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Item 2. Management’s Discussion and Analysis

2024-01-31 compared with 2023-11-01 · 232 added, 85 removed, 183 unchanged (63% of the section changed)

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations and our current operating environment.

For an understanding of the significant factors that influenced our performance during the thirteen week periods ended September 27, 2023 and September 28, 2022, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report.

For an understanding of the significant factors that influenced our performance during the thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report.

All amounts within the MD&A are presented in millions unless otherwise specified.

The Company is 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 of September 27, 2023, we owned, operated or franchised 1,651 restaurants, consisting of 1,181 Company-owned restaurants and 470 franchised restaurants, located in the United States, 29 other countries and two United States territories.

As of December 27, 2023, we owned, operated or franchised 1,658 restaurants, consisting of 1,184 Company-owned restaurants and 474 franchised restaurants, located in the United States, 29 other countries and two United States territories.

Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units.

External Impacts to Our Operating Environment

Our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs during fiscal 2023 and to a lesser extent during the first quarter of fiscal 2024.

Operations Strategy

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The operating results for our virtual brand, It’s Just Wings ® , are included in the results of our Chili’s brand, based on the restaurants that prepared and processed the food orders.

Maggiano’s - At Maggiano’s, we are focused making our guests feel special.

Maggiano’s - At Maggiano’s, we are focused on making our guests feel special.

This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special occasions.

While our dining rooms support the majority of our business, we have focused on increasing our carry-out and delivery business in recent years, including through partnerships with delivery service providers that have made our restaurants more accessible to guests and helped create an additional significant revenue channel.

Our restaurants also have banquet rooms to host large party events and we have a begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Franchise Partnerships - Our franchisees continue to grow our brands around the world, opening 3 restaurants for the thirteen week period ended September 27, 2023.

Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Franchise Partnerships - Our franchisees continue to grow our brands around the world, opening 14 restaurants and two new development agreements for the twenty-six week period ended December 27, 2023.

We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners.

Company Development - The following table details the number of restaurant openings during the thirteen week periods ended September 27, 2023 and September 28, 2022, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end:

Openings During the Full Year Projected Openings

Thirteen Week Periods Ended Total Open Restaurants at

September 27, 2023 September 28, 2022 Fiscal 2024 September 27, 2023 September 28, 2022

Company Development - The following table details the number of restaurant openings during the thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end:

Openings During the Openings During the Full Year Projected Openings

Thirteen Week Periods Ended Twenty-Six Week Periods Ended Total Open Restaurants at

2023 December 28,

2022 December 27,

2023 December 28,

2022 Fiscal 2024 December 27,

2023 December 28,

Company-owned restaurants

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Total 16 10 19 13 29-35 1,658 1,648

At September 27, 2023, we own property for 49 of the 1,181 Company-owned restaurants and one closed restaurant and one future restaurant.

At December 27, 2023, we own property for 50 of the 1,184 Company-owned restaurants and one closed restaurant.

The net book values associated with these restaurants included land of $42.5 million and buildings of $11.7 million.

Thirteen Week Period Ended September 27, 2023 compared to September 28, 2022

Thirteen and Twenty-Six Week Periods Ended December 27, 2023 compared to December 28, 2022

Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Loss) (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends:

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Chili’s Maggiano’s Total Revenues

Thirteen Week Period Ended September 28, 2022 $ 849.9 $ 105.6 $ 955.5

Thirteen Week Period Ended December 28, 2022 $ 878.7 $ 140.3 $ 1,019.0

Comparable restaurant sales 43.5 9.0 52.5

Restaurant acquisitions

Restaurant openings 12.3 — 12.3

Gift card discounts 0.1 0.1 0.2

Maggiano's banquet income — 0.1 0.1

Delivery service fee income (0.1) 0.2 0.1

Gift card breakage — (0.1) (0.1)

Digital entertainment revenues (0.3) — (0.3)

Restaurant closures

(7.9) (2.6) (10.5)

Company sales 47.6 6.7 54.3

Franchise revenues (1)

0.9 (0.1) 0.8

Thirteen Week Period Ended December 27, 2023 $ 927.2 $ 146.9 $ 1,074.1

Total Revenues

Chili’s Maggiano’s Total Revenues

Twenty-Six Week Period Ended December 28, 2022 $ 1,728.6 $ 245.9 $ 1,974.5

Comparable restaurant sales 94.2 11.6 105.8

Restaurant openings 25.4 — 25.4

Restaurant acquisitions

Maggiano's banquet income — 0.1 0.1

Gift card discounts — 0.1 0.1

Gift card breakage 0.2 (0.1) 0.1

Digital entertainment revenues (0.2) — (0.2)

Delivery service fee income (0.4) 0.2 (0.2)

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Franchise revenues (1)

Thirteen Week Period Ended September 27, 2023 $ 908.1 $ 104.4 $ 1,012.5

(1) Franchise revenues increased in the thirteen week period ended September 27, 2023 compared to September 28, 2022 primarily because of higher franchise advertising fees.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $202.8 million and $2.4 million respectively for the thirteen week period ended September 27, 2023 compared to $203.3 million and $2.4 million respectively in sales for the thirteen week period ended September 28, 2022.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen week period ended September 27, 2023 compared to September 28, 2022:

Percentage Change in the Thirteen Week Period Ended September 27, 2023 versus September 28, 2022

Twenty-Six Week Period Ended December 27, 2023 $ 1,835.3 $ 251.3 $ 2,086.6

(1) Franchise revenues increased in the thirteen and twenty-six week periods ended December 27, 2023 compared to December 28, 2022 primarily because of higher franchise advertising fees.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.9 million and $2.8 million and $426.2 million and $5.6 million, respectively, for the thirteen and twenty-six week periods ended December 27, 2023 compared to $213.4 million and $2.6 million and $419.0 million and $5.0 million, respectively, in for the thirteen and twenty-six week periods ended December 28, 2022.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and twenty-six week periods ended December 27, 2023 compared to December 28, 2022:

Percentage Change in the Thirteen Week Period Ended December 27, 2023 versus December 28, 2022

Comparable Restaurant Sales (1)

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System-wide (6)

Percentage Change in the Twenty-Six Week Period Ended December 27, 2023 versus December 28, 2022

Comparable Restaurant Sales (1)

Price Impact Mix-Shift Impact (2)

Traffic Impact Restaurant Capacity (3)

Company-owned 5.5 % 8.0 % 1.0 % (3.5) % (0.3) %

Chili’s 5.5 % 7.7 % 1.1 % (3.3) % (0.1) %

Maggiano’s 5.0 % 10.0 % (0.1) % (4.9) % (2.9) %

Franchise (4)

International 0.0 %

Chili’s domestic (5)

System-wide (6)

(1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 full months.

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(3) Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year.

(4) Chili’s and Maggiano’s franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Loss) (Unaudited);

(4) Franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Loss) (Unaudited);

however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable.

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Costs and Expenses

Thirteen Week Period Ended September 27, 2023 compared to September 28, 2022

Thirteen Week Period Ended December 27, 2023 compared to December 28, 2022

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

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27, 2023 September 28, 2022

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

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As a percentage of Company sales:

• Food and beverage costs were favorable 4.9%, due to 2.5% from increased menu pricing, 1.4% of favorable menu item mix, and 1.0% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverages costs.

• Restaurant labor was favorable 0.1%, due to 1.8% of sales leverage and 0.2% of lower manager training, partially offset by 1.2% of higher hourly labor expenses due to increased staffing levels and wage rates, 0.5% of higher manager salaries, and 0.2% of higher manager bonus.

• Restaurant expenses were unfavorable 0.6%, due to 2.0% of higher advertising, 0.5% of higher repairs and maintenance, 0.4% of higher workers’ compensation and general liability insurance, and 0.2% of higher other restaurant expenses, partially offset by 1.3% of sales leverage and 1.2% of lower delivery fees and to-go supplies.

Depreciation and amortization remained unchanged as follows:

• Food and beverage costs were favorable 3.0%, due to 1.9% from increased menu pricing, 0.8% of favorable commodity costs driven primarily by lower poultry and produce costs, partially offset by higher beverage costs, and 0.3% of favorable menu item mix.

• Restaurant labor was unfavorable 0.4%, due to 1.4% of higher hourly labor expenses driven by increased wage rates and staffing levels, and 0.6% of higher manager salaries, partially offset by 1.6% of sales leverage.

• Restaurant expenses were unfavorable 1.1%, due to 2.2% of higher advertising, 0.5% of higher repairs and maintenance, 0.2% of higher rent, and 0.2% of higher other restaurant expenses, partially offset by 1.0% of sales leverage and 1.0% of lower delivery fees and to-go supplies.

Depreciation and amortization decreased $0.5 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended September 28, 2022 $ 41.9

Thirteen Week Period Ended December 28, 2022 $ 41.8

Additions for new and existing restaurant assets 6.3

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Retirements and fully depreciated restaurant assets (5.3)

Thirteen Week Period Ended September 27, 2023 $ 41.9

General and administrative expen ses increased $2.9 million as follows:

Thirteen Week Period Ended December 27, 2023 $ 41.3

General and administrative expenses increased $7.6 million as follows:

General and Administrative

Thirteen Week Period Ended September 28, 2022 $ 39.5

Performance-based compensation 1.3

Thirteen Week Period Ended December 28, 2022 $ 35.6

Stock-based compensation (1)

Defined contribution plan employer expenses and other benefits 0.3

Thirteen Week Period Ended September 27, 2023 $ 42.4

Performance-based compensation 2.0

Corporate technology initiatives 1.0

Payroll expenses 0.4

Recruiting (0.4)

Thirteen Week Period Ended December 27, 2023 $ 43.2

(1) Stock-based compensation increased compared to the prior year primarily due to the impact of reversing expense associated with a performance share award in the second quarter of fiscal 2023, when we determined the performance target was not achievable.

Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Thirteen Week Periods Ended

September 27,

2023 September 28,

2023 December 28,

Enterprise system implementation costs $ 2.1 $ 1.0

Litigation & claims, net 1.0 0.3

Restaurant closure asset write-offs and charges 0.2 3.3

Remodel-related asset write-offs 0.1 0.2

Loss from natural disasters, net of (insurance recoveries) (0.6) 1.1

Gain on the disposition of restaurants (0.4) —

Other 0.9 2.6

Interest expenses increased $2.8 million due to higher interest rates on the 8.250% notes, offset slightly by lower long-term debt outstanding.

Twenty-Six Week Period Ended December 27, 2023 compared to December 28, 2022

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

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 531.9 25.8 % $ 578.9 29.6 % $ 47.0 3.8 %

Restaurant labor 704.2 34.1 % 665.2 34.0 % (39.0) (0.1) %

Restaurant expenses 585.5 28.3 % 537.2 27.5 % (48.3) (0.8) %

Depreciation and amortization 83.2 83.7 0.5

General and administrative 85.6 75.1 (10.5)

Other (gains) and charges 9.6 13.5 3.9

Interest expenses 33.7 26.2 (7.5)

Other income, net (0.1) (0.7) (0.6)

As a percentage of Company sales:

• Food and beverage costs were favorable 3.8%, due to 2.2% from increased menu pricing, 0.8% of favorable menu item mix and 0.8% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs.

• Restaurant labor was unfavorable 0.1%, due to 1.3% of higher hourly labor expenses driven by increased wage rates and staffing levels, and 0.6% of higher manager salaries partially offset by 1.7% of sales leverage and 0.1% of lower other labor expenses.

• Restaurant expenses were unfavorable 0.8%, due to 2.1% of higher advertising, 0.4% of higher repairs and maintenance expenses, 0.2% of higher higher workers’ compensation and general liability insurance, 0.4% of higher other restaurant expenses, partially offset by 1.2% of sales leverage and 1.1% of lower delivery fees and to-go supplies.

Depreciation and amortization decreased $0.5 million as follows:

Depreciation and Amortization

Twenty-Six Week Period Ended December 28, 2022 $ 83.7

Additions for existing and new restaurant assets 12.8

Corporate assets 1.4

Finance leases (4.2)

Retirements and fully depreciated restaurant assets (10.4)

Twenty-Six Week Period Ended December 27, 2023 $ 83.2

General and administrative expenses increased $10.5 million as follows:

General and Administrative

Twenty-Six Week Period Ended December 28, 2022 $ 75.1

Stock-based compensation (1)

Performance-based compensation 3.3

Corporate technology initiatives 1.2

Defined contribution plan employer expenses and other benefits 0.6

Travel and entertainment expenses 0.5

Recruiting (0.7)

Twenty-Six Week Period Ended December 27, 2023 $ 85.6

Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Twenty-Six Week Periods Ended

2023 December 28,

Enterprise system implementation costs $ 4.1 $ 2.0

Litigation & claims, net 3.2 0.8

Restaurant closure asset write-offs and charges 0.8 4.8

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Remodel-related asset write-offs 0.3 1.0

Loss from natural disasters, net of (insurance recoveries) (0.4) 0.9

Gain on the disposition of restaurants (0.4) —

Other 1.5 4.0

Interest expenses increased $4.7 million due to higher interest rates on the 8.250% notes and revolving credit facility slightly offset by lower long-term debt outstanding.

Thirteen Week Periods Ended

September 27,

2023 September 28,

Interest expenses increased $7.5 million due to higher interest rates on the 8.250% notes, slightly offset by lower long-term debt outstanding.

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2023 December 28,

2022 December 27,

2023 December 28,

Effective income tax rate 8.1 % (3.0) % 7.0 % 50.0 %

The federal statutory tax rate was 21.0% for the thirteen week periods ended September 27, 2023 and September 28, 2022.

The effective income tax rate in the thirteen week period ended September 27, 2023 decreased compared to the thirteen week period ended September 28, 2022.

The decrease is primarily due to a less favorable impact from the FICA tip tax credit against higher Income before income taxes.

The federal statutory tax rate was 21.0% for the thirteen and twenty-six week periods ended December 27, 2023 and December 28, 2022.

The change in the effective income tax rate in the thirteen and twenty-six week periods ended December 27, 2023 to the thirteen and twenty-six week periods ended December 28, 2022 is primarily due to a less favorable impact from the FICA tip tax credit against higher Income before income taxes.

Segment Results

Chili’s Segment

Thirteen Week Period Ended September 27, 2023 compared to September 28, 2022

Thirteen Week Period Ended December 27, 2023 compared to December 28, 2022

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage

September 27,

2023 September 28,

2023 December 28,

Company sales $ 916.9 $ 869.3 $ 47.6 5.5 %

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Total revenues $ 927.2 $ 878.7 $ 48.5 5.5 %

Chili’s Total revenues increased by 6.8% primarily due to menu price increases and favorable menu item mix, partially offset by lower traffic.

Chili’s Total revenues increased by 5.5% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by unfavorable menu item mix and lower traffic.

Refer to “Revenues” section above for further details about Chili’s revenues changes.

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Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27, 2023 September 28, 2022

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

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As a percentage of Company sales:

• Chili’s Food and beverage costs were favorable 5.0%, due to 2.7% from increased menu pricing, 1.3% of favorable menu item mix, and 1.0% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverages costs.

• Chili’s Restaurant labor was favorable 0.4%, due to 2.0% of sales leverage and 0.2% of lower manager training, partially offset by 1.3% of higher hourly labor driven by both increased staffing levels and wage rates and 0.5% of increased manager salary.

• Chili’s Restaurant expenses were unfavorable 0.6%, due to 2.2% of higher advertising, 0.5% of higher repairs and maintenance, 0.4% of higher workers’ compensation and general liability insurance, 0.3% of higher rent, and 0.1% of higher other restaurant expenses, partially offset by 1.5% of sales leverage and 1.4% lower delivery fees and to-go supplies.

Chili’s Depreciation and amortization increased $0.2 million as follows:

• Chili’s Food and beverage costs were favorable 3.1%, due to 2.0% from increased menu pricing, 0.9% of favorable commodity costs driven primarily by lower poultry and produce costs, partially offset by higher beverage costs, and 0.2% of favorable menu item mix.

• Chili’s Restaurant labor was unfavorable 0.5%, due to 1.5% of higher hourly labor driven by increased wage rates and staffing levels, and 0.7% of increased manager salary, partially offset by 1.7% of sales leverage.

• Chili’s Restaurant expenses were unfavorable 1.3%, due to 2.5% of higher advertising, 0.5% of higher repairs and maintenance, 0.5% of higher other restaurant expenses, partially offset by 1.1% of sales leverage and 1.1% lower delivery fees and to-go supplies.

Chili’s Depreciation and amortization decreased $0.5 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended September 28, 2022 $ 36.0

Thirteen Week Period Ended December 28, 2022 $ 36.0

Additions for new and existing restaurant assets 5.6

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Retirements and fully depreciated restaurant assets (3.7)

Thirteen Week Period Ended September 27, 2023 $ 36.2

Thirteen Week Period Ended December 27, 2023 $ 35.5

Chili’s General and administrative increased $1.7 million as follows:

General and Administrative

Thirteen Week Period Ended September 28, 2022 $ 9.5

Thirteen Week Period Ended December 28, 2022 $ 8.5

Performance-based compensation 0.8

Defined contribution plan employer expenses and other benefits 0.5

Stock-based compensation 0.5

Thirteen Week Period Ended December 27, 2023 $ 10.2

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Thirteen Week Periods Ended

2023 December 28,

Litigation & claims, net $ 0.8 $ 0.1

Restaurant closure asset write-offs and charges 0.2 3.1

Remodel-related asset write-offs — 0.2

Loss (gain) on disposition of restaurants (0.4) —

Loss from natural disasters, net of (insurance recoveries) (0.6) 1.1

Other 0.9 1.2

Twenty-Six Week Period Ended December 27, 2023 compared to December 28, 2022

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage

2023 December 28,

Company sales $ 1,814.7 $ 1,709.9 $ 104.8 6.1 %

Franchise revenues 20.6 18.7 1.9 10.2 %

Total revenues $ 1,835.3 $ 1,728.6 $ 106.7 6.2 %

Chili’s Total revenues increased 6.2% primarily due to favorable comparable restaurant sales driven by menu price increases and favorable menu item mix, partially offset by lower traffic.

Refer to “Revenues” section above for further details about Chili’s revenues changes.

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

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 472.3 26.0 % $ 514.6 30.1 % $ 42.3 4.1 %

Restaurant labor 624.0 34.4 % 586.7 34.3 % (37.3) (0.1) %

Restaurant expenses 516.8 28.5 % 471.0 27.6 % (45.8) (0.9) %

Depreciation and amortization 71.7 72.0 0.3

General and administrative 20.2 18.0 (2.2)

Other (gains) and charges 4.6 8.7 4.1

As a percentage of Company sales:

• Chili’s Food and beverage costs were favorable 4.1%, due to 2.4% from increased menu pricing, 0.9% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs, and 0.8% of favorable menu item mix.

• Chili’s Restaurant labor was unfavorable 0.1%, due to 1.3% of higher hourly labor expenses driven by increased wage rates and staffing levels, 0.6% of increased manager salaries, and 0.1% of higher other labor expenses, partially offset by 1.9% of sales leverage.

• Chili’s Restaurant expenses were unfavorable 0.9%, due to 2.4% of higher advertising, 0.5% of higher repairs and maintenance expenses, and 0.3% of higher other restaurant expenses, partially offset by 1.2% of lower delivery fees and to-go supplies and 1.1% of sales leverage.

Chili’s Depreciation and amortization decreased $0.3 million as follows:

Depreciation and Amortization

Twenty-Six Week Period Ended December 28, 2022 $ 72.0

Additions for existing and new restaurant assets 11.4

Finance leases (4.2)

Retirements and fully depreciated restaurant assets (7.6)

Twenty-Six Week Period Ended December 27, 2023 $ 71.7

Chili’s General and administrative increased $2.2 million as follows:

General and Administrative

Twenty-Six Week Period Ended December 28, 2022 $ 18.0

Performance-based compensation 1.0

Defined contribution plan employer expenses and other benefits 1.0

Stock-based compensation 0.5

Recruiting (0.6)

Thirteen Week Period Ended September 27, 2023 $ 10.0

Twenty-Six Week Period Ended December 27, 2023 $ 20.2

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Thirteen Week Periods Ended

September 27,

2023 September 28,

Twenty-Six Week Periods Ended

2023 December 28,

Litigation & claims, net $ 3.0 $ 0.4

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Remodel-related asset write-offs — 1.0

Loss (gain) on disposition of restaurants (0.4) —

Loss from natural disasters, net of (insurance recoveries) (0.4) 0.9

Other 1.6 2.2

Maggiano’s Segment

Thirteen Week Period Ended September 27, 2023 compared to September 28, 2022

Thirteen Week Period Ended December 27, 2023 compared to December 28, 2022

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage

September 27,

2023 September 28,

2023 December 28,

Company sales $ 146.8 $ 140.1 $ 6.7 4.8 %

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Total revenues $ 146.9 $ 140.3 $ 6.6 4.7 %

Maggiano’s Total revenues decreased 1.1% primarily due to restaurant closures in fiscal 2023, offset slightly by favorable comparable restaurant sales due to increased menu pricing, partially offset by lower traffic and unfavorable menu item mix.

Maggiano’s Total revenues increased 4.7% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic.

Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

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Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27, 2023 September 28, 2022

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

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As a percentage of Company sales:

• Maggiano’s Food and beverage costs were favorable 2.4%, due to 1.9% from increased menu pricing and 1.1% of favorable commodity costs driven primarily by lower poultry and dairy costs, partially offset by higher bread and beverages costs, and 0.6% of unfavorable menu item mix.

• Maggiano’s Restaurant labor was unfavorable 1.3%, due to 0.4% of sales deleverage, 0.4% of higher hourly labor costs, 0.3% of higher manager bonus, and 0.2% of higher manager salaries.

• Maggiano’s Restaurant expenses were unfavorable 0.8%, due to 0.7% higher supervision, 0.6% of higher repairs and maintenance, 0.3% of sales deleverage, 0.3% of higher workers’ compensation and general liability insurance, partially offset by 0.3% of lower delivery fees and to-go supplies, 0.3% of lower utilities, and 0.5% of lower other restaurant expenses.

• Maggiano’s Food and beverage costs were favorable 2.4%, due to 1.8% from increased menu pricing and 0.6% of favorable commodity costs driven primarily by lower poultry and seafood costs.

• Maggiano’s Restaurant labor was favorable 0.9%, due to 1.2% of sales leverage and 0.2% of lower other labor expenses, partially offset by 0.5% of higher hourly labor costs.

• Maggiano’s Restaurant expenses were unfavorable 0.3%, due to 0.5% of higher rent, 0.4% higher supervision, 0.4% of higher repairs and maintenance, and 0.3% of higher supplies, partially offset by 0.7% of sales leverage, 0.5% of lower delivery fees and to-go supplies, and 0.1% of lower other restaurant expenses.

Twenty-Six Week Period Ended December 27, 2023 compared to December 28, 2022

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage

2023 December 28,

Company sales $ 251.0 $ 245.6 $ 5.4 2.2 %

Franchise revenues 0.3 0.3 — — %

Total revenues $ 251.3 $ 245.9 $ 5.4 2.2 %

Maggiano’s Total revenues increased 2.2% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic.

Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

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

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 59.6 23.7 % $ 64.3 26.2 % $ 4.7 2.5 %

Restaurant labor 80.2 32.0 % 78.5 32.0 % (1.7) — %

Restaurant expenses 68.4 27.2 % 65.9 26.8 % (2.5) (0.4) %

Depreciation and amortization 6.4 6.5 0.1

General and administrative 4.5 4.0 (0.5)

Other (gains) and charges 0.4 0.8 0.4

As a percentage of Company sales:

• Maggiano’s Food and beverage costs were favorable 2.5%, due to 1.7% from increased menu pricing and 0.8% of favorable commodity costs driven by lower poultry costs.

• Maggiano’s Restaurant labor was flat 0.0%, due to 0.6% of sales leverage, partially offset by 0.5% of higher hourly labor costs and 0.1% of higher other labor costs.

• Maggiano’s Restaurant expenses were unfavorable 0.4%, due to 0.5% of higher repairs and maintenance, 0.4% of higher supervision, and 0.4% of higher other restaurant expenses, partially offset by 0.5% of lower delivery fees and to-go supplies and 0.4% of sales leverage.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27,

2023 September 28,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2023 December 28,

Net cash provided by operating activities $ 150.3 $ 68.0 $ 82.3

Net cash provided by operating activities increased due to an increase in operating income and the timing of operational receipts and payments, partially offset by an increase in payments of performance-based compensation in the current year.

Net cash provided by operating activities increased due to an increase in operating income, the timing of accrued interest payments on our 8.25% notes and the timing of other operational receipts and payments, partially offset by increases in payments of performance-based compensation and income taxes in the current year.

Cash Flows from Investing Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27,

2023 September 28,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2023 December 28,

Net cash used in investing activities $ (86.8) $ (93.2) $ 6.4

Net cash used in investing activities was flat compared to the prior year.

Increased Chili’s capital maintenance and spend on Maggiano’s remodels were offset by decreased spend on Chili’s remodels and new restaurant construction.

Net cash used in investing activities decreased compared to the prior year.

Decreased spend on Chili’s remodels and new restaurant construction were partially offset by increased Chili’s capital maintenance and spend on Maggiano’s remodels.

Cash Flows from Financing Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 27,

2023 September 28,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2023 December 28,

Net cash (used in) provided by financing activities $ (55.9) $ 26.4 $ (82.3)

Net cash (used in) provided by financing activities increased primarily due to an increase in share repurchases in fiscal 2024 of $22.7 million and a decrease of $21.0 million in net borrowing activity on the revolving credit facility in fiscal 2024 compared to fiscal 2023.

Net borrowings of $14.0 million were drawn during the thirteen week period ended September 27, 2023 on the revolving credit facility.

As of September 27, 2023, $724.7 million of credit was available under the revolving credit facility.

Net cash (used in) provided by financing activities increased primarily due to $25.0 million of net repayment activity in fiscal 2024 compared to $40.0 million of net borrowing activity in fiscal 2023 on the revolving credit facility and an increase in share repurchases in fiscal 2024 of $23.0 million.

Net repayments of $25.0 million were made during the twenty-six week period ended December 27, 2023 on the revolving credit facility.

As of December 27, 2023, $763.7 million of credit was available under the revolving credit facility.

The $900.0 million revolving credit facility matures on August 18, 2026 and bears interest of SOFR plus an applicable margin of 1.50% to 2.25% and an undrawn commitment fee of 0.25% to 0.35%, both based on a function of our debt-to-cash-flow ratio.

As of September 27, 2023, our interest rate was 7.17% consisting of SOFR of 5.32% plus the applicable margin and spread adjustment of 1.85%.

As of September 27, 2023, we were in compliance with our covenants pursuant to the $900.0 million revolving credit facility and under the terms of the indentures governing our 5.000% and 8.250% notes.

As of December 27, 2023, our interest rate was 7.21% consisting of SOFR of 5.36% plus the applicable margin and spread adjustment of 1.85%.

As of December 27, 2023, we were in compliance with our covenants pursuant to the $900.0 million revolving credit facility and under the terms of the indentures governing our 5.000% and 8.250% notes.

We expect to remain in compliance with our covenants during the remainder of fiscal 2024.

5 unchanged sentences

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.

In the thirteen week period ended September 27, 2023, we repurchased 0.8 million shares of our common stock for $24.7 million, including 0.7 million shares purchased for $21.0 million 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.

In the twenty-six week period ended December 27, 2023, we repurchased 0.8 million shares of our common stock for $25.1 million, including 0.7 million shares purchased for $21.0 million 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.

These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan.

As of September 27, 2023, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program.

As of December 27, 2023, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program.

Cash Flow Outlook

11 unchanged sentences

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 2. Management’s Discussion and Analysis