What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-21 compared with 2023-08-23 · 80 added, 143 removed, 241 unchanged (48% of the section changed)

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Our MD&A consists of the following sections:

• Overview - a brief description of our business and a discussion on the financial impact of COVID-19 and other trends impacting our business;

• Overview - a brief description of our business and a discussion on the external trends impacting our business;

• Results of Operations - an analysis of the Consolidated Statements of Comprehensive Income included in the Consolidated Financial Statements;

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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 2023 and Fiscal 2022, which ended on June 28, 2023 and June 29, 2022, respectively, each contained 52 weeks.

Fiscal 2021, which ended on June 30, 2021, contained 53 weeks.

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 2024, Fiscal 2023 and Fiscal 2022 which ended on June 26, 2024, June 28, 2023 and June 29, 2022 respectively, each contained 52 weeks.

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

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External Impacts to Our Operating Environment

During both fiscal 2022 and fiscal 2023, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs.

Geopolitical and other macroeconomic events could lead to wage inflation, staffing challenges, product cost inflation and disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operation.

During the recent years, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs.

Geopolitical and other macroeconomic events have led, and in the future may lead to, wage inflation, staffing challenges, product cost inflation and/ disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operation.

Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing the average amount guests spend in our restaurants.

During fiscal 2023, all our domestic Company-owned and franchise restaurants operated with no restrictions.

During fiscal 2022, the continuing spread of COVID-19 cases (particularly the Omicron variant), significantly impacted our guest traffic and sales.

Many of our restaurants had face mask requirements and some of our restaurants had proof of vaccination requirements for our customers, team members or both.

RESULTS OF OPERATIONS

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Income before income taxes 164.9 3.7 % 90.8 2.2 %

(Benefit) Provision for income taxes (11.8) (0.3) % (2.4) (0.1) %

Provision (benefit) for income taxes 9.6 0.2 % (11.8) (0.3) %

Net income $ 155.3 3.5 % $ 102.6 2.5 %

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Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income 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 gift card discount costs from third-party gift card sales.

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

• 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 discount costs from third-party gift card sales.

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

The following is a summary of the change in Total revenues:

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264.2 16.4 280.6

Restaurant acquisitions (2)

Restaurant openings 45.8 — 45.8

Restaurant acquisitions

Gift card discounts 0.4 0.2 0.6

Maggiano's banquet income — 0.2 0.2

Gift card discount costs 0.9 0.2 1.1

Gift card breakage (3)

(17.2) (2.4) (19.6)

Delivery service fee income (0.5) 0.4 (0.1)

Merchandise income (0.1) (0.1) (0.2)

Digital entertainment revenues (0.4) — (0.4)

Delivery service fee income (3.1) 0.6 (2.5)

Gift card breakage (2)

(4.7) (0.7) (5.4)

Restaurant closures (36.0) (7.8) (43.8)

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(1) Comparable restaurant sales increased due to menu price increases and favorable menu item mix, partially offset by lower traffic.

(2) We acquired 68 Chili’s restaurants from three former franchisees in fiscal 2022.

Restaurant acquisitions includes revenues of acquired restaurants until the restaurant has been in operation for more than 18 months.

(3) Gift card breakage decreased primarily due to a prior year change in estimate to increase the breakage rate on certain aged sales years.

(2) Gift card breakage decreased primarily due to a change in estimate related to a higher forecasted gift card redemption rates.

(3) Franchise revenues increased primarily due to higher franchise advertising fees.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $856.2 million and $11.8 million respectively in fiscal 2024 compared to $876.0 million and $10.6 million respectively in fiscal 2023.

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(2) Mix-Shift is calculated as the year-over-year percentage change in Company sales resulting from the change in menu items ordered by guests.

(3) Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year, including the effect of the acquisitions completed during fiscal 2022.

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

No adjustments have been made to capacity for temporary closures.

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

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

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

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As a percentage of Company sales:

• Food and beverage costs increased 0.1%, including 3.3% of higher poultry, meat, produce and other commodity costs resulting from inflationary pressures, partially offset by 2.4% of favorable menu pricing and 0.8% of favorable menu item mix.

• Restaurant labor decreased 0.2%, including 2.5% of sales leverage and 0.2% of lower other restaurant labor, partially offset by 1.4% of higher hourly restaurant wages due to increased staffing levels and higher wage rates and 1.1% of higher manager salaries and bonus expenses.

• Restaurant expenses increased 1.1%, driven by 0.8% of higher repairs and maintenance, 0.5% of higher advertising, 0.3% of higher utilities, 0.3% of higher workers’ compensation and general liability insurance, 0.2% of higher rent and 0.5% of higher other restaurant expenses.

These increases were partially offset by 1.5% of sales leverage.

• Food and beverage costs were favorable 2.7%, due to 2.1% from increased menu pricing, 0.4% of favorable commodity costs driven by lower poultry and meat costs, and 0.2% of favorable menu item mix.

• Restaurant labor was favorable 0.4%, due to 1.9% of sales leverage and 0.3% of lower other restaurant labor costs, partially offset by 1.1% of higher hourly labor driven by both wage rates and staffing levels, 0.4% of increased manager salaries, and 0.3% of higher manager bonus expense.

• Restaurant expenses were unfavorable 1.0%, due to 1.7% of higher advertising, 0.7% of higher repairs and maintenance, 0.2% of higher workers’ compensation and general liability insurance, and 0.5% of higher other restaurant expenses, partially offset by 1.3% of sales leverage and 0.8% of lower delivery fees and to-go supplies.

Depreciation and amortization increased $2.3 million as follows:

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Additions for existing and new restaurant assets 26.3

Acquisition of Chili’s restaurants (1)

Corporate assets 2.7

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Fiscal year ended June 26, 2024 $ 170.8

(1) Represents the incremental depreciation and amortization of the assets and finance leases related to the 68 Chili’s restaurants acquired in fiscal 2022.

General and administrative expenses increased $29.2 million as follows:

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Performance-based compensation (1)

Defined contribution plan employer expenses and other benefits 2.4

Payroll expenses 1.5

Travel and entertainment expenses 0.4

Stock-based compensation (2)

Payroll expenses 2.5

Corporate technology initiatives 1.8

Recruiting (1.6)

Fiscal year ended June 26, 2024 $ 183.7

(1) Performance-based compensation increased in fiscal 2023 due to higher business performance metrics compared to targets.

(2) Stock-based compensation decreased primarily due to the reversal in the second quarter of fiscal 2023 of performance-based award expense as certain performance targets are no longer expected to be achieved.

(3) Other increased primarily due to an increase in professional consulting fees and costs related to IT initiatives.

(1) Performance-based compensation increased in fiscal 2024 due to higher business performance compared to targets in the current fiscal year.

(2) Stock-based compensation increased primarily due to an increase in expense related to the fiscal 2023 performance share grant, as business performance is expected to exceed the plan target.

Additionally, incremental expenses were incurred in fiscal 2024 related to the fiscal 2022 performance share grant as business performance above expectations resulted in achievement of the minimum performance target for the grant.

The cumulative expense for this grant was reversed in fiscal 2023 based on forecasted business performance being well below the minimum target.

Other (gains) and charges consisted of the following (for further details refer to Note 13 - Other Gains and Charges):

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June 26, 2024 June 28, 2023

Enterprise system implementation costs $ 14.0 $ 4.7

Restaurant level impairment charges 12.3 12.1

Restaurant closure asset write-offs and charges 10.1 8.3

Enterprise system implementation costs 4.7 2.4

Severance and other benefit charges 3.7 —

Litigation & claims, net 6.6 2.5

Lease contingencies 0.8 2.0

Remodel-related asset write-off 1.1 4.9

Loss from natural disasters, net of (insurance recoveries) 0.8 1.1

Severance 0.5 3.7

Remodel-related asset write-offs 0.5 1.1

Gain on sale of assets, net (2.7) (3.7)

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$ 43.2 $ 32.7

Interest expenses increased $8.8 million primarily due to higher interest rates and average borrowing balances on our revolving credit facility in fiscal 2023.

Interest expenses increased $10.1 million primarily due to a higher interest rate on the 8.250% notes issued on June 27, 2023 , compared to the interest rate on the 3.875% notes which matured and were repaid on May 15, 2023, partially offset by the lower average revolver balance during fiscal 2024.

Fiscal Years Ended

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Effective income tax rate 5.8 % (13.0) %

The federal statutory tax rate was 21.0% for both fiscal 2023 and 2022.

Our effective income tax rates for fiscal 2023 and 2022 were lower than the federal statutory tax rate primarily due to the leverage of the FICA tip tax credit relative to Income before income taxes.

The higher tax benefit in fiscal 2023 is primarily due to an increased leverage of the FICA tip tax credit against a lower Income before incomes taxes compared to fiscal 2022.

The change in the effective income tax rate from fiscal 2023 to fiscal 2024 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit, which did not change significantly in fiscal 2024 compared to fiscal 2023.

Refer to Note 9 - Income Taxes for more information.

Segment Results

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Company sales $ 3,876.0 $ 3,606.7 $ 269.3 7.5 %

Franchise and other revenues 39.4 39.1 0.3 0.8 %

Franchise revenues 43.3 39.4 3.9 9.9 %

Total revenues $ 3,919.3 $ 3,646.1 $ 273.2 7.5 %

Chili’s Total revenues increased 7.9% primarily due to increased menu pricing, favorable menu item mix and the acquisition of 68 Chili’s restaurants from three former franchisees, partially offset by lower traffic.

Chili’s Total revenues increased 7.5% primarily due to favorable comparable restaurant sales driven by increased menu pricing and favorable menu item mix, partially offset by lower traffic.

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

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As a percentage of Company sales:

• Chili’s Food and beverage costs decreased 0.1%, including 2.5% of favorable menu pricing and 1.0% of favorable menu item mix, partially offset by 3.4% of higher poultry, meat, produce and other commodity costs resulting from inflationary pressures.

• Chili’s Restaurant labor decreased 0.1%, including 2.4% of sales leverage and 0.1% of lower other restaurant labor, partially offset by 1.2% of higher restaurant hourly wages and 1.2% of higher manager salaries and bonus expenses.

• Chili’s Restaurant expenses increased 1.4%, driven by 0.8% of higher repairs and maintenance, 0.6% of higher advertising, 0.3% of higher workers’ compensation and general liability insurance, 0.2% of higher utilities, 0.2% of higher rent, and 0.5% of higher other restaurant expense.

These increases were partially offset by 1.2% of sales leverage.

• Chili’s Food and beverage costs were favorable 2.8%, due to 2.2% from increased menu pricing, 0.4% of lower commodity costs driven by poultry and meat, and 0.2% of favorable menu item mix.

• Chili’s Restaurant labor was favorable 0.4%, due to 2.2% of sales leverage and 0.3% of lower other restaurant labor costs, partially offset by 1.3% of higher restaurant hourly labor driven by both wage rates and staffing levels and 0.5% of higher manager salaries and 0.3% of higher manager bonus expenses.

• Chili’s Restaurant expenses were unfavorable 0.9%, due to 2.0% of higher advertising, 0.7% of higher repairs and maintenance, 0.2% of higher workers’ compensation and general liability insurance, and 0.2% of higher other restaurant expense, partially offset by 1.4% of sales leverage and 0.8% of lower delivery fees and to-go supplies.

Chili’s Depreciation and amortization increased $2.4 million as follows:

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Additions for new and existing restaurant assets 23.2

Acquisition of Chili’s restaurants (1)

Finance leases (5.5)

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Fiscal year ended June 26, 2024 $ 147.7

(1) Represents the incremental depreciation and amortization of the assets and finance leases related to the 68 Chili’s restaurants acquired in fiscal 2022.

Chili’s General and administrative increased $7.3 million as follows:

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Performance-based compensation (1)

Payroll expenses 0.9

Defined contribution plan employer expenses and other benefits 0.7

Stock-based compensation 1.9

Defined contribution plan employer expenses and other benefits 1.7

Payroll expenses 0.8

Recruiting (1.0)

Fiscal year ended June 26, 2024 $ 42.8

(1) Performance-based compensation increased in fiscal 2024 due to higher business performance compared to targets in the current fiscal year.

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 13 - Other Gains and Charges):

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Restaurant closure asset write-offs and charges 10.1 7.3

Severance and other benefit charges 1.9 —

Remodel-related asset write-off 1.1 4.8

Loss from natural disasters, net of (insurance recoveries) 0.8 1.1

Litigation & claims, net 6.2 2.0

Remodel-related asset write-offs — 1.1

Severance 0.1 1.9

Gain on sale of assets, net (2.6) (3.7)

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Total revenues $ 495.8 $ 487.1 $ 8.7 1.8 %

Maggiano’s Total revenues increased 14.7% primarily due to increased menu pricing, favorable menu item mix and higher traffic.

Total banquet income increased $4.3 million in fiscal 2023 compared to fiscal 2022 as our banquet business recovered from the effects of the COVID-19 pandemic.

Maggiano’s Total revenues increased 1.8% primarily due to favorable comparable restaurant sales driven by increased menu pricing partially offset by lower traffic.

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

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As a percentage of Company sales:

• Maggiano’s Food and beverage costs increased 1.1%, including 2.1% of unfavorable commodity pricing and 0.2% of unfavorable menu item mix, partially offset by 1.2% of favorable menu pricing.

• Maggiano’s Restaurant labor decreased 1.1%, including 4.2% of sales leverage, 0.2% of lower manager bonus and 0.1% of other restaurant labor, partially offset by 2.8% of higher restaurant hourly wages and 0.6% of higher manager salaries.

• Maggiano’s Restaurant expenses decreased 1.0%, driven by 2.5% of sales leverage, partially offset by 0.5% of higher delivery fees and to-go supplies, 0.4% of higher repairs and maintenance, 0.2% of higher workers’ compensation and general liability insurance and 0.4% of higher other restaurant expenses.

Maggiano’s Other (gains) and charges primarily consisted of restaurant closure asset write offs and charges, refer to Note 14 - Other Gains and Charges)

• Maggiano’s Food and beverage costs were favorable 1.7%, due to 1.7% from increased menu pricing and 0.2% of favorable commodity pricing partially offset by 0.2% of unfavorable menu item mix.

• Maggiano’s Restaurant labor was favorable 0.3%, due to 0.4% of sales leverage and 0.1% of lower other restaurant labor costs, partially offset by 0.2% of higher manager bonus.

• Maggiano’s Restaurant expenses were unfavorable 1.3%, due to 0.8% of higher repairs and maintenance, 0.4% of higher supplies, 0.2% of higher workers’ compensation and general liability insurance, 0.2% of higher advertising, and 0.4% of higher other restaurant expenses partially offset by 0.4% of sales leverage and 0.3% of lower delivery fees and to-go supplies.

CRITICAL ACCOUNTING ESTIMATES

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Breakage income represents the value associated with the portion of gift cards sold that will most likely never be redeemed and is estimated based on our historical gift card redemption patterns and actuarial estimates.

Breakage revenues are recognized proportionate to the pattern of related gift card

Breakage revenues are recognized proportionate to the pattern of related gift card redemptions.

We recognize breakage income in Franchise revenues in the Consolidated Statements of Comprehensive Income.

We update our breakage rate estimate periodically and, if necessary, adjust the deferred revenues balance accordingly.

If actual redemption patterns vary from our estimate, actual gift card breakage income may differ from the amounts recorded.

If actual redemption patterns vary from our estimate, actual gift card breakage income may differ from

the amounts recorded.

Changing our breakage-rate assumption used to record breakage attributable to gift cards sold in fiscal 2024 by 50 basis points would result in an impact to the Consolidated Statements of Comprehensive Income of approximately $0.6 million on the current year.

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The impairment test is a two-step process.

Step one includes comparing the operating cash flows of each restaurant over its remaining service life to the carrying value of the asset group.

Step one includes comparing the operating cash flows of each restaurant (asset group) over its remaining service life to the carrying value of the asset group.

If the cash flows exceed the carrying value, then the asset group is not impaired, and no further evaluation is required.

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This process requires the use of estimates and assumptions, which are subject to a high degree of judgment.

At the inception of each lease, we evaluate the lease agreement to determine whether it is an operating or finance lease.

The evaluation requires significant judgments in determining the fair value of the lease asset and the lease liability and the appropriate reasonably certain lease term.

Given that our lease agreements generally do not provide an implicit interest rate, we estimate our fully collateralized incremental borrowing rate corresponding with the lease terms for the purposes of determining the fair value of initial liability for each lease.

We also estimate the reasonably certain lease term at inception.

The lease term commences on the date when the lessor makes the underlying property available, irrespective of the contractual lease payments schedule.

When determining the length of the lease term at commencement, we consider both termination and renewal option periods available.

The renewal periods included in the lease term at the inception are those during which failure to renew the lease imposes a significant penalty on us.

Lease accounting requires the application of significant judgements by management.

Variation in judgements applied could result in a change of lease classification and materially different expenses such as rent, depreciation and amortization in a given reporting period;

fair value of lease asset and lease liability at inception;

or reasonably certain lease terms at inception.

We make certain estimates and judgments in the calculation of tax expenses, the resulting tax liabilities, and in the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

When considered necessary, we record a valuation allowance to reduce deferred tax assets to a balance that is more likely than not to be recognized.

We use an estimate of our annual effective tax rate at each interim period based on the facts and circumstances available at that time while the actual effective tax rate is calculated at year-end.

We have recorded deferred tax assets reflecting the benefit of income tax credits and state loss carryforwards, which expire in varying amounts.

Realization is dependent on generating sufficient taxable income in the relevant jurisdiction prior to expiration of the income tax credits and state loss carryforwards.

Although realization is not assured, management believes it is more likely than not that the recognized deferred tax assets will be realized.

The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income in the carryforward period are reduced.

We record a liability for unrecognized tax benefits resulting from tax positions taken, or expected to be taken, in an income tax return.

We recognize any interest and penalties related to unrecognized tax benefits in (Benefit) Provision for income taxes.

Significant judgment is required in assessing, among other factors, the timing and amounts of deductible and taxable items.

Tax reserves are evaluated and adjusted as appropriate, while taking into account the progress of audits of various taxing jurisdictions.

In addition to the risks related to the effective tax rate described above, the effective tax rate reflected in forward-looking statements is based on current tax law.

Any significant changes in the tax laws could affect these estimates.

Insurance Reserves

We are self-insured for certain losses related to health, general liability and workers’ compensation.

We maintain stop loss coverage with third-party insurers to limit our total exposure.

We record a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost that falls below our specified retention levels or per-claim deductible amounts.

This liability represents an estimate of the ultimate cost of claims incurred and unpaid as of the balance sheet date.

In establishing our reserves, we consider certain actuarial assumptions and judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices.

The estimated liability is not discounted and is established based upon analysis of historical data and actuarial estimates and is reviewed on a quarterly basis to ensure that the liability is appropriate.

If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

Effect of New Accounting Standards

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LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are net cash provided by operating activities and borrowings if any, under our $900.0 million revolving credit facility as further discussed below.

Our main requirements for liquidity are to support our working capital, capital expenditures for new and existing restaurants, obligations under our operating leases, and interest payments on our debt.

Our operations have typically not required significant working capital.

Substantially all of our sales are tendered in cash and cash equivalents, which are received before related trade payables for food and beverage products, supplies, labor and services become due.

Changes in our cash flows from operating, investing and financing activities during fiscal 2024 compared to fiscal 2023 are outlined below.

Cash Flows from Operating Activities

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Net cash provided by operating activities $ 421.9 $ 256.3 $ 165.6

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

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

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June 26, 2024 June 28, 2023

Cash flows from investing activities

Payments for property and equipment $ (184.9) $ (150.3) $ (34.6)

Payments for franchise restaurant acquisitions — (106.6) 106.6

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

Proceeds from note receivable 4.5 2.1 2.4

Proceeds from sale of assets 5.5 0.1 5.4

Insurance recoveries 0.7 — 0.7

Net cash used in investing activities $ (192.2) $ (174.2) $ (18.0)

Net cash used in investing activities decreased primarily due to $106.6 million of cash consideration paid for the purchase of 68 Chili’s restaurants in fiscal 2022, partially offset by proceeds of $20.5 million received from the sale leaseback transactions on six of the acquired restaurants in fiscal 2022.

Additionally, capital expenditures increased in fiscal 2023 primarily for construction of new restaurants, new equipment purchases, and increased capital maintenance, partially offset by the reduction in scope of the Chili’s remodel initiative and reduced technology spend.

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

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

Cash Flows from Financing Activities

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June 26, 2024 June 28, 2023

Cash flows from financing activities

Borrowings on revolving credit facility $ 765.0 $ 720.5 $ 44.5

Payments on revolving credit facility (875.0) (620.5) (254.5)

Proceeds from issuance of long-term debt 350.0 — 350.0

Payments on long-term debt (322.1) (23.7) (298.4)

Purchases of treasury stock (5.0) (100.9) 95.9

Proceeds from issuance of treasury stock 12.5 0.4 12.1

Payments for debt issuance costs (5.3) (3.1) (2.2)

Payments of dividends (0.6) (1.1) 0.5

Net cash used in financing activities $ (180.2) $ (80.5) $ (99.7)

Net cash used in financing activities increased primarily due to the payoff of the $300.0 million 3.875% notes and $110.0 million of net repayment activity in fiscal 2023 compared to $100.0 million of net borrowing activity in fiscal 2022 on the revolving credit facility, partially offset by proceeds from issuance of the $350.0 million 8.250% notes (the “2030 Notes”), a decrease in share repurchases and an increase in proceeds from employee stock option exercises.

Revolving Credit Facility

On May 2, 2023, we amended our $800.0 million revolving credit facility to increase the capacity to $900.0 million and to adopt SOFR as the new benchmark rate, replacing LIBOR.

During fiscal 2023, we incurred and capitalized $0.5 million of debt issuance costs associated with the revolving credit facility, which are included in Other assets in the Consolidated Balance Sheets.

The $900.0 million revolving credit facility, as amended, matures on August 18, 2026 and bears interest of SOFR 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 June 28, 2023, our interest rate was 6.952% consisting of SOFR

of 5.102% plus the applicable margin and spread adjustment of 1.850%.

Net cash used in financing activities increased primarily due to $161.3 million of net repayment activity in fiscal 2024 compared to $110.0 million of net repayment activity in fiscal 2023 on the revolving credit facility.

Additionally in fiscal 2023, proceeds from issuance of the $350.0 million 8.250% notes were partially offset by the payoff of the $300.0 million 3.875% notes.

On June 27, 2023, we issued $350.0 million of 8.250% senior notes due July 15, 2030 .

The 2030 Notes require semi-annual interest payments in arrears, on each January 15 and July 15.

Our $900.0 million revolving credit facility, as amended, matures on August 18, 2026 and bears interest at a rate of SOFR plus an applicable margin of 1.60% to 2.35% 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 June 26, 2024, there was $900.0 million of borrowing capacity under the revolving credit facility.

On May 15, 2023, our $300.0 million 3.875% notes matured and the payoff was funded with borrowings from our revolving credit facility.

On June 27, 2023, we issued $350.0 million of 8.250% senior notes due July 15, 2030 and used $340.0 million of the proceeds to reduce outstanding borrowings on the revolver.

The 2030 Notes require semi-annual interest payments in arrears, on each January 15 and July 15, beginning on January 15, 2024.

During fiscal 2023, we incurred and capitalized $5.7 million of debt issuance costs associated with the 2030 Notes, which are included in Long-term debt and finance leases, less current installments in the Consolidated Balance Sheets.

As of June 28, 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 2024 Notes and 2030 Notes.

On October 1, 2024, our $350.0 million of 5.000% senior notes will mature.

As a result of our intent and ability to refinance these notes through our existing revolving credit facility, the notes are classified as long-term debt in the Consolidated Balance Sheets on June 26, 2024.

As of June 26, 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.

Refer to Note 7 - Debt within Part II, Item 8 - Financial Statements and Supplementary Data for further information about our notes and revolving credit facility.

Share Repurchase Program

In fiscal 2022, our Board of Directors approved a $300.0 million share repurchase program, and the Company repurchased 2.3 million shares of our common stock for $96.0 million.

The Company did not repurchase any shares under the repurchase program in fiscal 2023.

Our Board of Directors approved a $300.0 million share repurchase program in August 2021.

Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards.

We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings and planned investment and financing needs.

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

In fiscal 2023, we repurchased 0.1 million shares of our common stock for $5.0 million, all of which were 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.

The Company repurchased 0.7 million shares of our common stock for $21.0 million in fiscal 2024.

The Company did not repurchase any shares under the repurchase program in fiscal 2023.

On June 26, 2024, we had $183.0 million of authorized repurchases remaining under the share repurchase program.

Dividend Program

In the fourth quarter of fiscal 2020, our Board of Directors voted to suspend the quarterly cash dividend due to uncertainty surrounding the duration of closures of our dining rooms and other restrictions mandated by state and local governments in response to the COVID-19 pandemic.

Future decisions to reinstate the dividend program to pay, or to increase or decrease dividends, are at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of our revolving credit facility and applicable law, and such other factors that the Board of Directors considers relevant.

There were no dividends declared in fiscal 2024 or fiscal 2023.

The Company’s decision to pay dividends in the future is at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of our revolving credit facility and applicable law, and such other factors that the Board of Directors considers relevant.

Cash Flow Outlook

Cash flow from operations typically provides the company with a significant source of liquidity.

During fiscal 2023, all our domestic Company-owned and franchise restaurants operated with no state or local restrictions.

Additionally, during fiscal 2023, we increased the capacity under our revolving credit facility by $100.0 million and issued new $350.0 million senior notes that mature in 2030.

As a result of uncertainties in the near-term macro environment, including supply chain challenges, and commodity and labor inflation, we continue to focus on cash flow generation and maintaining a solid and flexible financial position to execute our long-term strategy of investing in our business.

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(1) Long-term debt consists of principal amounts owed on the 5.000% and 8.250% notes and the revolving credit facility.

As of June 28, 2023, $738.7 million of credit is available under the revolving credit facility.

The revolving credit facility is due in August 2026.

(2) Interest consists of remaining interest payments on the 5.000% and 8.250% notes totaling $230.2 million and remaining interest payments on the revolver totaling $35.0 million.

The interest rates on the notes are fixed whereas the interest rate on the revolver is variable based on SOFR and our applicable margin.

We have assumed that the revolver balance carried will be $161.3 million until the maturity date of August 18, 2026 using the interest rate of 6.952%, which is the total of SOFR plus our applicable margin as of June 28, 2023.

The $350.0 million 5.000% notes mature on October 1, 2024, and the $350.0 million 8.250% notes mature on July 15, 2030.

As of June 26, 2024, there was no outstanding balance on the $900.0 million credit facility.

(2) Interest consists of remaining interest payments on the 5.000% and 8.250% fixed rate notes totaling $196.5 million and remaining interest payments on the variable rate revolver totaling $46.0 million.

We have assumed that there will be no outstanding balance on the revolver until October 1, 2024 when the 5.000% notes will be paid using availability under the revolver, increasing the outstanding balance to $350.0 million until the maturity date of August 18, 2026 using our variable interest rate of 6.94% as of June 26, 2024.

(3) Finance leases and Operating leases total future lease payments represent the contractual obligations due under the lease agreements, including cancellable option periods where we are reasonably assured to exercise the options.

As of June 28, 2023, these total future lease payments included non-cancelable lease commitments of $63.6 million for finance leases and $1,067.6 million for operating leases.

(4) Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including:

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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-K

Item 7. Management’s Discussion and Analysis