What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-30 compared with 2024-01-31 · 138 added, 135 removed, 280 unchanged (49% of the section changed)

1 unchanged sentence

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 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.

For an understanding of the significant factors that influenced our performance during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, 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 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.

As of March 27, 2024, we owned, operated or franchised 1,618 restaurants, consisting of 1,176 Company-owned restaurants and 442 franchised restaurants, located in the United States, 27 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 and second quarters of fiscal 2024.

Operations Strategy

8 unchanged sentences

We have a flexible platform of value offerings at both lunch and dinner that we believe is compelling to our guests.

Our “3 for Me” platform, a flexible value bundle provides our guests an unbeatable everyday value, while allowing us to be more flexible in terms of pricing, in light of the inflationary challenges.

Our “3 for Me” platform, a flexible value bundle, provides our guests an unbeatable everyday value.

Additionally, we have continued our Margarita of the Month promotion that features a premium-liquor margarita every month at an every-day value price.

6 unchanged sentences

Third-party delivery orders for our restaurants are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests.

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.

The operating results for our virtual brand, It’s Just Wings ® , are included in the results of our Chili’s brand.

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.

We have focused on increasing our carry-out and delivery business in recent years by creating 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 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.

Franchise Partnerships - Our franchisees continue to grow our brands around the world, with 16 new restaurant openings and two new development agreements during the thirty-nine week period ended March 27, 2024.

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 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:

Company Development - The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, 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,

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended Total Open Restaurants at

2024 March 29,

2023 March 27,

2024 March 29,

2023 Fiscal 2024 March 27,

2024 March 29,

Company-owned restaurants

13 unchanged sentences

Total 4 10 23 23 28-34 1,618 1,654

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

At March 27, 2024, we own property for 50 of the 1,176 Company-owned restaurants and one closed restaurant.

The net book values associated with these restaurants included land of $42.4 million and buildings of $12.8 million.

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:

• Company sales 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, digital entertainment revenues, merchandise income and are net of gift card discounts from third-party gift card sales.

Thirteen and Thirty-Nine Week Periods Ended March 27, 2024 compared to March 29, 2023

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

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

• Franchise revenues include royalties, franchise advertising fees, franchise and development fees and gift card equalization.

2 unchanged sentences

Chili’s Maggiano’s Total Revenues

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

Thirteen Week Period Ended March 29, 2023 $ 963.4 $ 119.8 $ 1,083.2

Comparable restaurant sales 33.4 1.9 35.3

2 unchanged sentences

Maggiano's banquet income — 0.2 0.2

Merchandise Income

— (0.1) (0.1)

Delivery service fee income (0.1) 0.1 —

5 unchanged sentences

Franchise revenues (1)

0.9 (0.1) 0.8

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

Thirteen Week Period Ended March 27, 2024 $ 999.6 $ 120.7 $ 1,120.3

Total Revenues

Chili’s Maggiano’s Total Revenues

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

Thirty-Nine Week Period Ended March 29, 2023 $ 2,692.0 $ 365.7 $ 3,057.7

Comparable restaurant sales 127.6 13.5 141.1

4 unchanged sentences

Gift card breakage 0.3 (0.1) 0.2

Merchandise income — (0.1) (0.1)

Digital entertainment revenues (0.6) — (0.6)

3 unchanged sentences

Franchise revenues (1)

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

Thirty-Nine Week Period Ended March 27, 2024 $ 2,834.9 $ 372.0 $ 3,206.9

(1) Franchise revenues increased in the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023 primarily due to higher franchise advertising fees.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.2 million and $2.9 million and $644.3 million and $8.5 million, respectively, for the thirteen and thirty-nine week periods ended March 27, 2024 compared to $213.6 million and $2.5 million and $639.9 million and $7.5 million, respectively, in for the thirteen and thirty-nine week periods ended March 29, 2023.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023:

Percentage Change in the Thirteen Week Period Ended March 27, 2024 versus March 29, 2023

Comparable Restaurant Sales (1)

8 unchanged sentences

System-wide (6)

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

Percentage Change in the Thirty-Nine Week Period Ended March 27, 2024 versus March 29, 2023

Comparable Restaurant Sales (1)

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

(4) 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 (Unaudited);

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

3 unchanged sentences

Costs and Expenses

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

Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023

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

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

March 27, 2024 March 29, 2023

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

8 unchanged sentences

As a percentage of Company sales:

• 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:

• Food and beverage costs were favorable 1.7% due to 1.6% from increased menu pricing and 0.1% of favorable menu item mix.

• Restaurant labor was favorable 0.2% due to 1.0% of sales leverage, partially offset by 0.4% of higher hourly labor expenses driven by wage rates, 0.3% of higher manager salaries, and 0.1% of higher other labor expenses.

• Restaurant expenses were unfavorable 1.2% due to 1.5% of higher advertising, 0.4% of higher repairs and maintenance, and 0.3% of higher other restaurant expenses, partially offset by 0.5% of sales leverage and 0.5% of lower delivery fees and to-go supplies.

Depreciation and amortization increased $0.1 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended December 28, 2022 $ 41.8

Thirteen Week Period Ended March 29, 2023 $ 42.5

Additions for new and existing restaurant assets 6.8

2 unchanged sentences

Retirements and fully depreciated restaurant assets (5.5)

Thirteen Week Period Ended December 27, 2023 $ 41.3

Thirteen Week Period Ended March 27, 2024 $ 42.6

General and administrative expenses increased $5.5 million as follows:

General and Administrative

Thirteen Week Period Ended December 28, 2022 $ 35.6

Stock-based compensation (1)

Thirteen Week Period Ended March 29, 2023 $ 40.6

Performance-based compensation (1)

Corporate technology initiatives 1.0

Stock-based compensation (2)

Payroll expenses 0.7

Recruiting (0.5)

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.

Professional fees (1.0)

Thirteen Week Period Ended March 27, 2024 $ 46.1

(1) Performance-based compensation increased due to higher expected performance compared to target in the current year.

(2) Stock-based compensation increased primarily due to an increase in expense related to the fiscal 2023 performance share grant, which is expected to pay out above target due to better expected performance compared to plan.

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,

2024 March 29,

Restaurant closure asset write-offs and charges $ 4.0 $ 1.8

Enterprise system implementation costs 3.3 1.3

Litigation & claims, net 2.0 0.4

Restaurant closure asset write-offs and charges 0.2 3.3

Severance 0.4 1.0

Lease contingencies 0.3 2.0

Remodel-related asset write-offs 0.1 0.1

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

Gain on the disposition of restaurants (0.4) —

Other (0.2) (0.3)

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

Interest expenses increased $2.0 million due to higher interest rates on the 8.250% notes, offset by lower average revolver balance during the current year.

Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

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

8 unchanged sentences

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:

• Food and beverage costs were favorable 3.1% due to 2.0% from increased menu pricing, 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs, and 0.5% of favorable menu item mix.

• Restaurant labor was flat due to 1.4% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels, and 0.4% of higher manager salaries.

• Restaurant expenses were unfavorable 1.0% due to 1.9% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 0.9% of sales leverage and 0.9% of lower delivery fees and to-go supplies.

Depreciation and amortization increased $0.4 million as follows:

Depreciation and Amortization

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

Thirty-Nine Week Period Ended March 29, 2023 $ 126.2

Additions for existing and new restaurant assets 19.6

2 unchanged sentences

Retirements and fully depreciated restaurant assets (15.9)

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

Thirty-Nine Week Period Ended March 27, 2024 $ 125.8

General and administrative expenses increased $16.0 million as follows:

General and Administrative

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

Stock-based compensation (1)

Thirty-Nine Week Period Ended March 29, 2023 $ 115.7

Performance-based compensation (1)

Stock-based compensation (2)

Corporate technology initiatives 1.5

Defined contribution plan employer expenses and other benefits 0.6

Travel and entertainment expenses 0.5

Payroll expenses 0.9

Professional fees (1.1)

Recruiting (1.2)

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

Thirty-Nine Week Period Ended March 27, 2024 $ 131.7

(1) Performance-based compensation increased due to higher expected performance compared to target in the current year.

(2) Stock-based compensation increased primarily due to an increase in expense in third quarter of fiscal 2024 related to the fiscal 2023 performance share grant, which is expected to pay above target due to better expected performance compared to plan and the impact of reversing expense in the prior year related to the fiscal 2022 performance share grant, when we determined the performance target was unlikely to be achieved.

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,

Thirty-Nine Week Periods Ended

2024 March 29,

Enterprise system implementation costs $ 7.4 $ 3.3

2 unchanged sentences

Lease contingencies 0.8 2.0

Severance 0.5 3.9

Remodel-related asset write-offs 0.4 1.1

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

Gain on the disposition of restaurants (0.4) —

Other 0.4 1.7

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,

$ 19.5 $ 19.8

Interest expenses increased $9.5 million due to higher interest rates on the 8.250% notes, slightly offset by lower average revolver balance during the current year.

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

2024 March 29,

2023 March 27,

2024 March 29,

Effective income tax rate 9.6 % (0.2) % 8.3 % (5.2) %

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.

The federal statutory tax rate was 21.0% for the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023.

The change in the effective income tax rate in the thirteen and thirty-nine week periods ended March 27, 2024 to the thirteen and thirty-nine week periods ended March 29, 2023 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit.

Segment Results

Chili’s Segment

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

Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023

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

2023 December 28,

2024 March 29,

Company sales $ 988.4 $ 953.2 $ 35.2 3.7 %

1 unchanged sentence

Total revenues $ 999.6 $ 963.4 $ 36.2 3.8 %

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.

Chili’s Total revenues increased by 3.8% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by lower traffic and unfavorable menu item mix.

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

1 unchanged sentence

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

March 27, 2024 March 29, 2023

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

6 unchanged sentences

As a percentage of Company sales:

• 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 Food and beverage costs were favorable 1.8% due to 1.7% from increased menu pricing and 0.1% of favorable commodity costs.

• Chili’s Restaurant labor was favorable 0.3% due to 1.0% of sales leverage, partially offset by 0.4% of higher hourly labor driven by wage rates, and 0.3% of increased manager salary.

• Chili’s Restaurant expenses were unfavorable 1.2% due to 1.8% of higher advertising, 0.3% of higher repairs and maintenance, and 0.3% of higher other restaurant expenses, partially offset by 0.7% of sales leverage and 0.5% lower delivery fees and to-go supplies.

Chili’s Depreciation and amortization decreased $0.1 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended December 28, 2022 $ 36.0

Thirteen Week Period Ended March 29, 2023 $ 36.7

Additions for new and existing restaurant assets 6.0

1 unchanged sentence

Retirements and fully depreciated restaurant assets (4.1)

Thirteen Week Period Ended December 27, 2023 $ 35.5

Thirteen Week Period Ended March 27, 2024 $ 36.6

Chili’s General and administrative increased $2.0 million as follows:

General and Administrative

Thirteen Week Period Ended December 28, 2022 $ 8.5

Thirteen Week Period Ended March 29, 2023 $ 8.8

Performance-based compensation 0.9

1 unchanged sentence

Stock-based compensation 0.4

Thirteen Week Period Ended December 27, 2023 $ 10.2

Thirteen Week Period Ended March 27, 2024 $ 10.8

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

2024 March 29,

Restaurant closure asset write-offs and charges $ 4.0 $ 1.5

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

Litigation & claims, net 1.9 0.3

Other (0.2) 0.4

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,

Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage

2024 March 29,

Company sales $ 2,803.1 $ 2,663.1 $ 140.0 5.3 %

1 unchanged sentence

Total revenues $ 2,834.9 $ 2,692.0 $ 142.9 5.3 %

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.

Chili’s Total revenues increased 5.3% primarily due to favorable comparable restaurant sales driven by menu price increases 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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

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

6 unchanged sentences

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 Food and beverage costs were favorable 3.3% due to 2.1% from increased menu pricing, 0.6% of favorable menu item mix, and 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs.

• Chili’s Restaurant labor was flat due to 1.5% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels and 0.5% of increased manager salaries.

• Chili’s Restaurant expenses were unfavorable 1.0% due to 2.1% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 1.0% of sales leverage and 1.0% of lower delivery fees and to-go supplies.

Chili’s Depreciation and amortization decreased $0.4 million as follows:

Depreciation and Amortization

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

Thirty-Nine Week Period Ended March 29, 2023 $ 108.7

Additions for existing and new restaurant assets 17.4

1 unchanged sentence

Retirements and fully depreciated restaurant assets (11.7)

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

Thirty-Nine Week Period Ended March 27, 2024 $ 108.3

Chili’s General and administrative increased $4.2 million as follows:

General and Administrative

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

Thirty-Nine Week Period Ended March 29, 2023 $ 26.8

Performance-based compensation 1.9

2 unchanged sentences

Recruiting (0.8)

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

Thirty-Nine Week Period Ended March 27, 2024 $ 31.0

Chili’s 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,

Thirty-Nine Week Periods Ended

2024 March 29,

Litigation & claims, net $ 4.9 $ 0.7

Restaurant closure asset write-offs and charges 4.8 5.7

Severance 0.1 1.9

Remodel-related asset write-offs — 1.1

2 unchanged sentences

Other 1.3 0.7

$ 10.3 $ 10.9

Maggiano’s Segment

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

Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023

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

2023 December 28,

2024 March 29,

Company sales $ 120.5 $ 119.7 $ 0.8 0.7 %

5 unchanged sentences

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

December 27, 2023 December 28, 2022

March 27, 2024 March 29, 2023

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

6 unchanged sentences

As a percentage of Company sales:

• 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,

• Maggiano’s Food and beverage costs were favorable 1.0% due to 1.5% from increased menu pricing, partially offset by 0.3% of unfavorable commodity costs and 0.2% of unfavorable menu item mix.

• Maggiano’s Restaurant labor was favorable 0.1% due to sales leverage.

• Maggiano’s Restaurant expenses were unfavorable 1.0% due to 0.7% of higher repairs and maintenance and 0.4% of higher worker’s compensation and general liability insurance, partially offset by 0.1% of sales leverage.

Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage

2024 March 29,

Company sales $ 371.5 $ 365.3 $ 6.2 1.7 %

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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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

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 2.5%, 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.

• Maggiano’s Food and beverage costs were favorable 2.0% due to 1.7% from increased menu pricing and 0.4% of favorable commodity costs driven primarily by lower poultry costs, and 0.1% of unfavorable menu item mix.

• Maggiano’s Restaurant labor was flat due to 0.5% of sales leverage offset by 0.2% of higher hourly labor costs, 0.2% of increased manager salaries and 0.1% of higher other labor costs.

• Maggiano’s Restaurant expenses were unfavorable 0.6% due to 0.6% of higher repairs and maintenance, 0.2% of higher worker’s compensation and general liability insurance, 0.2% of higher supervision, 0.2% of higher rent, and 0.2% of higher supplies, partially offset by 0.4% of sales leverage and 0.4% of lower delivery fees and to-go supplies.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2023 December 28,

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Net cash provided by operating activities $ 280.4 $ 200.8 $ 79.6

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.

Net cash provided by operating activities increased due to an increase in operating income and the timing of other operational receipts and payments, partially offset by an increase in the payment of income taxes in the current year.

Cash Flows from Investing Activities

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2023 December 28,

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Net cash used in investing activities $ (138.0) $ (133.3) $ (4.7)

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.

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

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

Cash Flows from Financing Activities

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 $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.

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Net cash used in financing activities $ (142.0) $ (67.2) $ (74.8)

Net cash used in financing activities increased primarily due to $110.0 million of net repayment activity in fiscal 2024 compared to $50.0 million of net payment activity in fiscal 2023 on the revolving credit facility and an increase in share repurchases in fiscal 2024 of $23.4 million.

Net repayments of $110.0 million were made during the thirty-nine week period ended March 27, 2024 on the revolving credit facility.

As of March 27, 2024, $848.7 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 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.

As of March 27, 2024, our interest rate was 7.20% consisting of SOFR of 5.32% plus the applicable margin and spread adjustment of 1.88%.

As of March 27, 2024, 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.

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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 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.

In the thirty-nine week period ended March 27, 2024, we repurchased 0.8 million shares of our common stock for $25.6 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 December 27, 2023, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program.

As of March 27, 2024, 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