What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-04-30 · 101 added, 246 removed, 172 unchanged (67% 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 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.

For an understanding of the significant factors that influenced our performance during the thirteen week periods ended September 25, 2024 and September 27, 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 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.

We own, develop, operate, and franchise the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands.

As of September 25, 2024 we owned, operated or franchised 1,625 restaurants, consisting of 1,170 Company-owned restaurants and 455 franchised restaurants, located in the United States, 28 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 fiscal 2024.

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/or 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.

Operations Strategy

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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.

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

Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise.

In dining rooms, we use tabletop devices to engage our guests at the table.

These devices provide functionality for guests to pay at the table, order or re-order, engage in digital entertainment, to provide guest feedback and interact with our My Chili’s Rewards program.

Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency.

We customize offerings for these guests based on their purchase behavior.

Our “3 for Me” platform allows guests to enjoy a non-alcoholic drink, an appetizer and certain entrées starting at just $10.99.

We believe our value offerings will continue to be an important traffic driver in the current economic circumstances and we will continue to highlight this value in our marketing efforts.

We have increased menu pricing in other areas in light of the inflationary challenges and we have also improved menu offerings and merchandising to incentivize our guests to purchase higher priced items.

In addition, Chili’s has focused on a seamless digital experience as our guests’ preferences and expectations around dining convenience have evolved in recent years.

Investments in our technology and off-premise options have enabled us to provide a faster, more convenient dine-in experience and to offer more To-Go and delivery options for our guests.

Our To-Go menu is available through the Chili’s mobile app, chilis.com, our delivery partners DoorDash, Uber Eats and Grubhub, Google Food Ordering or by calling the restaurant directly.

Our It’s Just

Wings ® offering is available through the website, itsjustwings.com.

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

In dining rooms, we use tabletop devices with functionality for guests to pay at the table, provide guest feedback and interact with our My Chili’s Rewards ® program.

Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency and allows us to communicate and advertise to our guests through email and text.

Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests.

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.

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.

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.

While our dining rooms support the majority of our business, we also offer carry-out and delivery options through partnerships with delivery service providers that have made our restaurants more accessible to guests.

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, with 16 new restaurant openings and two new development agreements during the thirty-nine week period ended March 27, 2024.

Franchise Partnerships - During the thirteen week period ended September 25, 2024, there were 14 new franchise restaurant openings.

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 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 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 Development - The following table details the number of restaurant openings during the thirteen week periods ended September 25, 2024 and September 27, 2023, respectively, total full year projected openings in fiscal 2025 and the total restaurants open at each period end:

Openings During the Full Year Projected Openings

Thirteen Week Periods Ended Total Open Restaurants at

September 25,

2024 September 27,

2023 Fiscal 2025 September 25,

2024 September 27,

Company-owned restaurants

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Total 15 3 29-36 1,625 1,651

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

At September 25, 2024, we own property for 50 of the 1,170 Company-owned restaurants and one closed restaurant.

The net book values associated with these restaurants included land of $41.7 million and buildings of $13.5 million.

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

Thirteen Week Period Ended September 25, 2024 compared to September 27, 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.

• 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.

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

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Chili’s Maggiano’s Total Revenues

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

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

Comparable restaurant sales 123.9 4.4 128.3

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Maggiano's banquet income — (0.2) (0.2)

Merchandise Income

— (0.1) (0.1)

Delivery service fee income (0.1) 0.1 —

Gift card breakage (0.1) — (0.1)

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Franchise revenues (1)

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

Total Revenues

Chili’s Maggiano’s Total Revenues

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

Restaurant openings 36.7 — 36.7

Restaurant acquisitions

Maggiano's banquet income — 0.3 0.3

Gift card discounts 0.4 0.1 0.5

Gift card breakage 0.3 (0.1) 0.2

Merchandise income — (0.1) (0.1)

Digital entertainment revenues (0.6) — (0.6)

Delivery service fee income (0.5) 0.3 (0.2)

Restaurant closures (24.5) (7.8) (32.3)

Company sales 140.0 6.2 146.2

Franchise revenues (1)

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)

Price Impact Mix-Shift Impact (2)

Traffic Impact Restaurant Capacity (3)

Company-owned 3.3 % 6.4 % (0.7) % (2.4) % (0.5) %

Chili’s 3.5 % 6.1 % (0.8) % (1.8) % (0.5) %

Maggiano’s 1.7 % 8.2 % 1.0 % (7.5) % (1.2) %

Franchise (4)

International (0.8) %

Chili’s domestic (5)

System-wide (6)

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

Thirteen Week Period Ended September 25, 2024 $ 1,030.4 $ 108.6 $ 1,139.0

(1) Franchise revenues increased in the thirteen week periods ended September 25, 2024 compared to September 27, 2023 primarily due to higher royalties and franchise advertising revenues.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $225.7 million and $3.2 million respectively, for the thirteen week period ended September 25, 2024 compared to $202.8 million and $2.4 million respectively, for the thirteen week period ended September 27, 2023.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen week period ended September 25, 2024 compared to September 27, 2023:

Percentage Change in the Thirteen Week Period Ended September 25, 2024 versus September 27, 2023

Comparable Restaurant Sales (1)

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Costs and Expenses

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

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

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

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

September 25, 2024 September 27, 2023

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

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As a percentage of Company sales:

• Food and beverage costs were favorable 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.

• Food and beverage costs were favorable 0.6% due to 1.7% from menu pricing, partially offset by 0.6% of unfavorable commodity costs primarily driven by poultry and produce and 0.5% of unfavorable menu item mix.

• Restaurant labor was favorable 1.3% due to 2.4% of sales leverage and 0.1% of lower other labor expenses, partially offset by 0.8% of higher hourly labor expenses driven by increased wage rates and staffing levels and 0.4% of higher manager salaries.

• Restaurant expenses were favorable 1.2% due to 2.5% of sales leverage and 0.3% of lower delivery fees, partially offset by 1.3% of higher repairs and maintenance and 0.3% of higher other restaurant expenses.

Depreciation and amortization increased $4.4 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended March 29, 2023 $ 42.5

Thirteen Week Period Ended September 27, 2023 $ 41.9

Additions for new and existing restaurant assets 7.5

Corporate assets 0.6

Finance leases 2.4

Retirements and fully depreciated restaurant assets (5.5)

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 March 29, 2023 $ 40.6

Performance-based compensation (1)

Stock-based compensation (2)

Payroll expenses 0.7

Recruiting (0.5)

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

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

Severance 0.4 1.0

Lease contingencies 0.3 2.0

Remodel-related asset write-offs 0.1 0.1

Other (0.2) (0.3)

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:

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

Food and beverage costs $ 809.7 25.5 % $ 866.4 28.6 % $ 56.7 3.1 %

Restaurant labor 1,074.8 33.9 % 1,026.4 33.9 % (48.4) — %

Restaurant expenses 888.9 28.0 % 818.1 27.0 % (70.8) (1.0) %

Depreciation and amortization 125.8 126.2 0.4

General and administrative 131.7 115.7 (16.0)

Other (gains) and charges 19.5 19.8 0.3

Interest expenses 49.9 40.4 (9.5)

Other income, net (0.3) (1.3) (1.0)

As a percentage of Company sales:

• 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

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

Additions for existing and new restaurant assets 19.6

Corporate assets 0.8

Finance leases (6.0)

Retirements and fully depreciated restaurant assets (6.1)

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

Thirteen Week Period Ended September 25, 2024 $ 46.3

General and administrative expenses increased $9.4 million as follows:

General and Administrative

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

Thirteen Week Period Ended September 27, 2023 $ 42.4

Performance-based compensation (1)

Stock-based compensation (2)

Corporate technology initiatives 1.5

Payroll expenses 1.9

Stock-based compensation

Professional fees 1.4

Recruiting (1.2)

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

Thirteen Week Period Ended September 25, 2024 $ 51.8

(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):

Thirty-Nine Week Periods Ended

2024 March 29,

Thirteen Week Periods Ended

September 25,

2024 September 27,

Enterprise system implementation costs $ 4.4 $ 2.0

2 unchanged sentences

Lease contingencies — 0.5

Severance 0.5 3.9

Remodel-related asset write-offs 0.4 1.1

Other 1.3 1.0

$ 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,

Interest expenses decreased $2.7 million primarily due to a lower average revolver balance during the current year.

Thirteen Week Periods Ended

September 25,

2024 September 27,

Effective income tax rate 9.0 % — %

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.

The federal statutory tax rate was 21.0% for the thirteen week periods ended September 25, 2024 and September 27, 2023.

The change in the effective income tax rate in the thirteen week period ended September 25, 2024 to the thirteen week period ended September 27, 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 March 27, 2024 compared to March 29, 2023

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

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

2024 March 29,

September 25,

2024 September 27,

Company sales $ 1,018.9 $ 897.8 $ 121.1 13.5 %

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Total revenues $ 1,030.4 $ 908.1 $ 122.3 13.5 %

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.

Chili’s Total revenues increased by 13.5% primarily due to favorable comparable restaurant sales driven by menu pricing, higher traffic, and favorable 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

March 27, 2024 March 29, 2023

September 25, 2024 September 27, 2023

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

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As a percentage of Company sales:

• Chili’s Food and beverage costs were favorable 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:

• Chili’s Food and beverage costs were favorable 0.6% due to 1.8% from menu pricing partially offset by 0.6% of unfavorable commodity costs primarily driven by poultry and produce and 0.6% of unfavorable menu item mix.

• Chili’s Restaurant labor was favorable 1.1% due to 2.6% of sales leverage, partially offset by 1.1% of higher hourly labor driven by increased wage rates and staffing levels and 0.4% of increased manager salary.

• Chili’s Restaurant expenses were favorable 1.2% due to 2.7% of sales leverage and 0.4% lower delivery fees, partially offset by 1.5% of higher repairs and maintenance and 0.4% of higher other restaurant expenses.

Chili’s Depreciation and amortization increased $4.3 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended March 29, 2023 $ 36.7

Thirteen Week Period Ended September 27, 2023 $ 36.2

Additions for new and existing restaurant assets 6.8

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Retirements and fully depreciated restaurant assets (4.7)

Thirteen Week Period Ended March 27, 2024 $ 36.6

Thirteen Week Period Ended September 25, 2024 $ 40.5

Chili’s General and administrative increased $1.8 million as follows:

General and Administrative

Thirteen Week Period Ended March 29, 2023 $ 8.8

Thirteen Week Period Ended September 27, 2023 $ 10.0

Performance-based compensation 0.8

Defined contribution plan employer expenses and other benefits 0.3

Stock-based compensation 0.6

Thirteen Week Period Ended March 27, 2024 $ 10.8

Payroll expenses 0.5

Thirteen Week Period Ended September 25, 2024 $ 11.8

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

2024 March 29,

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

Litigation & claims, net 1.9 0.3

Other (0.2) 0.4

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 %

Franchise revenues 31.8 28.9 2.9 10.0 %

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

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:

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

Food and beverage costs $ 721.6 25.7 % $ 772.5 29.0 % $ 50.9 3.3 %

Restaurant labor 955.3 34.1 % 908.7 34.1 % (46.6) — %

Restaurant expenses 785.5 28.0 % 718.5 27.0 % (67.0) (1.0) %

Depreciation and amortization 108.3 108.7 0.4

General and administrative 31.0 26.8 (4.2)

Other (gains) and charges 10.3 10.9 0.6

As a percentage of Company sales:

• 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

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

Additions for existing and new restaurant assets 17.4

Finance leases (6.0)

Retirements and fully depreciated restaurant assets (11.7)

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

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

General and Administrative

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

Performance-based compensation 1.9

Defined contribution plan employer expenses and other benefits 1.3

Stock-based compensation 0.9

Recruiting (0.8)

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):

Thirty-Nine Week Periods Ended

2024 March 29,

September 25,

2024 September 27,

Litigation & claims, net $ 1.2 $ 2.2

Restaurant closure asset write-offs and charges 0.7 0.6

Severance 0.1 1.9

Remodel-related asset write-offs — 1.1

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

Loss from natural disasters, net of (insurance recoveries) (0.4) 0.8

Other 1.0 0.9

$ 10.3 $ 10.9

Maggiano’s Segment

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

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

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

2024 March 29,

September 25,

2024 September 27,

Company sales $ 108.4 $ 104.2 $ 4.2 4.0 %

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Total revenues $ 108.6 $ 104.4 $ 4.2 4.0 %

Maggiano’s Total revenues increased 0.8% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic.

Maggiano’s Total revenues increased 4.0% primarily due to favorable comparable restaurant sales driven by menu pricing and favorable menu item mix, partially offset by lower traffic.

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

1 unchanged sentence

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

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

Food and beverage costs $ 28.5 23.7 % $ 29.6 24.7 % $ 1.1 1.0 %

Restaurant labor 39.3 32.6 % 39.2 32.7 % (0.1) 0.1 %

Restaurant expenses 34.6 28.7 % 33.1 27.7 % (1.5) (1.0) %

Depreciation and amortization 3.4 3.3 (0.1)

General and administrative 2.4 2.0 (0.4)

Other (gains) and charges 0.2 0.4 0.2

As a percentage of Company sales:

• 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 %

Franchise revenues 0.5 0.4 0.1 25.0 %

Total revenues $ 372.0 $ 365.7 $ 6.3 1.7 %

Maggiano’s Total revenues increased 1.7% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic.

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

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

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

March 27, 2024 March 29, 2023

September 25, 2024 September 27, 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 2.0% 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.

• Maggiano’s Food and beverage costs were favorable 1.4% due to 1.9% from menu pricing and 0.2% of favorable menu item mix, partially offset by 0.7% of unfavorable commodity costs primarily driven by dairy and poultry.

• Maggiano’s Restaurant labor was favorable 2.6% due to 1.7% of lower hourly labor, 0.8% of sales leverage, and 0.1% of lower other labor expenses.

• Maggiano’s Restaurant expenses were favorable 0.5% due to 0.9% of sales leverage and 0.5% of lower supervision, partially offset by 0.4% of higher repairs and maintenance and 0.5% of higher other restaurant expenses.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Net cash provided by operating activities $ 62.8 $ 59.1 $ 3.7

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.

Net cash provided by operating activities increased due to an increase in operating income, partially offset by an increase in payments of performance-based compensation and interest on the 8.250% notes in the current year, and the timing of other operational receipts and payments.

Cash Flows from Investing Activities

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Net cash used in investing activities $ (56.5) $ (45.6) $ (10.9)

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.

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

Cash Flows from Financing Activities

Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance

2024 March 29,

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Net cash used in financing activities $ (54.7) $ (14.2) $ (40.5)

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 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.

Net cash used in financing activities increased primarily due to an increase in share repurchase activity in fiscal 2025 of $50.1 million, partially offset by an increase of $11.0 million in net borrowing activity on the revolving credit facility.

During the thirteen week period ended September 25, 2024, net borrowings of $25.0 million were drawn on the revolving credit facility.

As of September 25, 2024, $875.0 million of credit was available under the revolving credit facility.

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 September 25, 2024, our interest rate was 6.46% consisting of SOFR of 4.86% plus the applicable margin and spread adjustment of 1.60%.

As of September 25, 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.

We intend to refinance our 5.000% notes, which will mature in October 2024, through our existing revolving credit facility.

Subsequent to the end of the first quarter, on October 1, 2024, our $350.0 million of 5.000% senior notes matured and were repaid using available capacity under our existing revolving credit facility.

Refer to Note 6 - Debt for further information about our notes and revolving credit facility.

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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 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.

In the thirteen week period ended September 25, 2024, we repurchased 1.1 million shares of our common stock for $74.8 million, including 0.9 million shares purchased for $66.0 million as part of our share repurchase program and 0.2 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 March 27, 2024, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program.

As of September 25, 2024, approximately $117.0 million of share repurchase authorization remains under the current share repurchase program.

Cash Flow Outlook

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

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.

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.

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 unfold.

Critical Accounting Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis