Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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, the MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data of this report. Our MD&A consists of the following sections:
• 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;
• Liquidity and Capital Resources - an analysis of cash flows, including capital expenditures, aggregate contractual obligations, financing activity, and known trends that may impact liquidity, including off-balance sheet arrangements; and
• Critical Accounting Estimates - a discussion of accounting policies that require critical judgments and estimates, including recent accounting pronouncements.
The following MD&A includes a discussion comparing our results in fiscal 2024 to fiscal 2023. For a discussion comparing our results from fiscal 2023 to fiscal 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 28, 2023, filed with the SEC on August 23, 2023.
The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States, and include the accounts of Brinker International, Inc. and our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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,
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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.
OVERVIEW
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. Our two restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units. Refer to Part I, Item 1 - Business of this document for additional information about our business and operational strategies.
External Impacts to Our Operating Environment
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.
RESULTS OF OPERATIONS
The following table sets forth selected operating data:
Fiscal Years Ended
June 26, 2024 June 28, 2023
Dollars As a percentage (1)
Dollars As a percentage (1)
Revenues
Company sales $ 4,371.1 99.0 % $ 4,093.2 99.0 %
Franchise revenues 44.0 1.0 % 40.0 1.0 %
Total revenues 4,415.1 100.0 % 4,133.2 100.0 %
Operating costs and expenses
Food and beverage costs 1,107.6 25.3 % 1,146.3 28.0 %
Restaurant labor 1,467.3 33.6 % 1,389.3 34.0 %
Restaurant expenses 1,212.9 27.8 % 1,097.5 26.8 %
Depreciation and amortization 170.8 3.9 % 168.5 4.1 %
General and administrative 183.7 4.2 % 154.5 3.7 %
Other (gains) and charges 43.2 1.0 % 32.7 0.8 %
Total operating costs and expenses 4,185.5 94.8 % 3,988.8 96.5 %
Operating income 229.6 5.2 % 144.4 3.5 %
Interest expenses 65.0 1.5 % 54.9 1.3 %
Other income, net (0.3) 0.0 % (1.3) 0.0 %
Income before income taxes 164.9 3.7 % 90.8 2.2 %
Provision (benefit) for income taxes 9.6 0.2 % (11.8) (0.3) %
Net income $ 155.3 3.5 % $ 102.6 2.5 %
(1) Food and beverage costs, Restaurant labor and Restaurant expenses are calculated based on a percentage of Company sales. All others are calculated as a percentage of Total revenues.
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Revenues
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, 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:
Total Revenues
Chili’s Maggiano’s Total Revenues
Fiscal year ended June 28, 2023 $ 3,646.1 $ 487.1 $ 4,133.2
Change from:
Comparable restaurant sales (1)
264.2 16.4 280.6
Restaurant openings 45.8 — 45.8
Restaurant acquisitions
0.6 — 0.6
Gift card discounts 0.4 0.2 0.6
Maggiano's banquet income — 0.2 0.2
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)
Gift card breakage (2)
(4.7) (0.7) (5.4)
Restaurant closures (36.0) (7.8) (43.8)
Company sales 269.3 8.6 277.9
Franchise revenues (3)
3.9 0.1 4.0
Fiscal year ended June 26, 2024 $ 3,919.3 $ 495.8 $ 4,415.1
(1) Comparable restaurant sales increased due to menu price increases and favorable menu item mix, partially offset by lower traffic.
(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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The table below presents the percentage change in comparable restaurant sales and restaurant capacity for fiscal 2024 compared to fiscal 2023:
Comparable
Sales (1)
Price Impact Mix-Shift Impact (2)
Traffic Impact Restaurant Capacity (3)
Company-owned 7.0 % 7.6 % 0.6 % (1.2) % (0.6) %
Chili’s 7.4 % 7.4 % 0.6 % (0.6) % (0.6) %
Maggiano’s 3.5 % 9.4 % 0.6 % (6.5) % (1.8) %
Franchise (4)
1.2 %
U.S. 7.1 %
International (2.0) %
Chili’s domestic (5)
7.4 %
System-wide (6)
6.1 %
(1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 full months. Restaurants temporarily closed 14 days or more are excluded from Comparable Restaurant Sales. Percentage amounts are calculated based on the comparable periods year-over-year.
(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. No adjustments have been made to capacity for temporary closures.
(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. We believe presenting Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance.
(5) Chili’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s restaurants in the United States.
(6) System-wide Comparable Restaurant Sales are derived from sales generated by Chili’s and Maggiano’s Company-owned and franchise-operated restaurants.
Costs and Expenses
The following is a summary of the changes in Costs and Expenses:
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 1,107.6 25.3 % $ 1,146.3 28.0 % $ 38.7 2.7 %
Restaurant labor 1,467.3 33.6 % 1,389.3 34.0 % (78.0) 0.4 %
Restaurant expenses 1,212.9 27.8 % 1,097.5 26.8 % (115.4) (1.0) %
Depreciation and amortization 170.8 168.5 (2.3)
General and administrative 183.7 154.5 (29.2)
Other (gains) and charges 43.2 32.7 (10.5)
Interest expenses 65.0 54.9 (10.1)
Other income, net (0.3) (1.3) (1.0)
As a percentage of Company sales:
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• 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:
Depreciation and Amortization
Fiscal year ended June 28, 2023 $ 168.5
Change from:
Additions for existing and new restaurant assets 26.3
Corporate assets 2.7
Finance leases (5.5)
Retirements and fully depreciated restaurant assets (21.2)
Fiscal year ended June 26, 2024 $ 170.8
General and administrative expenses increased $29.2 million as follows:
General and Administrative
Fiscal year ended June 28, 2023 $ 154.5
Change from:
Performance-based compensation (1)
13.0
Stock-based compensation (2)
11.7
Payroll expenses 2.5
Corporate technology initiatives 1.8
Recruiting (1.6)
Other
1.8
Fiscal year ended June 26, 2024 $ 183.7
(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.
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Other (gains) and charges consisted of the following (for further details refer to Note 13 - Other Gains and Charges):
Fiscal Years Ended
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
Litigation & claims, net 6.6 2.5
Lease contingencies 0.8 2.0
Severance 0.5 3.7
Remodel-related asset write-offs 0.5 1.1
Gain on sale of assets, net (2.7) (3.7)
Other 1.1 2.0
$ 43.2 $ 32.7
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.
Income Taxes
Fiscal Years Ended
June 26, 2024 June 28, 2023
Effective income tax rate 5.8 % (13.0) %
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
Chili’s Segment
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023 Dollars %
Company sales $ 3,876.0 $ 3,606.7 $ 269.3 7.5 %
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 7.5% 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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The following is a summary of the changes in Chili’s operating costs and expenses:
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 990.7 25.5 % $ 1,022.9 28.3 % $ 32.2 2.8 %
Restaurant labor 1,309.0 33.8 % 1,232.3 34.2 % (76.7) 0.4 %
Restaurant expenses 1,073.2 27.7 % 966.2 26.8 % (107.0) (0.9) %
Depreciation and amortization 147.7 145.3 (2.4)
General and administrative 42.8 35.5 (7.3)
Other (gains) and charges 26.9 22.0 (4.9)
As a percentage of Company sales:
• 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:
Depreciation and Amortization
Fiscal year ended June 28, 2023 $ 145.3
Change from:
Additions for new and existing restaurant assets 23.2
Finance leases (5.5)
Retirements and fully depreciated restaurant assets (15.6)
Other 0.3
Fiscal year ended June 26, 2024 $ 147.7
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Chili’s General and administrative increased $7.3 million as follows:
General and Administrative
Fiscal year ended June 28, 2023 $ 35.5
Change from:
Performance-based compensation (1)
3.6
Stock-based compensation 1.9
Defined contribution plan employer expenses and other benefits 1.7
Payroll expenses 0.8
Recruiting (1.0)
Other 0.3
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):
Fiscal Years Ended
June 26, 2024 June 28, 2023
Restaurant level impairment charges $ 11.9 $ 12.1
Restaurant closure asset write-offs and charges 10.1 7.3
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)
Other 1.2 1.3
$ 26.9 $ 22.0
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Maggiano’s Segment
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023 Dollars %
Company sales $ 495.1 $ 486.5 $ 8.6 1.8 %
Franchise revenues 0.7 0.6 0.1 16.7 %
Total revenues $ 495.8 $ 487.1 $ 8.7 1.8 %
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.
The following is a summary of the changes in Maggiano’s operating costs and expenses:
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales
Food and beverage costs $ 116.9 23.6 % $ 123.4 25.3 % $ 6.5 1.7 %
Restaurant labor 158.3 32.0 % 157.0 32.3 % (1.3) 0.3 %
Restaurant expenses 139.2 28.1 % 130.4 26.8 % (8.8) (1.3) %
Depreciation and amortization 13.1 13.0 (0.1)
General and administrative 10.2 7.8 (2.4)
Other (gains) and charges 0.6 1.4 0.8
As a percentage of Company sales:
• 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
Our significant accounting policies are disclosed in Note 1 - Nature of Operations and Summary of Significant Accounting Policies in Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements. The following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results, and that require significant judgment.
Gift Card Revenues Recognition
Proceeds from the sale of gift cards are recorded as deferred revenues and recognized as revenues when the gift cards are redeemed by the holders. 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 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
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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.
Valuation of Long-Lived Assets
We review the carrying amount of property, equipment and lease assets on an annual basis or more often if events or circumstances indicate that the carrying amount may not be recoverable. The impairment test is a two-step process. 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. If the carrying value of the asset group exceeds its cash flows, impairment may exist and performing step two is necessary to determine the impairment loss. If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value of the asset group. We determine fair value based on discounted projected future operating cash flows of each restaurant over its remaining service life using a risk adjusted discount rate. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment.
Effect of New Accounting Standards
The impact of new accounting pronouncements can be found at Note 1 - Nature of Operations and Summary of Significant Accounting Policies in Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements.
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
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Net cash provided by operating activities $ 421.9 $ 256.3 $ 165.6
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
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Net cash used in investing activities $ (192.2) $ (174.2) $ (18.0)
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.
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Cash Flows from Financing Activities
Fiscal Years Ended Favorable (Unfavorable) Variance
June 26, 2024 June 28, 2023
Net cash used in financing activities $ (180.2) $ (80.5) $ (99.7)
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.
Debt
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 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
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. 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
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
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. We continue to monitor the macro environment and will adjust our overall approach to capital allocation, including share repurchases, as events and macroeconomic trends unfolds.
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Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our existing revolving credit facility will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months, including the repayment of current debt obligations.
Future Commitments and Contractual Obligations
Payments due under our contractual obligations for outstanding indebtedness, leases and purchase obligations as of June 26, 2024 are as follows:
Payments Due by Period
Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Total
Long-term debt (1)
$ 350.0 $ — $ — $ 350.0 $ 700.0
Interest (2)
55.6 85.8 57.8 43.3 242.5
Finance leases (3)
19.8 45.7 31.3 33.4 130.2
Operating leases (3)
180.7 332.4 267.9 917.0 1,698.0
Purchase obligations (4)
33.4 49.7 8.5 — 91.6
(1) Long-term debt consists of principal amounts owed on the 5.000% and 8.250% notes and the revolving credit facility. 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.
(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: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase obligations primarily consist of long-term obligations for the purchase of fountain beverages, software and professional services contracts, as well as non-cancellable insurance premiums, and exclude agreements that are cancellable without significant penalty.
Off -Balance Sheet Arrangements
We have entered into certain pre-commencement leases as disclosed in Note 6 - Leases and have obligations for guarantees on certain lease agreements and letters of credit as disclosed in Note 8 - Commitments and Contingencies included within Part II, Item 8 - Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.