and the modifications of 25 leases.

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

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

(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 14 - Fiscal 2022 Chili’s Restaurant Acquisitions for further 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 30, 2022 and June 30, 2021, we have outstanding lease guarantees or are secondarily liable for an estimated $ 28.7 million and $ 29.2 million, respectively.

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

As of September 28, 2022 and June 29, 2022, we have outstanding lease guarantees or are secondarily liable for an estimated $ 24.6 million and $ 26.3 million, respectively.

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

These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2023 through fiscal 2032.

Footnote Index

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

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

As of March 30, 2022, we have contingent liabilities of $ 3.2 million for our estimated exposure of the lease defaults related to these lease guarantees.

In the event of default under a lease by a

Footnote Index

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

As of September 28, 2022, we have contingent liabilities of $ 2.0 million for our estimated exposure of the lease defaults related to these lease guarantees.

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

1 unchanged sentence

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

As of March 30, 2022, we had $ 5.8 million in undrawn standby letters of credit outstanding.

As of September 28, 2022, we had $ 5.8 million in undrawn standby letters of credit outstanding.

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

1 unchanged sentence

In fiscal 2018, we discovered malware at certain Chili’s restaurants that may have resulted in unauthorized access or acquisition of customer payment card data.

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

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

In connection with this event, the Company was also named as a defendant in a putative class action lawsuit in the United States District Court for the Middle District of Florida (the “Litigation”) relating to this incident.

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

Briefing of our appeal to the 11 th Circuit Court of Appeals seeking to overturn the district court’s class certification orders is complete.

Oral argument of the appeal is scheduled for June 8, 2022 in Jacksonville, Florida.

Oral argument of our appeal of the district court’s class certification order was held before the Eleventh Circuit Court of Appeals on June 8, 2022 in Jacksonville, Florida.

We await the court’s ruling.

In the interim, all matters at the district court have been stayed.

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

As such, as of March 30, 2022, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded a liability related to the Litigation.

As such, as of September 28, 2022, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded a liability related to the Litigation.

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

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.

FISCAL 2022 CHILI’S RESTAURANT ACQUISITIONS

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

The acquisition was funded with borrowings from our existing credit facility and proceeds from a sale leaseback transaction completed simultaneously with the acquisition.

• Great Lakes Region Acquisition - On October 31, 2021, we acquired 37 previously franchised Chili’s restaurants located in the Great Lakes and Northeast region of the United States for a total purchase price of $ 57.1 million, including post-closing adjustments, funded with borrowings from our existing credit facility.

Footnote Index

• Northwest Region Acquisition - On February 1, 2022, we acquired six previously franchised Chili’s restaurants and on May 5, 2022, we acquired two additional previously franchised Chili’s restaurants located in the Northwest region of the United States for a total purchase price of $ 2.0 million, including post-closing adjustments, funded with borrowings from our existing credit facility.

We accounted for each of these acquisitions as a business combination.

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

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

These inputs represent Level 3 fair value measurements as defined under GAAP.

The amounts recorded for the fair value of acquired assets and liabilities at the acquisition dates for the material acquisitions are as follows:

Mid-Atlantic Region Great Lakes Region

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

Current assets $ 1.4 $ 2.1

Property and equipment 46.2 43.6

Operating lease assets 23.6 47.8

Reacquired franchise rights (1)

Current liabilities ( 1.4 ) ( 1.4 )

Finance lease liabilities, less current portion ( 3.7 ) —

Operating lease liabilities, less current portion ( 23.1 ) ( 46.8 )

Net assets acquired (3)

$ 47.7 $ 57.1

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

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

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

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

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