DE
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75-1914582
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(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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3000 Olympus Blvd
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Dallas
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TX
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75019
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(Address of principal executive offices)
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(Zip Code)
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(972)
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980-9917
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(Registrant’s telephone number, including area code)
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Title of each class
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Trading Symbol(s)
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Name of exchange on which registered
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Common Stock, $0.10 par value
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EAT
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NYSE
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Class
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Outstanding at August 14, 2020
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Common Stock, $0.10 par value
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45,065,101 shares
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Page
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PART I
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PART II
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PART III
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PART IV
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•
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Trade area demographics, such as target population density and household income levels;
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•
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Physical site characteristics, such as visibility, accessibility and traffic volume;
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•
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Relative proximity to activity centers, such as shopping centers, hotel and entertainment complexes and office buildings; and
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•
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Supply and demand trends, such as proposed infrastructure improvements, new developments and existing and potential competition.
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Fiscal 2020
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Fiscal 2021
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Fiscal Year Openings
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Full Year Projected Openings
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New Openings
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Company-owned restaurants
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Chili’s domestic
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6
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7
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Chili’s international
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0
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0
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Maggiano’s domestic
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0
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0
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Total Company-owned
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6
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7
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Relocation Openings
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Chili’s domestic Company-owned relocations
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0
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2
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Fiscal 2020
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Fiscal 2021
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Fiscal Year Openings
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Full Year Projected Openings
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New Openings
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Franchise restaurants
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Chili’s domestic
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2
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1-3
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Chili’s international
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23
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6-9
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Maggiano’s domestic
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0
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1
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Total franchise
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25
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8-13
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(1)
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Domestic - the percentages in this column are based on number of domestic franchised restaurants versus total domestic restaurants.
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(2)
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International - the percentages in this column are based on number of international franchised restaurants versus total international restaurants.
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(3)
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Overall - the percentages in this column are based on the total number of franchised restaurants (domestic and international) versus total system-wide number of restaurants.
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•
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Increase gross sales and operating profits at existing restaurants with food and beverage options desired by our guests;
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•
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Evolve our marketing and branding strategies in order to appeal to guests;
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•
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Innovate and implement technology initiatives that provide a unique digital guest experience;
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•
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Identify adequate sources of capital to fund and finance strategic initiatives, including reimaging of existing restaurants, new restaurant development and new restaurant equipment;
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•
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Grow and expand operations, including identifying available, suitable and economically viable locations for new restaurants, or making strategic acquisitions; and
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•
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Improve the speed and quality of our service.
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•
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Difficulties in achieving consistency of product quality and service as compared to United States operations;
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•
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Changes to recipes and menu offerings to meet cultural norms;
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•
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Challenges to obtain adequate and reliable supplies necessary to provide menu items and maintain food quality; and
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•
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Differences, changes or uncertainties in economic, regulatory, legal, cultural, social and political conditions.
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•
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Increase our cost of borrowing;
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•
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Limit our ability to access capital;
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•
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Result in more restrictive covenants in agreements governing the terms of any future indebtedness that we may incur, including restrictions on our ability to pay distributions or repurchase shares;
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•
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Require us to provide collateral for any future borrowings; and
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•
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Adversely affect the market price of our outstanding debt securities.
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June 24, 2020
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|||||||
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Domestic
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International
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Total
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Chili’s
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Company-owned
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1,059
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5
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1,064
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Franchise
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174
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372
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546
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1,233
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377
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1,610
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Maggiano’s
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Company-owned
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52
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—
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52
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Franchise
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1
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—
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1
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53
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—
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53
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System-wide
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1,286
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377
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1,663
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Chili’s
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Maggiano’s
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Square feet
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3,200 - 8,100
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8,100 - 28,400
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Dining seats
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140 - 420
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260 - 770
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Dining tables
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35 - 70
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60 - 130
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Fiscal 2015
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Fiscal 2016
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Fiscal 2017
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Fiscal 2018
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Fiscal 2019
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Fiscal 2020
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||||||||||||
Brinker International
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$
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100.00
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$
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82.38
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$
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70.06
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$
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94.99
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$
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75.92
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$
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48.07
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S&P 500
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$
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100.00
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$
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103.99
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$
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122.60
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$
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140.23
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$
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154.83
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$
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166.45
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S&P Restaurants(1)
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$
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100.00
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$
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110.56
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$
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133.23
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$
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132.42
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$
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196.08
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$
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178.63
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(1)
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The S&P Restaurants Index is comprised of Chipotle Mexican Grill, Inc., Darden Restaurants, Inc., McDonald’s Corp., Domino’s Pizza Inc., Starbucks Corporation and Yum! Brands, Inc.
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Total
Number
of Shares
Purchased(1)
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Average
Price Paid per Share |
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Total Number
of Shares Purchased as Part of Publicly Announced Program |
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Approximate Dollar Value that May Yet be
Purchased
Under the Program
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||||||
March 26, 2020 through April 29, 2020
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—
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$
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—
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—
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$
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166.8
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April 30, 2020 through May 27, 2020
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0.0
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$
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20.53
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—
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$
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166.8
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May 28, 2020 through June 24, 2020
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0.0
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$
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28.76
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—
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$
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166.8
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Total
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0.0
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$
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24.50
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—
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(1)
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Shares owned and tendered by team members to satisfy tax withholding obligations were purchased at the average of the high and low prices of the Company’s shares on the date of vesting. In the fourth quarter of fiscal 2020, 6.4 thousand shares were tendered by team members at an average price of $24.50.
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Fiscal Years Ended
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||||||||||||||||||
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6/24/2020(1)(2)
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6/26/2019(2)
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6/27/2018
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6/28/2017
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6/29/2016(3)
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Income Statement Data:
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Revenues
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Company sales
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$
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3,004.9
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$
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3,106.2
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$
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3,041.5
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$
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3,062.5
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$
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3,166.7
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Franchise and other revenues
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73.6
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|
|
111.7
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93.9
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88.3
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90.8
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|||||
Total revenues
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3,078.5
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3,217.9
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3,135.4
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3,150.8
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3,257.5
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|||||
Operating costs and expenses
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Food and beverage costs
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798.6
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823.0
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796.0
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791.3
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840.2
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Restaurant labor
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1,045.5
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1,059.7
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1,033.9
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1,017.9
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1,036.0
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|||||
Restaurant expenses
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825.8
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812.3
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757.5
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773.5
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762.7
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|||||
Depreciation and amortization
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162.3
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147.6
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151.4
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156.4
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156.4
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|||||
General and administrative
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136.3
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149.1
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136.0
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132.8
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127.6
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|||||
Other (gains) and charges
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47.4
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(4.5
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)
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34.5
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22.7
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17.1
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|||||
Total operating costs and expenses
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3,015.9
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2,987.2
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2,909.3
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2,894.6
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2,940.0
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|||||
Operating income
|
62.6
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|
|
230.7
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226.1
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|
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256.2
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|
|
317.5
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|||||
Interest expenses
|
59.6
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|
|
61.6
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|
|
59.0
|
|
|
49.6
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|
|
32.6
|
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|||||
Other (income), net
|
(1.9
|
)
|
|
(2.7
|
)
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|
(3.1
|
)
|
|
(1.9
|
)
|
|
(1.5
|
)
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|||||
Income before income taxes
|
4.9
|
|
|
171.8
|
|
|
170.2
|
|
|
208.5
|
|
|
286.4
|
|
|||||
Provision (benefit) for income taxes
|
(19.5
|
)
|
|
16.9
|
|
|
44.3
|
|
|
57.7
|
|
|
85.8
|
|
|||||
Net income
|
$
|
24.4
|
|
|
$
|
154.9
|
|
|
$
|
125.9
|
|
|
$
|
150.8
|
|
|
$
|
200.6
|
|
|
|
|
|
|
|
|
|
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||||||||||
Basic net income per share
|
$
|
0.64
|
|
|
$
|
4.04
|
|
|
$
|
2.75
|
|
|
$
|
2.98
|
|
|
$
|
3.47
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net income per share
|
$
|
0.63
|
|
|
$
|
3.96
|
|
|
$
|
2.72
|
|
|
$
|
2.94
|
|
|
$
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic weighted average shares outstanding
|
38.2
|
|
|
38.3
|
|
|
45.7
|
|
|
50.6
|
|
|
57.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted weighted average shares outstanding
|
38.9
|
|
|
39.1
|
|
|
46.3
|
|
|
51.2
|
|
|
58.7
|
|
|||||
|
|
|
|
|
|
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|
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|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
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|
||||||||||
Working capital
|
$
|
(273.5
|
)
|
|
$
|
(244.6
|
)
|
|
$
|
(278.0
|
)
|
|
$
|
(292.0
|
)
|
|
$
|
(257.2
|
)
|
Total assets(4)
|
2,356.0
|
|
|
1,258.3
|
|
|
1,347.3
|
|
|
1,403.6
|
|
|
1,458.5
|
|
|||||
Long-term obligations(4)
|
2,337.2
|
|
|
1,614.9
|
|
|
1,631.3
|
|
|
1,461.0
|
|
|
1,248.4
|
|
|||||
Shareholders’ deficit
|
(479.1
|
)
|
|
(778.2
|
)
|
|
(718.3
|
)
|
|
(493.6
|
)
|
|
(225.6
|
)
|
|||||
Dividends per share
|
$
|
1.14
|
|
|
$
|
1.52
|
|
|
$
|
1.52
|
|
|
$
|
1.36
|
|
|
$
|
1.28
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of Restaurants Open (End of Year):
|
|
|
|
|
|
|
|
|
|
||||||||||
Company-owned
|
1,116
|
|
|
1,001
|
|
|
997
|
|
|
1,003
|
|
|
1,001
|
|
|||||
Franchise
|
547
|
|
|
664
|
|
|
689
|
|
|
671
|
|
|
659
|
|
|||||
Total
|
1,663
|
|
|
1,665
|
|
|
1,686
|
|
|
1,674
|
|
|
1,660
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues of Franchisees(5)
|
$
|
833.7
|
|
|
$
|
1,311.3
|
|
|
$
|
1,309.4
|
|
|
$
|
1,331.9
|
|
|
$
|
1,348.6
|
|
(1)
|
Fiscal 2020 reflects the impact of the adoption of the new lease accounting standard using the alternative transition method. All other periods presented have not been restated. Refer to Part II, Item 8 - Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements, Note 1 - Nature of Operations and Summary of Significant Accounting Policies and Note 4 - Leases for information regarding our adoption of the new revenue standard.
|
(2)
|
Fiscal 2020 and fiscal 2019 reflect the impact of the adoption of the new revenue recognition accounting standard using the modified retrospective transition method. All other periods presented have not been restated. Refer to Part II, Item 8 - Financial Statements and Supplementary Data, Notes to the Consolidated Financial Statements, Note 1 - Nature of Operations and Summary of Significant Accounting Policies for information on our revenue policy.
|
(3)
|
Fiscal 2016 consisted of 53 weeks while all other periods presented consisted of 52 weeks.
|
(4)
|
Debt issuance costs are presented in the Consolidated Balance Sheets as a direct deduction from the associated debt liability. Amounts presented for fiscal years prior to fiscal 2017 were reclassified from Other assets to Long-term debt to conform to the current presentation.
|
(5)
|
Revenues of Franchisees represent the gross sales reported by our franchisees. Royalty revenues recognized by us are based on these sales generated and reported to us by franchisees.
|
•
|
Overview - a general description of our business strategy and the casual dining segment of the restaurant industry
|
•
|
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, share repurchase activity, and known trends that may impact liquidity
|
•
|
Impact of Inflation - a discussion of the effect of inflation on our business
|
•
|
Off-Balance Sheet Arrangements - a discussion of the off-balance sheet arrangements entered into by us
|
•
|
Critical Accounting Estimates - a discussion of accounting policies that require critical judgments and estimates including recent accounting pronouncements
|
•
|
Comparable restaurant sales in the fourth quarter of fiscal 2020 decreased 36.7% (Chili’s decreased 32.2%, and Maggiano’s decreased 66.7%) compared to the same prior year period
|
•
|
Certain charges, net of (credits) were recorded in the second half of fiscal 2020 related to the COVID-19 pandemic in Other (gains) and charges in the Consolidated Statements of Comprehensive Income, these primarily included:
|
–
|
Employee assistance - $17.3 million of expenses related to both Chili’s and Maggiano’s employee assistance payments and related payroll taxes for the team members that experienced reduced shifts during this pandemic, who would have otherwise not received such payment under our normal compensation practices
|
–
|
Other COVID-19-related expenses - $1.5 million of expenses related to restaurant supplies such as face masks and hand sanitizer required to reopen dining rooms, as well as costs related to canceled projects due to the pandemic, and $1.1 million of expenses related to spoiled inventory at both Chili’s and Maggiano’s due to the unexpected decline in sales and dining room closures
|
–
|
Employee retention credit - $7.9 million credit of certain payroll taxes was received as part of the Coronavirus Aid Relief and Economic Security (“CARES”) Act relief package. The CARES Act was designed primarily to help keep businesses running during and after the pandemic. As of June 24, 2020, this package allowed us to take advantage of credits, deferments, and deductions. Additional information regarding the impact of the CARES Act is set forth within Part II Item 7. Management’s
|
–
|
Long-lived and operating lease impairments - $14.5 million of non-cash expenses were recorded during the fourth quarter of fiscal 2020 related to 18 underperforming Chili’s and 3 underperforming Maggiano’s restaurants. Of the impaired restaurants, 19 continue to operate, and 2 Chili’s will be permanently closed
|
•
|
As of July 29, 2020, there were 885 Chili’s and 52 Maggiano’s Company-owned restaurants with dining rooms or patios open, representing 84.0% of total Company-owned restaurants. Capacities are limited in accordance with state and local mandates
|
•
|
Comparable restaurant sales for the first period of fiscal 2021, ended July 29, 2020, compared to the prior year are as follows:
|
|
Comparable Restaurant Sales
|
|||||||
|
Opened Dining Rooms
|
|
Off-Premise Only
|
|
Total Comparable Restaurant Sales
|
|||
Chili’s
|
(3.8
|
)%
|
|
(46.3
|
)%
|
|
(10.9
|
)%
|
Maggiano’s
|
(44.6
|
)%
|
|
N/A
|
|
|
(44.6
|
)%
|
•
|
It’s Just Wings™, a virtual brand offering through our partnership with DoorDash, launched nationally in 1,050 of our Company-owned restaurants on June 23, 2020. It’s Just Wings sales are included in comparable restaurant sales for restaurants operating the virtual brand
|
•
|
Brinker had total liquidity of $576.2 million as of July 29, 2020
|
|
Fiscal Years Ended
|
||||
|
June 24, 2020
|
|
June 26, 2019
|
||
Revenues
|
|
|
|
||
Company sales(1)
|
97.6
|
%
|
|
96.5
|
%
|
Franchise and other revenues(1)
|
2.4
|
%
|
|
3.5
|
%
|
Total revenues(1)
|
100.0
|
%
|
|
100.0
|
%
|
Operating costs and expenses
|
|
|
|
||
Food and beverage costs(2)
|
26.6
|
%
|
|
26.5
|
%
|
Restaurant labor(2)
|
34.8
|
%
|
|
34.1
|
%
|
Restaurant expenses(2)
|
27.5
|
%
|
|
26.2
|
%
|
Depreciation and amortization(1)
|
5.3
|
%
|
|
4.6
|
%
|
General and administrative(1)
|
4.4
|
%
|
|
4.6
|
%
|
Other (gains) and charges(1)
|
1.5
|
%
|
|
(0.1
|
)%
|
Total operating costs and expenses(1)
|
98.0
|
%
|
|
92.8
|
%
|
Operating income(1)
|
2.0
|
%
|
|
7.2
|
%
|
Interest expenses(1)
|
1.9
|
%
|
|
1.9
|
%
|
Other (income), net(1)
|
(0.1
|
)%
|
|
0.0
|
%
|
Income before income taxes(1)
|
0.2
|
%
|
|
5.3
|
%
|
Provision (benefit) for income taxes(1)
|
(0.6
|
)%
|
|
0.5
|
%
|
Net income(1)
|
0.8
|
%
|
|
4.8
|
%
|
(1)
|
As a percentage of Total revenues
|
(2)
|
As a percentage of Company sales
|
•
|
Company sales include revenues generated by the operation of Company-owned restaurants including sales made with gift card redemptions.
|
•
|
Franchise and other revenues include Royalties and Franchise fees and other revenues. Franchise fees and other revenues include gift card breakage, Maggiano’s banquet service charge income, franchise advertising fees, delivery fee income, digital entertainment revenues, gift card equalization, franchise and development fees, merchandise income, retail royalty revenues, and gift card discount costs from third-party gift card sales.
|
|
Total Revenues
|
||||||||||
|
Chili’s
|
|
Maggiano’s
|
|
Total Revenues
|
||||||
Fiscal year ended June 26, 2019
|
$
|
2,782.2
|
|
|
$
|
435.7
|
|
|
$
|
3,217.9
|
|
Change from:
|
|
|
|
|
|
||||||
Comparable restaurant sales(1)
|
(226.6
|
)
|
|
(82.2
|
)
|
|
(308.8
|
)
|
|||
Restaurant openings
|
21.6
|
|
|
—
|
|
|
21.6
|
|
|||
Restaurant relocations
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||
Restaurant closings(2)
|
(17.3
|
)
|
|
—
|
|
|
(17.3
|
)
|
|||
Restaurant acquisitions(3)
|
203.3
|
|
|
—
|
|
|
203.3
|
|
|||
Company sales
|
(19.1
|
)
|
|
(82.2
|
)
|
|
(101.3
|
)
|
|||
Royalties(4)
|
(19.1
|
)
|
|
(0.1
|
)
|
|
(19.2
|
)
|
|||
Franchise fees and other revenues
|
(12.3
|
)
|
|
(6.6
|
)
|
|
(18.9
|
)
|
|||
Franchise and other revenues
|
(31.4
|
)
|
|
(6.7
|
)
|
|
(38.1
|
)
|
|||
Fiscal year ended June 24, 2020
|
$
|
2,731.7
|
|
|
$
|
346.8
|
|
|
$
|
3,078.5
|
|
(1)
|
Comparable restaurant sales decreased due to the COVID-19 pandemic that impacted restaurant sales due to guests dining out less, temporary dining room closures and capacity limitations, partially offset by increased off-premise sales.
|
(2)
|
Restaurant closings include the impact of permanently closed locations, including temporary COVID-19 closures that have extended past 14 consecutive days.
|
(3)
|
Effective September 5, 2019, we acquired 116 Chili’s restaurants from a franchisee. The revenues from these restaurants are included in Company sales subsequent to the acquisition date.
|
(4)
|
Royalties are based on franchise sales. Our franchisees generated sales of approximately $833.7 million in fiscal 2020, and $1,311.3 million in fiscal 2019. Lower royalties in fiscal 2020 are primarily due to the acquisition of 116 Chili’s restaurants from a franchisee in the first quarter of fiscal 2020 and the adverse impact of the COVID-19 pandemic.
|
|
Percentage Change in the Fifty-Two Week Period Ended June 24, 2020 versus June 26, 2019
|
|||||||||||||
|
Comparable
Sales(1)
|
|
Price Impact
|
|
Mix
Shift(2)
|
|
Traffic
|
|
Restaurant Capacity(3)
|
|||||
Company-owned(4)
|
(10.1
|
)%
|
|
1.3
|
%
|
|
(2.0
|
)%
|
|
(9.4
|
)%
|
|
9.5
|
%
|
Chili’s(4)
|
(8.6
|
)%
|
|
1.3
|
%
|
|
(1.1
|
)%
|
|
(8.8
|
)%
|
|
10.0
|
%
|
Maggiano’s
|
(19.9
|
)%
|
|
1.5
|
%
|
|
(4.0
|
)%
|
|
(17.4
|
)%
|
|
0.3
|
%
|
Chili’s franchise(4)(5)
|
(14.4
|
)%
|
|
|
|
|
|
|
|
|
||||
U.S.(4)
|
(10.1
|
)%
|
|
|
|
|
|
|
|
|
||||
International
|
(23.1
|
)%
|
|
|
|
|
|
|
|
|
||||
Chili’s domestic(4)(6)
|
(8.8
|
)%
|
|
|
|
|
|
|
|
|
||||
System-wide(4)(7)
|
(10.8
|
)%
|
|
|
|
|
|
|
|
|
(1)
|
Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 months except acquired restaurants which are included after more than 12 months ownership. 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. Chili’s Company-owned Restaurant Capacity increased in fiscal 2020 primarily related to the acquisition of 116 Chili’s restaurants in the first quarter of fiscal 2020. We believe the COVID-19 related restaurant closures are temporary and therefore no adjustment has been made to capacity.
|
(4)
|
Chili’s Company-owned Comparable Restaurant Sales exclude the impact from the 116 Chili’s restaurants acquired in the first quarter of fiscal 2020. Chili’s Franchise U.S. Comparable Restaurant Sales include sales from these 116 acquired restaurants until the September 5, 2019 acquisition date.
|
(5)
|
Chili’s Franchise sales generated by franchisees are not included in revenues in the Consolidated Statements of Comprehensive Income; however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe including franchise comparable restaurant sales provides investors information regarding brand performance that is relevant to current operations.
|
(6)
|
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.
|
(7)
|
System-wide Comparable Restaurant Sales are derived from sales generated by Company-owned Chili’s and Maggiano’s restaurants in addition to the sales generated at franchise-operated Chili’s restaurants.
|
|
Fiscal Years Ended
|
|
(Favorable) Unfavorable Variance
|
|||||||||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
||||||||||||||||
|
Dollars
|
|
% of Company Sales
|
|
Dollars
|
|
% of Company Sales
|
|
Dollars
|
|
% of Company Sales
|
|||||||||
Food and beverage costs
|
$
|
798.6
|
|
|
26.6
|
%
|
|
$
|
823.0
|
|
|
26.5
|
%
|
|
$
|
(24.4
|
)
|
|
0.1
|
%
|
Restaurant labor
|
1,045.5
|
|
|
34.8
|
%
|
|
1,059.7
|
|
|
34.1
|
%
|
|
(14.2
|
)
|
|
0.7
|
%
|
|||
Restaurant expenses
|
825.8
|
|
|
27.5
|
%
|
|
812.3
|
|
|
26.2
|
%
|
|
13.5
|
|
|
1.3
|
%
|
|||
Depreciation and amortization
|
162.3
|
|
|
|
|
147.6
|
|
|
|
|
14.7
|
|
|
|
||||||
General and administrative
|
136.3
|
|
|
|
|
149.1
|
|
|
|
|
(12.8
|
)
|
|
|
||||||
Other (gains) and charges
|
47.4
|
|
|
|
|
(4.5
|
)
|
|
|
|
51.9
|
|
|
|
||||||
Interest expenses
|
59.6
|
|
|
|
|
61.6
|
|
|
|
|
(2.0
|
)
|
|
|
||||||
Other (income), net
|
(1.9
|
)
|
|
|
|
(2.7
|
)
|
|
|
|
0.8
|
|
|
|
|
Depreciation and Amortization
|
||
Fiscal year ended June 26, 2019
|
$
|
147.6
|
|
Change from:
|
|
||
Additions for existing and new restaurant assets(1)
|
15.9
|
|
|
Finance leases(2)
|
10.6
|
|
|
Acquisition of franchise restaurants(3)
|
8.3
|
|
|
Corporate assets
|
1.6
|
|
|
Retirements and fully depreciated restaurant assets
|
(21.5
|
)
|
|
Other
|
(0.2
|
)
|
|
Fiscal year ended June 24, 2020
|
$
|
162.3
|
|
(1)
|
Additions for existing and new restaurant assets increased primarily related to the Chili’s remodel initiative and six new Chili’s restaurants opened during fiscal 2020.
|
(2)
|
Finance leases increased primarily due to the new Chili’s table-top devices installed during fiscal 2020.
|
(3)
|
Acquisition of franchise restaurants represents the depreciation and amortization of the assets and finance leases acquired of the 116 Chili’s restaurants in the first quarter of fiscal 2020.
|
|
General and Administrative
|
||
Fiscal year ended June 26, 2019
|
$
|
149.1
|
|
Change from:
|
|
||
Performance-based compensation
|
(7.8
|
)
|
|
Professional and legal fees
|
(2.7
|
)
|
|
Stock-based compensation
|
(1.9
|
)
|
|
Other
|
(0.4
|
)
|
|
Fiscal year ended June 24, 2020
|
$
|
136.3
|
|
|
Fifty-Two Week Periods Ended
|
||||||
|
June 24, 2020
|
|
June 26, 2019
|
||||
Restaurant impairment charges
|
$
|
19.1
|
|
|
$
|
10.8
|
|
COVID-19 related charges, net of (credits)
|
12.2
|
|
|
—
|
|
||
Restaurant closure charges
|
3.8
|
|
|
4.3
|
|
||
Remodel-related costs
|
3.2
|
|
|
7.7
|
|
||
Severance and other benefit charges
|
3.2
|
|
|
0.9
|
|
||
Corporate headquarters relocation charges
|
1.1
|
|
|
6.3
|
|
||
Property damages, net of (insurance recoveries)
|
(0.7
|
)
|
|
(0.7
|
)
|
||
Loss (gain) on sale of assets, net
|
(0.2
|
)
|
|
(6.9
|
)
|
||
Sale leaseback (gain), net of transaction charges
|
—
|
|
|
(27.3
|
)
|
||
Other
|
5.7
|
|
|
0.4
|
|
||
|
$
|
47.4
|
|
|
$
|
(4.5
|
)
|
|
Fiscal Years Ended
|
|
Favorable (Unfavorable) Variance
|
||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
|||||||
Company sales
|
$
|
2,673.5
|
|
|
$
|
2,692.6
|
|
|
$
|
(19.1
|
)
|
Royalties
|
33.7
|
|
|
52.8
|
|
|
(19.1
|
)
|
|||
Franchise fees and other revenues
|
24.5
|
|
|
36.8
|
|
|
(12.3
|
)
|
|||
Franchise and other revenues
|
58.2
|
|
|
89.6
|
|
|
(31.4
|
)
|
|||
Total revenues
|
2,731.7
|
|
|
2,782.2
|
|
|
(50.5
|
)
|
|||
|
|
|
|
|
|
||||||
Company restaurant expenses(1)
|
2,363.2
|
|
|
2,329.6
|
|
|
(33.6
|
)
|
|||
Depreciation and amortization
|
133.9
|
|
|
120.1
|
|
|
(13.8
|
)
|
|||
General and administrative
|
32.1
|
|
|
38.7
|
|
|
6.6
|
|
|||
Other (gains) and charges
|
35.3
|
|
|
(6.4
|
)
|
|
(41.7
|
)
|
|||
Total operating costs and expenses
|
2,564.5
|
|
|
2,482.0
|
|
|
(82.5
|
)
|
|||
Operating income
|
$
|
167.2
|
|
|
$
|
300.2
|
|
|
$
|
(133.0
|
)
|
Operating income as a percentage of Total revenues
|
6.1
|
%
|
|
10.8
|
%
|
|
(4.7
|
)%
|
(1)
|
Company restaurant expenses include Food and beverage costs, Restaurant labor, and Restaurant expenses, including advertising.
|
|
Fiscal Years Ended
|
|
Favorable (Unfavorable) Variance
|
||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
|||||||
Company sales
|
$
|
331.4
|
|
|
$
|
413.6
|
|
|
$
|
(82.2
|
)
|
Royalties
|
0.2
|
|
|
0.3
|
|
|
(0.1
|
)
|
|||
Franchise fees and other revenues
|
15.2
|
|
|
21.8
|
|
|
(6.6
|
)
|
|||
Franchise and other revenues
|
15.4
|
|
|
22.1
|
|
|
(6.7
|
)
|
|||
Total revenues
|
346.8
|
|
|
435.7
|
|
|
(88.9
|
)
|
|||
|
|
|
|
|
|
||||||
Company restaurant expenses(1)
|
306.1
|
|
|
364.8
|
|
|
58.7
|
|
|||
Depreciation and amortization
|
15.4
|
|
|
16.2
|
|
|
0.8
|
|
|||
General and administrative
|
5.7
|
|
|
6.1
|
|
|
0.4
|
|
|||
Other (gains) and charges
|
6.8
|
|
|
1.0
|
|
|
(5.8
|
)
|
|||
Total operating costs and expenses
|
334.0
|
|
|
388.1
|
|
|
54.1
|
|
|||
Operating income
|
$
|
12.8
|
|
|
$
|
47.6
|
|
|
$
|
(34.8
|
)
|
Operating income as a percentage of Total revenues
|
3.7
|
%
|
|
10.9
|
%
|
|
(7.2
|
)%
|
(1)
|
Company restaurant expenses includes Food and beverage costs, Restaurant labor, and Restaurant expenses, including advertising expenses.
|
|
Fiscal Years Ended
|
|
|
|||||
|
June 24, 2020
|
|
June 26, 2019
|
|
Change
|
|||
Effective income tax rate
|
(398.0
|
)%
|
|
9.8
|
%
|
|
(407.8
|
)%
|
•
|
Issuing common stock for net proceeds of $139.1 million to provide additional liquidity, and amended our revolving credit facility to provide additional flexibility during this time;
|
•
|
Significantly reducing capital expenditures to essential spend only, including suspending the Chili’s remodel program and delaying construction of new restaurants;
|
•
|
Temporarily reducing pay for corporate leadership and team members, as well as above-restaurant level leadership in the fourth quarter of fiscal 2020;
|
•
|
Reducing marketing, general and administrative and restaurant expenses to support the current operations;
|
•
|
Suspending the quarterly cash dividend and the share repurchase program; and
|
•
|
Engaging in discussions with our landlords, vendors and other business partners to temporarily reduce or defer our lease and other contractual payments and obtain other concessions in the fourth quarter of fiscal 2020. Refer to Note 2 - Novel Coronavirus Pandemic within Part II, Item 8 - Financial Statements and Supplementary Data Notes to the Consolidated Financial Statements for more information.
|
•
|
Reduce our fiscal 2020 payroll tax liability by utilizing employee retention credits to assist with employee payroll costs during this outbreak of $7.9 million
|
•
|
Amend our 2018 and 2019 U.S. Income Tax Returns in order to claim additional depreciation deductions related to qualified improvement property that will allow us to generate aggregate refunds of $4.6 million, and upon filing our fiscal 2020 U.S. Income Tax Return we anticipate to include a benefit related to the additional depreciation on qualified improvement property of approximately $2.0 million
|
•
|
Defer the employer portion of certain payroll taxes, totaling $12.9 million which will be repaid in two equal installments: on December 31, 2021, and December 31, 2022
|
|
Fiscal Years Ended
|
|
Favorable (Unfavorable) Variance
|
||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
|||||||
Net cash provided by operating activities
|
$
|
245.0
|
|
|
$
|
212.7
|
|
|
$
|
32.3
|
|
|
Fiscal Years Ended
|
|
Favorable (Unfavorable) Variance
|
||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
|||||||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Payments for property and equipment
|
$
|
(104.5
|
)
|
|
$
|
(167.6
|
)
|
|
$
|
63.1
|
|
Payments for franchise restaurant acquisitions
|
(94.6
|
)
|
|
(3.1
|
)
|
|
(91.5
|
)
|
|||
Proceeds from sale of assets
|
1.2
|
|
|
1.6
|
|
|
(0.4
|
)
|
|||
Insurance recoveries
|
1.1
|
|
|
1.7
|
|
|
(0.6
|
)
|
|||
Proceeds from note receivable
|
2.8
|
|
|
2.8
|
|
|
—
|
|
|||
Proceeds from sale leaseback transactions, net of related expenses
|
—
|
|
|
485.9
|
|
|
(485.9
|
)
|
|||
Net cash (used in) provided by investing activities
|
$
|
(194.0
|
)
|
|
$
|
321.3
|
|
|
$
|
(515.3
|
)
|
|
Fiscal Years Ended
|
|
Favorable (Unfavorable) Variance
|
||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
|||||||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Borrowings on revolving credit facility
|
$
|
808.4
|
|
|
$
|
853.0
|
|
|
$
|
(44.6
|
)
|
Payments on revolving credit facility
|
(858.8
|
)
|
|
(1,150.0
|
)
|
|
291.2
|
|
|||
Purchases of treasury stock
|
(32.4
|
)
|
|
(167.7
|
)
|
|
135.3
|
|
|||
Payments on long-term debt
|
(17.8
|
)
|
|
(9.5
|
)
|
|
(8.3
|
)
|
|||
Payments of dividends
|
(57.4
|
)
|
|
(60.3
|
)
|
|
2.9
|
|
|||
Proceeds from issuance of common stock
|
146.9
|
|
|
—
|
|
|
146.9
|
|
|||
Proceeds from issuance of treasury stock
|
1.6
|
|
|
3.0
|
|
|
(1.4
|
)
|
|||
Payments for common stock issuance costs
|
(7.8
|
)
|
|
—
|
|
|
(7.8
|
)
|
|||
Payments for debt issuance costs
|
(3.2
|
)
|
|
—
|
|
|
(3.2
|
)
|
|||
Net cash used in financing activities
|
$
|
(20.5
|
)
|
|
$
|
(531.5
|
)
|
|
$
|
511.0
|
|
•
|
Modified the maturity date of the $110.0 million portion of the facility to expire on September 12, 2021, which coincides with the maturity date for the $890.0 million portion
|
•
|
Secured a waiver of compliance with financial covenants effective the third quarter of fiscal 2020 until the end of the third quarter of fiscal 2021
|
•
|
Imposed a minimum liquidity covenant (defined as availability under the revolving credit facility plus unrestricted cash and cash equivalents) to require at least $175.0 million through the third quarter of fiscal 2021
|
•
|
Increased interest rates temporarily, from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021, to be fixed at LIBOR plus 2.350%. After this temporary period, the interest rate will return to LIBOR plus an applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 1.700%. Additionally the LIBOR floor was permanently increased to 0.750%
|
•
|
Increased facility fee temporarily to 40 basis points from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021. After this temporary period, the facility fee will return to a set fee schedule which is a function of our credit rating, but is subject to a maximum of 30 basis points
|
•
|
Prohibited from making dividends, stock repurchases and investments from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021, and following this period, we will be subject to a $50.0 million aggregate limitation on dividends, stock repurchases and investments
|
•
|
Expanded the collateral securing the revolving credit facility, including intellectual property, among other things, and provided additional subsidiary guarantees
|
|
Payments Due by Period
|
||||||||||||||||||
|
Less than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than 5 Years
|
|
Total
|
||||||||||
Long-term debt(1)
|
$
|
—
|
|
|
$
|
772.9
|
|
|
$
|
350.0
|
|
|
$
|
—
|
|
|
$
|
1,122.9
|
|
Interest(2)
|
44.4
|
|
|
61.4
|
|
|
26.2
|
|
|
—
|
|
|
132.0
|
|
|||||
Finance leases(3)
|
17.8
|
|
|
42.3
|
|
|
20.9
|
|
|
53.6
|
|
|
134.6
|
|
|||||
Operating leases(3)
|
179.4
|
|
|
323.0
|
|
|
280.8
|
|
|
854.2
|
|
|
1,637.4
|
|
|||||
Purchase obligations(4)
|
15.8
|
|
|
20.2
|
|
|
12.4
|
|
|
6.3
|
|
|
54.7
|
|
(1)
|
Long-term debt consists of principal amounts owed on the revolving credit facility, 3.875% and 5.000% notes. As of June 24, 2020, $527.1 million of credit is available under the revolving credit facility. The revolving credit facility is due in September 2021.
|
(2)
|
Interest consists of remaining interest payments on the 3.875% and 5.000% notes totaling $113.6 million and remaining interest payments on the revolver totaling $18.4 million. The interest rates on the notes are fixed whereas the interest rate on the revolver is variable based on LIBOR and our applicable margin. We have assumed that the revolver balance carried will be $491.3 million in fiscal 2021 and fiscal 2022 until the maturity date of September 12, 2021 using the interest rate of 3.100%, which is the total of LIBOR plus our applicable margin as of June 24, 2020.
|
(3)
|
Finance leases and Operating leases total future lease payments represent the contractual obligations due under the contract, including cancelable option periods where we are reasonably assured to exercise the options. As of June 24, 2020, these total future lease payments included non-cancelable lease commitments of $113.4 million for finance leases, and $1,083.4 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: 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 and professional services contracts and exclude agreements that are cancelable without significant penalty.
|
|
Page
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Revenues
|
|
|
|
|
|
||||||
Company sales
|
$
|
3,004.9
|
|
|
$
|
3,106.2
|
|
|
$
|
3,041.5
|
|
Franchise and other revenues
|
73.6
|
|
|
111.7
|
|
|
93.9
|
|
|||
Total revenues
|
3,078.5
|
|
|
3,217.9
|
|
|
3,135.4
|
|
|||
Operating costs and expenses
|
|
|
|
|
|
||||||
Food and beverage costs
|
798.6
|
|
|
823.0
|
|
|
796.0
|
|
|||
Restaurant labor
|
1,045.5
|
|
|
1,059.7
|
|
|
1,033.9
|
|
|||
Restaurant expenses
|
825.8
|
|
|
812.3
|
|
|
757.5
|
|
|||
Depreciation and amortization
|
162.3
|
|
|
147.6
|
|
|
151.4
|
|
|||
General and administrative
|
136.3
|
|
|
149.1
|
|
|
136.0
|
|
|||
Other (gains) and charges
|
47.4
|
|
|
(4.5
|
)
|
|
34.5
|
|
|||
Total operating costs and expenses
|
3,015.9
|
|
|
2,987.2
|
|
|
2,909.3
|
|
|||
Operating income
|
62.6
|
|
|
230.7
|
|
|
226.1
|
|
|||
Interest expenses
|
59.6
|
|
|
61.6
|
|
|
59.0
|
|
|||
Other (income), net
|
(1.9
|
)
|
|
(2.7
|
)
|
|
(3.1
|
)
|
|||
Income before income taxes
|
4.9
|
|
|
171.8
|
|
|
170.2
|
|
|||
Provision (benefit) for income taxes
|
(19.5
|
)
|
|
16.9
|
|
|
44.3
|
|
|||
Net income
|
$
|
24.4
|
|
|
$
|
154.9
|
|
|
$
|
125.9
|
|
|
|
|
|
|
|
||||||
Basic net income per share
|
$
|
0.64
|
|
|
$
|
4.04
|
|
|
$
|
2.75
|
|
|
|
|
|
|
|
||||||
Diluted net income per share
|
$
|
0.63
|
|
|
$
|
3.96
|
|
|
$
|
2.72
|
|
|
|
|
|
|
|
||||||
Basic weighted average shares outstanding
|
38.2
|
|
|
38.3
|
|
|
45.7
|
|
|||
|
|
|
|
|
|
||||||
Diluted weighted average shares outstanding
|
38.9
|
|
|
39.1
|
|
|
46.3
|
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss)
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
$
|
(0.6
|
)
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Other comprehensive income (loss)
|
(0.6
|
)
|
|
0.2
|
|
|
0.2
|
|
|||
Comprehensive income
|
$
|
23.8
|
|
|
$
|
155.1
|
|
|
$
|
126.1
|
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
43.9
|
|
|
$
|
13.4
|
|
Accounts receivable, net
|
52.3
|
|
|
55.0
|
|
||
Inventories
|
27.3
|
|
|
23.2
|
|
||
Restaurant supplies
|
51.6
|
|
|
47.1
|
|
||
Prepaid expenses
|
13.9
|
|
|
23.7
|
|
||
Income taxes receivable, net
|
35.4
|
|
|
14.6
|
|
||
Total current assets
|
224.4
|
|
|
177.0
|
|
||
Property and equipment, at cost
|
|
|
|
||||
Land
|
34.2
|
|
|
33.4
|
|
||
Buildings and leasehold improvements
|
1,534.4
|
|
|
1,454.6
|
|
||
Furniture and equipment
|
785.7
|
|
|
757.5
|
|
||
Construction-in-progress
|
24.4
|
|
|
19.2
|
|
||
|
2,378.7
|
|
|
2,264.7
|
|
||
Less accumulated depreciation and amortization
|
(1,573.4
|
)
|
|
(1,509.6
|
)
|
||
Net property and equipment
|
805.3
|
|
|
755.1
|
|
||
Other assets
|
|
|
|
||||
Operating lease assets (Note 4)
|
1,054.6
|
|
|
—
|
|
||
Goodwill
|
187.6
|
|
|
165.5
|
|
||
Deferred income taxes, net (Note 4)
|
38.2
|
|
|
112.0
|
|
||
Intangibles, net
|
23.0
|
|
|
22.3
|
|
||
Other
|
22.9
|
|
|
26.4
|
|
||
Total other assets
|
1,326.3
|
|
|
326.2
|
|
||
Total assets
|
$
|
2,356.0
|
|
|
$
|
1,258.3
|
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
104.9
|
|
|
$
|
97.5
|
|
Gift card liability
|
109.9
|
|
|
100.9
|
|
||
Accrued payroll
|
65.2
|
|
|
82.1
|
|
||
Operating lease liabilities (Note 4)
|
117.3
|
|
|
—
|
|
||
Other accrued liabilities
|
100.6
|
|
|
141.1
|
|
||
Total current liabilities
|
497.9
|
|
|
421.6
|
|
||
Long-term debt and finance leases, less current installments
|
1,208.5
|
|
|
1,206.6
|
|
||
Long-term operating lease liabilities, less current portion (Note 4)
|
1,061.6
|
|
|
—
|
|
||
Deferred gain on sale leaseback transactions (Note 4)
|
—
|
|
|
255.3
|
|
||
Other liabilities (Note 4)
|
67.1
|
|
|
153.0
|
|
||
Commitments and contingencies (Note 18)
|
|
|
|
||||
Shareholders’ deficit
|
|
|
|
||||
Common stock (250.0 million authorized shares; $0.10 par value; 70.3 million shares issued and 45.0 million shares outstanding at June 24, 2020, and 176.2 million shares issued and 37.5 million shares outstanding at June 26, 2019)
|
7.0
|
|
|
17.6
|
|
||
Additional paid-in capital
|
669.4
|
|
|
522.0
|
|
||
Accumulated other comprehensive loss
|
(6.2
|
)
|
|
(5.6
|
)
|
||
Retained (deficit) earnings
|
(397.5
|
)
|
|
2,771.2
|
|
||
Treasury stock, at cost (25.3 million shares at June 24, 2020, and 138.7 million shares at June 26, 2019)
|
(751.8
|
)
|
|
(4,083.4
|
)
|
||
Total shareholders’ deficit
|
(479.1
|
)
|
|
(778.2
|
)
|
||
Total liabilities and shareholders’ deficit
|
$
|
2,356.0
|
|
|
$
|
1,258.3
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
24.4
|
|
|
$
|
154.9
|
|
|
$
|
125.9
|
|
Adjustments to reconcile Net income to Net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
162.3
|
|
|
147.6
|
|
|
151.4
|
|
|||
Stock-based compensation
|
14.8
|
|
|
16.4
|
|
|
14.2
|
|
|||
Restructure charges and other impairments
|
28.9
|
|
|
26.5
|
|
|
21.7
|
|
|||
Net loss (gain) on disposal of assets
|
1.2
|
|
|
(33.1
|
)
|
|
1.6
|
|
|||
Undistributed loss on equity investments
|
—
|
|
|
—
|
|
|
0.3
|
|
|||
Other
|
2.8
|
|
|
3.0
|
|
|
3.1
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
4.1
|
|
|
(3.0
|
)
|
|
(3.3
|
)
|
|||
Inventories
|
(2.8
|
)
|
|
1.0
|
|
|
—
|
|
|||
Restaurant supplies
|
(1.2
|
)
|
|
(0.6
|
)
|
|
(1.2
|
)
|
|||
Prepaid expenses
|
7.2
|
|
|
(3.0
|
)
|
|
(1.7
|
)
|
|||
Operating lease assets, net of liabilities
|
3.6
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes, net
|
8.6
|
|
|
(75.8
|
)
|
|
3.4
|
|
|||
Other assets
|
0.1
|
|
|
0.9
|
|
|
0.3
|
|
|||
Accounts payable
|
9.8
|
|
|
(4.1
|
)
|
|
1.6
|
|
|||
Gift card liability
|
6.3
|
|
|
(10.1
|
)
|
|
(7.3
|
)
|
|||
Accrued payroll
|
(17.8
|
)
|
|
6.8
|
|
|
4.2
|
|
|||
Other accrued liabilities
|
4.0
|
|
|
(7.7
|
)
|
|
(6.8
|
)
|
|||
Current income taxes
|
(20.7
|
)
|
|
(12.7
|
)
|
|
(14.9
|
)
|
|||
Other liabilities
|
9.4
|
|
|
5.7
|
|
|
(8.0
|
)
|
|||
Net cash provided by operating activities
|
245.0
|
|
|
212.7
|
|
|
284.5
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Payments for property and equipment
|
(104.5
|
)
|
|
(167.6
|
)
|
|
(101.3
|
)
|
|||
Payments for franchise restaurant acquisitions
|
(94.6
|
)
|
|
(3.1
|
)
|
|
—
|
|
|||
Proceeds from note receivable
|
2.8
|
|
|
2.8
|
|
|
1.9
|
|
|||
Proceeds from sale of assets
|
1.2
|
|
|
1.6
|
|
|
19.9
|
|
|||
Insurance recoveries
|
1.1
|
|
|
1.7
|
|
|
1.7
|
|
|||
Proceeds from sale leaseback transactions, net of related expenses
|
—
|
|
|
485.9
|
|
|
—
|
|
|||
Net cash (used in) provided by investing activities
|
(194.0
|
)
|
|
321.3
|
|
|
(77.8
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Payments on revolving credit facility
|
(858.8
|
)
|
|
(1,150.0
|
)
|
|
(588.0
|
)
|
|||
Borrowings on revolving credit facility
|
808.4
|
|
|
853.0
|
|
|
1,016.0
|
|
|||
Payments of dividends
|
(57.4
|
)
|
|
(60.3
|
)
|
|
(70.0
|
)
|
|||
Purchases of treasury stock
|
(32.4
|
)
|
|
(167.7
|
)
|
|
(303.2
|
)
|
|||
Payments on long-term debt
|
(17.8
|
)
|
|
(9.5
|
)
|
|
(260.3
|
)
|
|||
Payments for common stock issuance costs
|
(7.8
|
)
|
|
—
|
|
|
—
|
|
|||
Payments for debt issuance costs
|
(3.2
|
)
|
|
—
|
|
|
(1.6
|
)
|
|||
Proceeds from issuance of common stock
|
146.9
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of treasury stock
|
1.6
|
|
|
3.0
|
|
|
2.3
|
|
|||
Net cash used in financing activities
|
(20.5
|
)
|
|
(531.5
|
)
|
|
(204.8
|
)
|
|||
Net change in cash and cash equivalents
|
30.5
|
|
|
2.5
|
|
|
1.9
|
|
|||
Cash and cash equivalents at beginning of period
|
13.4
|
|
|
10.9
|
|
|
9.0
|
|
|||
Cash and cash equivalents at end of period
|
$
|
43.9
|
|
|
$
|
13.4
|
|
|
$
|
10.9
|
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Retained Earnings (Deficit)
|
|
Treasury
Stock |
|
Accumulated
Other Comprehensive Loss |
|
Total
|
|||||||||||||||
Shares
|
|
Amount
|
||||||||||||||||||||||||
Balances at June 28, 2017
|
48.4
|
|
|
$
|
17.6
|
|
|
$
|
502.1
|
|
|
$
|
2,627.1
|
|
|
$
|
(3,628.5
|
)
|
|
$
|
(11.9
|
)
|
|
$
|
(493.6
|
)
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
125.9
|
|
|
—
|
|
|
—
|
|
|
125.9
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
||||||
Dividends ($1.52 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(70.0
|
)
|
|
—
|
|
|
—
|
|
|
(70.0
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
14.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14.2
|
|
||||||
Purchases of treasury stock
|
(7.9
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(303.0
|
)
|
|
—
|
|
|
(303.2
|
)
|
||||||
Issuances of common stock
|
0.3
|
|
|
—
|
|
|
(4.5
|
)
|
|
—
|
|
|
6.8
|
|
|
—
|
|
|
2.3
|
|
||||||
Disposition of equity method investment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
|
5.9
|
|
||||||
Balances at June 27, 2018
|
40.8
|
|
|
17.6
|
|
|
511.6
|
|
|
2,683.0
|
|
|
(3,924.7
|
)
|
|
(5.8
|
)
|
|
(718.3
|
)
|
||||||
Effect of ASC 606 adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
154.9
|
|
|
—
|
|
|
—
|
|
|
154.9
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
||||||
Dividends ($1.52 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(59.3
|
)
|
|
—
|
|
|
—
|
|
|
(59.3
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
16.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.4
|
|
||||||
Purchases of treasury stock
|
(3.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
(167.1
|
)
|
|
—
|
|
|
(167.7
|
)
|
||||||
Issuances of common stock
|
0.3
|
|
|
—
|
|
|
(5.4
|
)
|
|
—
|
|
|
8.4
|
|
|
—
|
|
|
3.0
|
|
||||||
Balances at June 26, 2019
|
37.5
|
|
|
17.6
|
|
|
522.0
|
|
|
2,771.2
|
|
|
(4,083.4
|
)
|
|
(5.6
|
)
|
|
(778.2
|
)
|
||||||
Effect of ASC 842 adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
195.9
|
|
|
—
|
|
|
—
|
|
|
195.9
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
24.4
|
|
|
—
|
|
|
—
|
|
|
24.4
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
(0.6
|
)
|
||||||
Dividends ($1.14 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(43.6
|
)
|
|
—
|
|
|
—
|
|
|
(43.6
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
14.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14.7
|
|
||||||
Purchases of treasury stock
|
(0.8
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(32.1
|
)
|
|
—
|
|
|
(32.4
|
)
|
||||||
Issuances of common stock
|
8.3
|
|
|
0.8
|
|
|
133.0
|
|
|
—
|
|
|
6.9
|
|
|
—
|
|
|
140.7
|
|
||||||
Retirement of treasury stock
|
—
|
|
|
(11.4
|
)
|
|
—
|
|
|
(3,345.4
|
)
|
|
3,356.8
|
|
|
—
|
|
|
—
|
|
||||||
Balances at June 24, 2020
|
45.0
|
|
|
$
|
7.0
|
|
|
$
|
669.4
|
|
|
$
|
(397.5
|
)
|
|
$
|
(751.8
|
)
|
|
$
|
(6.2
|
)
|
|
$
|
(479.1
|
)
|
Note #
|
|
Description
|
|
Page
|
|
Nature of Operations and Summary of Significant Accounting Policies
|
|
||
|
Novel Coronavirus Pandemic
|
|
||
|
Chili's Restaurant Acquisition
|
|
||
|
Leases
|
|
||
|
Revenue Recognition
|
|
||
|
Equity Method Investment
|
|
||
|
Defined Contribution Plan
|
|
||
|
Other Gains and Charges
|
|
||
|
Income Taxes
|
|
||
|
Segment Information
|
|
||
|
Goodwill and Intangibles
|
|
||
|
Debt
|
|
||
|
Accrued and Other Liabilities
|
|
||
|
Stock-based Compensation
|
|
||
|
Shareholders’ Deficit
|
|
||
|
Fair Value Measurements
|
|
||
|
Supplemental Cash Flow Information
|
|
||
|
Commitments and Contingencies
|
|
||
|
Effect of New Accounting Standards
|
|
||
|
Quarterly Results of Operations (Unaudited)
|
|
||
|
Subsequent Events
|
|
•
|
Package of practical expedients - the election of this package allowed us to carry forward our historical lease classification and our assessment of whether a contract is or contains a lease for any leases that existed prior to the adoption of ASC 842.
|
•
|
Combine lease and non-lease components policy - we elected for all classes of underlying leased assets to account for lease and non-lease components (such as common area maintenance) and include executory costs (such as property taxes and insurance) to combine as a single lease component.
|
•
|
Short-term lease policy - we elected the short-term lease exemption from balance sheet recognition for all classes of underlying assets with an initial term of 12 months or less and that do not include an option to purchase the underlying asset that we are reasonably certain to exercise. Short-term leases are expensed as incurred in Restaurant expenses in the Consolidated Statements of Comprehensive Income.
|
Level 1
|
Unadjusted quoted prices in active markets for identical assets or liabilities
|
Level 2
|
Observable inputs available at measurement date other than quote prices included in Level 1
|
Level 3
|
Unobservable inputs that cannot be corroborated by observable market data
|
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
|||
Basic weighted average shares outstanding
|
38.2
|
|
|
38.3
|
|
|
45.7
|
|
Dilutive stock options
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
Dilutive restricted shares
|
0.6
|
|
|
0.6
|
|
|
0.5
|
|
Total dilutive impact
|
0.7
|
|
|
0.8
|
|
|
0.6
|
|
Diluted weighted average shares outstanding
|
38.9
|
|
|
39.1
|
|
|
46.3
|
|
|
|
|
|
|
|
|||
Awards excluded due to anti-dilutive effect
|
1.5
|
|
|
0.9
|
|
|
1.1
|
|
•
|
Employee assistance - $17.3 million of expenses related to both Chili’s and Maggiano’s employee assistance payments and related payroll taxes for the team members that experienced reduced shifts during this pandemic, who would have otherwise not received such payment under our normal compensation practices
|
•
|
Other COVID-19-related expenses - $1.5 million of expenses related to restaurant supplies such as face masks and hand sanitizer required to reopen dining rooms, as well as costs related to canceled projects due to the pandemic, and $1.1 million of expenses related to spoiled inventory at both Chili’s and Maggiano’s due to the unexpected decline in sales and dining room closures
|
•
|
Employee retention credit - $7.9 million credit of certain payroll taxes was received as part of the Coronavirus Aid Relief and Economic Security (“CARES”) Act relief package
|
|
Fair Value September 5, 2019
|
||
Current assets(1)
|
$
|
7.3
|
|
Property and equipment
|
60.3
|
|
|
Operating lease assets
|
163.5
|
|
|
Reacquired franchise rights(2)
|
6.9
|
|
|
Goodwill(3)
|
22.4
|
|
|
Total assets acquired
|
260.4
|
|
|
Current liabilities(4)
|
9.1
|
|
|
Operating lease liabilities, less current portion
|
158.3
|
|
|
Total liabilities assumed
|
167.4
|
|
|
Net assets acquired(5)
|
$
|
93.0
|
|
(1)
|
Current assets included petty cash, inventory, and restaurant supplies.
|
(2)
|
Reacquired franchise rights have a weighted average amortization period of approximately 8 years.
|
(3)
|
Goodwill is expected to be deductible for tax purposes. The portion of the purchase price attributable to goodwill represents the benefits expected as a result of the acquisition, including sales and unit growth opportunities, and the benefit of the assembled workforce of the acquired restaurants.
|
(4)
|
Current liabilities included current portion of operating lease liabilities, gift card liability and accrued property tax.
|
(5)
|
Net assets acquired at fair value are equal to the total purchase price of $99.0 million, less $3.2 million of closing adjustments and $2.8 million allocated to prepayment of leases entered into between us and the franchisee (refer to Note 4 - Leases for more information).
|
|
Legacy GAAP
|
|
ASC 842 Cumulative Adjustments
|
|
ASC 842
|
||||||
|
June 26, 2019
|
|
|
June 27, 2019
|
|||||||
ASSETS
|
|
|
|
|
|
||||||
Current assets(1)
|
$
|
177.0
|
|
|
$
|
0.3
|
|
|
$
|
177.3
|
|
Other assets
|
|
|
|
|
|
||||||
Operating lease assets(2)
|
—
|
|
|
1,034.3
|
|
|
1,034.3
|
|
|||
Deferred income taxes, net(3)
|
112.0
|
|
|
(65.1
|
)
|
|
46.9
|
|
|||
Intangibles, net(1)
|
22.3
|
|
|
(4.1
|
)
|
|
18.2
|
|
|||
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
||||||
Current liabilities
|
|
|
|
|
|
||||||
Operating lease liabilities(4)
|
—
|
|
|
110.8
|
|
|
110.8
|
|
|||
Other accrued liabilities(1)(5)
|
141.1
|
|
|
(38.3
|
)
|
|
102.8
|
|
|||
Long-term operating lease liabilities, less current portion(4)
|
—
|
|
|
1,044.9
|
|
|
1,044.9
|
|
|||
Deferred gain on sale leaseback transactions(5)
|
255.3
|
|
|
(255.3
|
)
|
|
—
|
|
|||
Other liabilities(1)
|
153.0
|
|
|
(92.6
|
)
|
|
60.4
|
|
|||
Retained earnings
|
2,771.2
|
|
|
195.9
|
|
|
2,967.1
|
|
(1)
|
The following prior lease balances were reclassified into Operating lease assets upon adoption of ASC 842:
|
–
|
Current assets adjustment related to the prepaid rent.
|
–
|
Intangibles, net adjustment related to the favorable lease asset position.
|
–
|
Other accrued liabilities and Other liabilities balances adjustments related to the current and long-term portions of straight-line rent balances, unfavorable lease liability positions, exit-related lease accruals, and landlord contributions.
|
(2)
|
Operating lease assets represent the capitalization of operating lease assets equal to the amount of recognized operating lease liability as described in (4) below, adjusted by the net carrying amounts described in (1) above, and $15.5 million related to the impairment of certain operating lease assets for restaurant facilities previously fully impaired under our long-lived asset impairment policy that were recorded to Retained earnings.
|
(3)
|
Deferred income taxes, net was reduced by $68.6 million related to the elimination of the deferred gain on sale leaseback transactions as described in (5) below, partially offset by $3.5 million related to the impact of adopting ASC 842 and recording the operating lease assets and liabilities.
|
(4)
|
Operating lease liabilities, both current and long-term, represents the liabilities based on the present value of the lease payments, consisting of fixed costs and certain rent escalations, using our incremental borrowing rate applicable to the lease term upon date of adoption.
|
(5)
|
Deferred gain on sale leaseback transactions balance of $255.3 million, the related short-term deferred gain balance recorded within Other accrued liabilities of $19.3 million, and the associated Deferred income taxes, net of $68.6 million as described in (3) above, were eliminated upon ASC 842 adoption into Retained earnings as required by ASC 842 using the alternative transition method. No further gain will be amortized to Other (gains) and charges in the Consolidated Statements of Comprehensive Income effective fiscal 2020.
|
|
June 24, 2020
|
||||||||||
|
Finance
Leases(1)
|
|
Operating
Leases(2)
|
|
Total Leases
|
||||||
Lease assets
|
$
|
81.6
|
|
|
$
|
1,054.6
|
|
|
$
|
1,136.2
|
|
|
|
|
|
|
|
||||||
Current lease liabilities
|
12.2
|
|
|
117.3
|
|
|
129.5
|
|
|||
Long-term lease liabilities
|
89.9
|
|
|
1,061.6
|
|
|
1,151.5
|
|
|||
Total lease liabilities
|
$
|
102.1
|
|
|
$
|
1,178.9
|
|
|
$
|
1,281.0
|
|
(1)
|
Finance lease assets are recorded in Property and equipment, at cost, and the related current and long-term lease liabilities are recorded within Other accrued liabilities and Long-term debt and finance leases, less current installments, respectively.
|
(2)
|
Operating lease assets are recorded in Operating lease assets and the related current and long-term lease liabilities are recorded within Operating lease liabilities and Long-term operating lease liabilities, less current portion, respectively.
|
|
Fifty-Two Week Period Ended June 24, 2020
|
||
Operating lease cost
|
$
|
162.8
|
|
Finance lease amortization
|
20.9
|
|
|
Finance lease interest
|
4.6
|
|
|
Short-term lease cost
|
1.4
|
|
|
Variable lease cost
|
57.7
|
|
|
Sublease (income)
|
(4.6
|
)
|
|
Total lease costs, net
|
$
|
242.8
|
|
|
Fifty-Two Week Period Ended June 24, 2020
|
||
Cash flows from operating activities
|
|
||
Cash paid related to lease liabilities
|
|
||
Operating leases
|
$
|
159.6
|
|
Finance leases
|
4.6
|
|
|
Cash flows from financing activities
|
|
||
Cash paid related to lease liabilities
|
|
||
Finance leases
|
17.8
|
|
|
Non-cash lease assets obtained in exchange for lease liabilities
|
|
||
Operating leases(1)
|
224.0
|
|
|
Finance leases(1)
|
73.2
|
|
(1)
|
New lease assets obtained, net of lease liabilities primarily related to the new and assumed operating and finance leases from the Chili’s restaurant acquisition. Refer to Note 3 - Chili's Restaurant Acquisition and “Significant Changes in Leases in the Period” section below for more information.
|
|
June 24, 2020
|
||||
|
Finance Leases
|
|
Operating Leases
|
||
Weighted average remaining lease term
|
9.4 years
|
|
|
11.5 years
|
|
Weighted average discount rate
|
5.9
|
%
|
|
5.7
|
%
|
|
June 24, 2020
|
||||||||||
Fiscal Year
|
Finance Leases
|
|
Operating Leases
|
|
Sublease (Income)
|
||||||
2021
|
$
|
17.8
|
|
|
$
|
179.4
|
|
|
$
|
(3.4
|
)
|
2022
|
22.0
|
|
|
167.4
|
|
|
(3.3
|
)
|
|||
2023
|
20.3
|
|
|
155.6
|
|
|
(2.6
|
)
|
|||
2024
|
10.3
|
|
|
145.4
|
|
|
(1.9
|
)
|
|||
2025
|
10.6
|
|
|
135.4
|
|
|
(1.9
|
)
|
|||
Thereafter
|
53.6
|
|
|
854.2
|
|
|
(4.8
|
)
|
|||
Total future lease payments(1)
|
134.6
|
|
|
1,637.4
|
|
|
$
|
(17.9
|
)
|
||
Less: Imputed interest
|
32.5
|
|
|
458.5
|
|
|
|
||||
Present value of lease liability
|
$
|
102.1
|
|
|
$
|
1,178.9
|
|
|
|
(1)
|
Total future lease payments as of June 24, 2020 included non-cancelable lease commitments of $113.4 million for finance leases, and $1,083.4 million for operating leases.
|
|
June 26, 2019
|
||||||
Fiscal Year
|
Capital Leases
|
|
Operating Leases(2)
|
||||
2020
|
$
|
12.3
|
|
|
$
|
156.8
|
|
2021
|
10.1
|
|
|
154.5
|
|
||
2022
|
8.2
|
|
|
148.6
|
|
||
2023
|
6.7
|
|
|
137.7
|
|
||
2024
|
6.0
|
|
|
127.6
|
|
||
Thereafter
|
17.4
|
|
|
771.7
|
|
||
Total minimum lease payments(1)
|
60.7
|
|
|
$
|
1,496.9
|
|
|
Imputed interest (average rate of 6.18%)
|
(12.3
|
)
|
|
|
|||
Present value of minimum lease payments
|
48.4
|
|
|
|
|||
Less current capital lease obligations
|
(9.7
|
)
|
|
|
|||
Long-term capital lease obligations
|
$
|
38.7
|
|
|
|
(1)
|
Total minimum lease payments were not reduced by minimum sublease rentals to be received in the future under non-cancelable subleases. The total of undiscounted future sublease rentals was approximately $22.0 million and $14.6 million for capital and operating subleases, respectively, as of June 26, 2019.
|
(2)
|
Operating lease expenses for the fifty-two weeks ended June 26, 2019, recorded under Legacy GAAP, totaled $158.6 million, which included $141.7 million for straight-lined minimum rent, $3.3 million for contingent rent, and $13.6 million of other rent-related expenses.
|
|
Deferred Franchise and Development Fees
|
||||||
|
June 24, 2020
|
|
June 26, 2019
|
||||
Beginning balance
|
$
|
16.2
|
|
|
$
|
—
|
|
Cumulative effect adjustment from adoption of ASC 606
|
—
|
|
|
18.1
|
|
||
Additions
|
0.8
|
|
|
0.9
|
|
||
Amount recognized for Chili's restaurant acquisition(1)
|
(2.6
|
)
|
|
—
|
|
||
Amount recognized to Franchise and other revenues
|
(1.7
|
)
|
|
(2.8
|
)
|
||
Ending balance
|
$
|
12.7
|
|
|
$
|
16.2
|
|
(1)
|
Deferred development and franchise fees remaining balances associated with the 116 Chili’s restaurants acquired from a franchisee at the September 5, 2019 acquisition date were recognized in Other (gains) and charges in the Consolidated Statements of Comprehensive Income.
|
Fiscal Year
|
Franchise and Development Fees Revenue Recognition
|
||
2021
|
$
|
1.1
|
|
2022
|
1.0
|
|
|
2023
|
1.0
|
|
|
2024
|
1.0
|
|
|
2025
|
1.0
|
|
|
Thereafter
|
7.6
|
|
|
|
$
|
12.7
|
|
|
Gift Card Liability
|
||||||
|
June 24, 2020
|
|
June 26, 2019
|
||||
Beginning balance
|
$
|
100.9
|
|
|
$
|
119.1
|
|
Gift card sales
|
164.4
|
|
|
180.3
|
|
||
Gift card redemptions recognized to Company sales
|
(139.2
|
)
|
|
(169.4
|
)
|
||
Gift card breakage recognized to Franchise and other revenues(1)
|
(15.8
|
)
|
|
(26.0
|
)
|
||
Other
|
(0.4
|
)
|
|
(3.1
|
)
|
||
Ending balance
|
$
|
109.9
|
|
|
$
|
100.9
|
|
(1)
|
Gift card breakage in fiscal 2019 included the recognition of $8.2 million from the cumulative effect of adopting ASC 606, Revenue from Contracts with Customers due to the change in timing of recognition of breakage, with a corresponding $2.0 million decrease in Deferred income taxes, net, and a $6.2 million decrease in Shareholders’ deficit.
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Employer contributions match expenses
|
$
|
9.3
|
|
|
$
|
9.6
|
|
|
$
|
9.2
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Restaurant impairment charges
|
$
|
19.1
|
|
|
$
|
10.8
|
|
|
$
|
10.9
|
|
COVID-19 related charges, net of (credits)
|
12.2
|
|
|
—
|
|
|
—
|
|
|||
Restaurant closure charges
|
3.8
|
|
|
4.3
|
|
|
7.5
|
|
|||
Remodel-related costs
|
3.2
|
|
|
7.7
|
|
|
1.5
|
|
|||
Severance and other benefit charges
|
3.2
|
|
|
0.9
|
|
|
0.3
|
|
|||
Corporate headquarters relocation charges
|
1.1
|
|
|
6.3
|
|
|
1.9
|
|
|||
Property damages, net of (insurance recoveries)
|
(0.7
|
)
|
|
(0.7
|
)
|
|
5.1
|
|
|||
Loss (gain) on sale of assets, net
|
(0.2
|
)
|
|
(6.9
|
)
|
|
(0.3
|
)
|
|||
Sale leaseback (gain), net of transaction charges
|
—
|
|
|
(27.3
|
)
|
|
2.0
|
|
|||
Other
|
5.7
|
|
|
0.4
|
|
|
5.6
|
|
|||
|
$
|
47.4
|
|
|
$
|
(4.5
|
)
|
|
$
|
34.5
|
|
•
|
Restaurant impairment charges primarily consisted of the long-lived assets of 25 underperforming Chili’s and 3 underperforming Maggiano’s restaurants, which included the $14.5 million impaired during the fourth quarter of fiscal 2020 during the COVID-19 pandemic related to 18 underperforming Chili’s and 3 underperforming Maggiano’s restaurants. Refer to Note 2 - Novel Coronavirus Pandemic and Note 16 - Fair Value Measurements for more information.
|
•
|
COVID-19 related charges, net of (credits) that included the employee retention credit, were recorded related to the initial impact and our efforts to address the COVID-19 pandemic beginning in the third quarter of fiscal 2020. Refer to Note 2 - Novel Coronavirus Pandemic for further details.
|
•
|
Restaurant closure charges primarily consisted of Chili’s lease termination charges and certain Chili’s restaurant closure costs.
|
•
|
Remodel-related costs were recorded related to existing fixed asset write-offs associated with the Chili’s remodel project.
|
•
|
Severance and other benefit charges primarily consisted of $2.7 million of expenses incurred for a corporate reorganization related to the elimination of 44 corporate positions to align and support our current operating model in the fourth quarter of fiscal 2020.
|
•
|
Corporate headquarters relocation charges were recorded related to costs associated with the previous corporate headquarters location.
|
•
|
Property damages, net of (insurance recoveries) primarily consisted of proceeds related to a previously filed fire claim, partially offset by costs incurred for damages from Tropical Storm Imelda.
|
•
|
Loss (gain) on sale of assets, net primarily consisted of gain on sale of liquor licenses of closed restaurants.
|
•
|
Restaurant impairment charges primarily consisted of the long-lived assets of 11 underperforming Chili’s restaurants.
|
•
|
Restaurant closure charges primarily consisted of Chili’s lease termination charges and certain Chili’s restaurant closure costs.
|
•
|
Remodel-related costs were recorded related to existing fixed asset write-offs associated with the Chili’s remodel project.
|
•
|
Severance and other benefit charges primarily consisted of the restructuring of certain Maggiano’s back-office positions.
|
•
|
Corporate headquarters relocation charges primarily consisted of costs associated with the previous corporate headquarters location and accelerated depreciation on certain leasehold improvements associated with the leased portion of our previous corporate headquarters property which closed in the third quarter of fiscal 2019.
|
•
|
Property damages, net of (insurance recoveries) primarily consisted of insurance proceeds received related to a previously filed fire claim and final proceeds received from the Hurricane Harvey claim, partially offset by expenses associated with storm damages at certain restaurant locations.
|
•
|
Loss (gain) on sale of assets, net primarily consisted of $5.8 million for the net gain recognized on the sale of the owned-portion of our previous corporate headquarters building and $0.8 million of gain recognized on the sale of land in Scottsdale, AZ and Pensacola, FL.
|
•
|
Sale leaseback (gain), net of transaction charges were recorded related to the fiscal 2019 sale leaseback transactions, refer to Note 4 - Leases for further details on this transaction.
|
•
|
Restaurant impairment charges primarily consisted of charges of $7.2 million recorded in the first quarter of fiscal 2018 associated with the closure of nine Alberta, Canada Chili’s restaurants in the second quarter of fiscal 2018 due to an economic recession primarily related to lower oil production. The decision to close these restaurants was driven by management’s belief that the long-term profitability of these restaurants would not meet our required level of return. Additionally, during fiscal 2018, we recorded Restaurant impairment charges of $3.7 million primarily related to the long-lived assets and reacquired franchise rights of certain underperforming Maggiano’s and Chili’s restaurants that will continue to operate.
|
•
|
Restaurant closure charges primarily consisted of expenses of $4.6 million associated with the Canada closures and related lease termination charges. We also recorded $1.8 million in lease termination expenses related to locations where we are the primary lessee of leases that were sublet to the Macaroni Grill, a divested brand, currently in bankruptcy proceedings, that discontinued sublease rental payments and closed the restaurants. Additionally, we recorded Restaurant closure charges of $1.1 million primarily related to lease termination charges and closure costs associated with Chili’s restaurants closed during fiscal 2018.
|
•
|
Remodel-related costs were recorded related to existing fixed asset write-offs associated with the Chili’s remodel project.
|
•
|
Corporate headquarters relocation charges primarily consisted of accelerated depreciation on certain leasehold improvements associated with the leased portion of our previous corporate headquarters property which closed in the third quarter of fiscal 2019.
|
•
|
Property damages, net of (insurance recoveries) primarily consisted of incurred expenses associated with Hurricanes Harvey and Irma primarily related to employee relief payments and inventory spoilage, net of insurance proceeds related to certain Hurricane Harvey property damage claims. Also in fiscal 2018, we received property damage insurance proceeds of $0.5 million related to natural flooding in Louisiana that were recorded within Other (gains) and charges in the Consolidated Statements of Comprehensive Income. Additionally, we received business interruption funds of $0.4 million related to the Louisiana flooding from insurers that are recorded within Restaurant expenses in the Consolidated Statements of Comprehensive Income.
|
•
|
Loss (gain) on sale of assets, net primarily consisted of the gain on sale of our Mexico joint venture. Refer to Note 6 - Equity Method Investment for more information.
|
•
|
Sale leaseback (gain), net of transaction charges primarily consisted of professional service fees for brokers, legal, due diligence and other professional services firms in connection with the marketing of sale-leaseback transactions of certain Company-owned restaurant properties.
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Domestic
|
$
|
5.0
|
|
|
$
|
168.1
|
|
|
$
|
182.1
|
|
Foreign
|
(0.1
|
)
|
|
3.7
|
|
|
(11.9
|
)
|
|||
Income before income taxes
|
$
|
4.9
|
|
|
$
|
171.8
|
|
|
$
|
170.2
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Current income tax (benefit) expenses:
|
|
|
|
|
|
||||||
Federal
|
$
|
(32.9
|
)
|
|
$
|
63.3
|
|
|
$
|
28.7
|
|
State
|
4.8
|
|
|
28.8
|
|
|
12.2
|
|
|||
Foreign
|
0.0
|
|
|
0.6
|
|
|
0.0
|
|
|||
Total current income tax (benefit) expenses
|
(28.1
|
)
|
|
92.7
|
|
|
40.9
|
|
|||
Deferred income tax (benefit) expenses:
|
|
|
|
|
|
||||||
Federal
|
8.8
|
|
|
(58.5
|
)
|
|
6.6
|
|
|||
State
|
(0.2
|
)
|
|
(18.0
|
)
|
|
0.1
|
|
|||
Foreign
|
0.0
|
|
|
0.7
|
|
|
(3.3
|
)
|
|||
Total deferred income tax (benefit) expenses
|
8.6
|
|
|
(75.8
|
)
|
|
3.4
|
|
|||
Provision (benefit) for income taxes
|
$
|
(19.5
|
)
|
|
$
|
16.9
|
|
|
$
|
44.3
|
|
|
|
|
|
|
|
||||||
Effective tax rate
|
(398.0
|
)%
|
|
9.8
|
%
|
|
26.0
|
%
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Income tax expense at statutory rate
|
$
|
1.0
|
|
|
$
|
36.1
|
|
|
$
|
47.8
|
|
FICA and other tax credits
|
(24.8
|
)
|
|
(28.2
|
)
|
|
(22.6
|
)
|
|||
State income taxes, net of Federal benefit
|
3.6
|
|
|
8.5
|
|
|
8.7
|
|
|||
Tax reform impact
|
—
|
|
|
—
|
|
|
8.2
|
|
|||
Stock based compensation tax shortfall
|
0.5
|
|
|
0.5
|
|
|
1.1
|
|
|||
Other
|
0.2
|
|
|
0.0
|
|
|
1.1
|
|
|||
Provision (benefit) for income taxes
|
$
|
(19.5
|
)
|
|
$
|
16.9
|
|
|
$
|
44.3
|
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
Deferred income tax assets:
|
|
|
|
||||
Lease liabilities
|
$
|
313.7
|
|
|
$
|
27.5
|
|
Gift cards
|
13.7
|
|
|
12.3
|
|
||
Insurance reserves
|
12.2
|
|
|
11.5
|
|
||
Stock-based compensation
|
11.0
|
|
|
9.9
|
|
||
Federal credit carryover
|
7.3
|
|
|
9.0
|
|
||
Net operating losses
|
3.2
|
|
|
3.7
|
|
||
State credit carryover
|
2.8
|
|
|
2.6
|
|
||
Restructure charges and impairments
|
1.4
|
|
|
3.0
|
|
||
Deferred gain on sale leaseback transactions
|
—
|
|
|
68.6
|
|
||
Other, net
|
10.3
|
|
|
11.2
|
|
||
Less: Valuation allowance
|
(5.6
|
)
|
|
(5.5
|
)
|
||
Total deferred income tax assets
|
370.0
|
|
|
153.8
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Lease assets
|
275.5
|
|
|
2.2
|
|
||
Goodwill and other amortization
|
21.6
|
|
|
20.6
|
|
||
Depreciation and capitalized interest on property and equipment
|
19.8
|
|
|
4.3
|
|
||
Prepaid expenses
|
14.4
|
|
|
13.6
|
|
||
Other, net
|
0.5
|
|
|
1.1
|
|
||
Total deferred income tax liabilities
|
331.8
|
|
|
41.8
|
|
||
Deferred income taxes, net
|
$
|
38.2
|
|
|
$
|
112.0
|
|
•
|
Reduce our fiscal 2020 payroll tax liability by utilizing employee retention credits to assist with employee payroll costs during this outbreak of $7.9 million
|
•
|
Amend our 2018 and 2019 U.S. Income Tax Returns in order to claim additional depreciation deductions related to qualified improvement property that will allow us to generate aggregate refunds of $4.6 million, and upon filing our fiscal 2020 U.S. Income Tax Return we anticipate to include a benefit related to the additional depreciation on qualified improvement property of approximately $2.0 million
|
•
|
Defer the employer portion of certain payroll taxes, totaling $12.9 million which will be repaid in two equal installments: on December 31, 2021, and December 31, 2022
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
Balance at beginning of year
|
$
|
3.5
|
|
|
$
|
3.9
|
|
Additions based on tax positions related to the current year
|
0.3
|
|
|
0.4
|
|
||
Additions based on tax positions related to prior years
|
—
|
|
|
—
|
|
||
Settlements with tax authorities
|
0.0
|
|
|
(0.1
|
)
|
||
Expiration of statute of limitations
|
(0.8
|
)
|
|
(0.7
|
)
|
||
Balance at end of year
|
$
|
3.0
|
|
|
$
|
3.5
|
|
|
Fiscal Year Ended June 24, 2020
|
||||||||||||||
|
Chili’s(2)
|
|
Maggiano’s
|
|
Other
|
|
Consolidated
|
||||||||
Company sales
|
$
|
2,673.5
|
|
|
$
|
331.4
|
|
|
$
|
—
|
|
|
$
|
3,004.9
|
|
Royalties
|
33.7
|
|
|
0.2
|
|
|
—
|
|
|
33.9
|
|
||||
Franchise fees and other revenues
|
24.5
|
|
|
15.2
|
|
|
—
|
|
|
39.7
|
|
||||
Franchise and other revenues
|
58.2
|
|
|
15.4
|
|
|
—
|
|
|
73.6
|
|
||||
Total revenues
|
2,731.7
|
|
|
346.8
|
|
|
—
|
|
|
3,078.5
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Company restaurant expenses(1)
|
2,363.2
|
|
|
306.1
|
|
|
0.6
|
|
|
2,669.9
|
|
||||
Depreciation and amortization
|
133.9
|
|
|
15.4
|
|
|
13.0
|
|
|
162.3
|
|
||||
General and administrative
|
32.1
|
|
|
5.7
|
|
|
98.5
|
|
|
136.3
|
|
||||
Other (gains) and charges
|
35.3
|
|
|
6.8
|
|
|
5.3
|
|
|
47.4
|
|
||||
Total operating costs and expenses
|
2,564.5
|
|
|
334.0
|
|
|
117.4
|
|
|
3,015.9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
167.2
|
|
|
12.8
|
|
|
(117.4
|
)
|
|
62.6
|
|
||||
Interest expenses
|
4.6
|
|
|
—
|
|
|
55.0
|
|
|
59.6
|
|
||||
Other (income), net
|
(0.6
|
)
|
|
—
|
|
|
(1.3
|
)
|
|
(1.9
|
)
|
||||
Income (loss) before income taxes
|
$
|
163.2
|
|
|
$
|
12.8
|
|
|
$
|
(171.1
|
)
|
|
$
|
4.9
|
|
|
|
|
|
|
|
|
|
||||||||
Segment assets(3)
|
$
|
1,967.3
|
|
|
$
|
228.2
|
|
|
$
|
160.5
|
|
|
$
|
2,356.0
|
|
Payments for property and equipment
|
88.2
|
|
|
8.1
|
|
|
8.2
|
|
|
104.5
|
|
|
Fiscal Year Ended June 26, 2019
|
||||||||||||||
|
Chili’s
|
|
Maggiano’s
|
|
Other
|
|
Consolidated
|
||||||||
Company sales
|
$
|
2,692.6
|
|
|
$
|
413.6
|
|
|
$
|
—
|
|
|
$
|
3,106.2
|
|
Royalties
|
52.8
|
|
|
0.3
|
|
|
—
|
|
|
53.1
|
|
||||
Franchise fees and other revenues
|
36.8
|
|
|
21.8
|
|
|
—
|
|
|
58.6
|
|
||||
Franchise and other revenues
|
89.6
|
|
|
22.1
|
|
|
—
|
|
|
111.7
|
|
||||
Total revenues
|
2,782.2
|
|
|
435.7
|
|
|
—
|
|
|
3,217.9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Company restaurant expenses(1)
|
2,329.6
|
|
|
364.8
|
|
|
0.6
|
|
|
2,695.0
|
|
||||
Depreciation and amortization
|
120.1
|
|
|
16.2
|
|
|
11.3
|
|
|
147.6
|
|
||||
General and administrative
|
38.7
|
|
|
6.1
|
|
|
104.3
|
|
|
149.1
|
|
||||
Other (gains) and charges(4)
|
(6.4
|
)
|
|
1.0
|
|
|
0.9
|
|
|
(4.5
|
)
|
||||
Total operating costs and expenses
|
2,482.0
|
|
|
388.1
|
|
|
117.1
|
|
|
2,987.2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
300.2
|
|
|
47.6
|
|
|
(117.1
|
)
|
|
230.7
|
|
||||
Interest expenses
|
3.2
|
|
|
0.3
|
|
|
58.1
|
|
|
61.6
|
|
||||
Other (income), net
|
—
|
|
|
—
|
|
|
(2.7
|
)
|
|
(2.7
|
)
|
||||
Income (loss) before income taxes
|
$
|
297.0
|
|
|
$
|
47.3
|
|
|
$
|
(172.5
|
)
|
|
$
|
171.8
|
|
|
|
|
|
|
|
|
|
||||||||
Segment assets
|
$
|
1,002.8
|
|
|
$
|
163.9
|
|
|
$
|
91.6
|
|
|
$
|
1,258.3
|
|
Payments for property and equipment
|
129.1
|
|
|
10.8
|
|
|
27.7
|
|
|
167.6
|
|
|
Fiscal Year Ended June 27, 2018
|
||||||||||||||
|
Chili’s
|
|
Maggiano’s
|
|
Other
|
|
Consolidated
|
||||||||
Company sales
|
$
|
2,628.3
|
|
|
$
|
413.2
|
|
|
$
|
—
|
|
|
$
|
3,041.5
|
|
Franchise and other revenues
|
71.9
|
|
|
22.0
|
|
|
—
|
|
|
93.9
|
|
||||
Total revenues
|
2,700.2
|
|
|
435.2
|
|
|
—
|
|
|
3,135.4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Company restaurant expenses(1)
|
2,224.0
|
|
|
362.8
|
|
|
0.6
|
|
|
2,587.4
|
|
||||
Depreciation and amortization
|
125.0
|
|
|
15.9
|
|
|
10.5
|
|
|
151.4
|
|
||||
General and administrative
|
39.6
|
|
|
5.5
|
|
|
90.9
|
|
|
136.0
|
|
||||
Other (gains) and charges
|
24.5
|
|
|
1.1
|
|
|
8.9
|
|
|
34.5
|
|
||||
Total operating costs and expenses
|
2,413.1
|
|
|
385.3
|
|
|
110.9
|
|
|
2,909.3
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income (loss)
|
287.1
|
|
|
49.9
|
|
|
(110.9
|
)
|
|
226.1
|
|
||||
Interest expenses
|
—
|
|
|
—
|
|
|
59.0
|
|
|
59.0
|
|
||||
Other (income), net
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
(3.1
|
)
|
||||
Income (loss) before income taxes
|
$
|
287.1
|
|
|
$
|
49.9
|
|
|
$
|
(166.8
|
)
|
|
$
|
170.2
|
|
|
|
|
|
|
|
|
|
||||||||
Payments for property and equipment
|
$
|
85.3
|
|
|
$
|
7.6
|
|
|
$
|
8.4
|
|
|
$
|
101.3
|
|
(1)
|
Company restaurant expenses include Food and beverage costs, Restaurant labor and Restaurant expenses, including advertising expenses. Fiscal 2020 and fiscal 2019, are presented under the ASC 606 revenue accounting standard such that advertising contributions received from Chili’s franchisees are recorded as Franchise fees and other revenues, which differs from fiscal 2018 that included advertising contributions on a net basis within Company restaurant expenses.
|
(2)
|
Chili’s segment information for fiscal 2020 includes the results of operations and fair value of assets and goodwill related to the 116 restaurants purchased from a former franchisee since the September 5, 2019 acquisition date. Refer to Note 3 - Chili's Restaurant Acquisition for further details.
|
(3)
|
Segment assets for fiscal 2020 are presented in accordance with the newly adopted ASC 842 lease accounting standard that now include Operating lease assets. Refer to Note 4 - Leases for further details.
|
(4)
|
Other (gains) and charges in fiscal 2019 included the net impact from our completed sale leaseback transactions of 151 Company-owned Chili’s restaurant properties and one Maggiano’s property. As part of this transaction, we sold the related restaurant fixed assets, net of accumulated depreciation, totaling $185.3 million. Chili’s recognized a $26.8 million, and Maggiano’s recognized a $0.5 million gain on the sale, including a certain portion of the deferred gain, net of related transaction costs incurred in Other (gains) and charges in the Consolidated Statements of Comprehensive Income. Refer to Note 4 - Leases for further details.
|
|
June 24, 2020
|
|
June 26, 2019
|
||||||||||||||||||||
|
Chili’s
|
|
Maggiano’s
|
|
Consolidated
|
|
Chili’s
|
|
Maggiano’s
|
|
Consolidated
|
||||||||||||
Balance at beginning of year
|
$
|
127.1
|
|
|
$
|
38.4
|
|
|
$
|
165.5
|
|
|
$
|
125.4
|
|
|
$
|
38.4
|
|
|
$
|
163.8
|
|
Changes in goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Additions(1)
|
22.4
|
|
|
—
|
|
|
22.4
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
||||||
Foreign currency translation adjustment
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
||||||
Balance at end of year
|
$
|
149.2
|
|
|
$
|
38.4
|
|
|
$
|
187.6
|
|
|
$
|
127.1
|
|
|
$
|
38.4
|
|
|
$
|
165.5
|
|
(1)
|
In the fiscal years ended June 24, 2020 and June 26, 2019, we acquired 116 and three domestic Chili’s restaurants, respectively, previously owned by franchise partners. Refer to Note 3 - Chili's Restaurant Acquisition for information about the fiscal 2020 acquisition.
|
|
June 24, 2020
|
|
June 26, 2019
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Definite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Chili’s reacquired franchise rights(1)
|
$
|
19.8
|
|
|
$
|
(7.1
|
)
|
|
$
|
12.7
|
|
|
$
|
13.3
|
|
|
$
|
(5.5
|
)
|
|
$
|
7.8
|
|
Chili’s other
|
0.4
|
|
|
(0.4
|
)
|
|
0.0
|
|
|
5.6
|
|
|
(1.5
|
)
|
|
4.1
|
|
||||||
|
$
|
20.2
|
|
|
$
|
(7.5
|
)
|
|
$
|
12.7
|
|
|
$
|
18.9
|
|
|
$
|
(7.0
|
)
|
|
$
|
11.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Chili’s liquor licenses
|
$
|
9.4
|
|
|
|
|
|
|
$
|
9.5
|
|
|
|
|
|
||||||||
Maggiano’s liquor licenses
|
0.9
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
||||||||||
|
$
|
10.3
|
|
|
|
|
|
|
$
|
10.4
|
|
|
|
|
|
(1)
|
We recorded an impairment charges of $0.2 million in fiscal 2020, and $0.5 million in fiscal 2019, in Other (gains) and charges in the Consolidated Statements of Comprehensive Income. Refer to Note 8 - Other Gains and Charges and Note 16 - Fair Value Measurements and for additional disclosures.
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Definite-lived intangible amortization expense
|
$
|
1.9
|
|
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
Revolving credit facility
|
$
|
472.9
|
|
|
$
|
523.3
|
|
5.000% notes
|
350.0
|
|
|
350.0
|
|
||
3.875% notes
|
300.0
|
|
|
300.0
|
|
||
Finance lease obligations
|
102.1
|
|
|
48.4
|
|
||
Total long-term debt
|
1,225.0
|
|
|
1,221.7
|
|
||
Less: unamortized debt issuance costs and discounts
|
(4.3
|
)
|
|
(5.4
|
)
|
||
Total long-term debt, less unamortized debt issuance costs and discounts
|
1,220.7
|
|
|
1,216.3
|
|
||
Less: current installments of long-term debt(1)
|
(12.2
|
)
|
|
(9.7
|
)
|
||
Long-term debt less current installments
|
$
|
1,208.5
|
|
|
$
|
1,206.6
|
|
(1)
|
Current installments of long-term debt consist only of finance leases for the periods presented and are recorded within Other accrued liabilities in the Consolidated Balance Sheets. Refer to Note 13 - Accrued and Other Liabilities for further details.
|
Fiscal Year
|
Long-Term Debt
|
||
2021
|
$
|
—
|
|
2022
|
472.9
|
|
|
2023
|
300.0
|
|
|
2024
|
—
|
|
|
2025
|
350.0
|
|
|
Thereafter
|
—
|
|
|
|
$
|
1,122.9
|
|
•
|
Modified the maturity date of the $110.0 million portion of the facility to expire on September 12, 2021, which coincides with the maturity date for the $890.0 million portion
|
•
|
Secured a waiver of compliance with financial covenants effective the third quarter of fiscal 2020 until the end of the third quarter of fiscal 2021
|
•
|
Imposed a minimum liquidity covenant (defined as availability under the revolving credit facility plus unrestricted cash and cash equivalents) to require at least $175.0 million through the third quarter of fiscal 2021
|
•
|
Increased interest rates temporarily, from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021, to be fixed at LIBOR plus 2.350%. After this temporary period, the interest rate will return to LIBOR plus an applicable margin, which is a function of our credit rating and debt to cash flow ratio, but is subject to a maximum of LIBOR plus 1.700%. Additionally the LIBOR floor was permanently increased to 0.750%
|
•
|
Increased facility fee temporarily to 40 basis points from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021. After this temporary period, the facility fee will return to a set fee schedule which is a function of our credit rating, but is subject to a maximum of 30 basis points
|
•
|
Prohibited from making dividends, stock repurchases and investments from the fourth quarter of fiscal 2020 through the third quarter of fiscal 2021, and following this period, we will be subject to a $50.0 million aggregate limitation on dividends, stock repurchases and investments
|
•
|
Expanded the collateral securing the revolving credit facility, including intellectual property, among other things, and provided additional subsidiary guarantees
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
Property tax
|
$
|
22.9
|
|
|
$
|
17.3
|
|
Insurance
|
20.7
|
|
|
17.9
|
|
||
Sales tax
|
13.3
|
|
|
14.6
|
|
||
Current installments of finance leases
|
12.2
|
|
|
9.7
|
|
||
Interest
|
7.5
|
|
|
7.5
|
|
||
Cyber security incident
|
3.4
|
|
|
0.8
|
|
||
Dividends(1)
|
1.5
|
|
|
14.9
|
|
||
Deferred franchise and development fees
|
1.1
|
|
|
1.4
|
|
||
Deferred sale leaseback gains(2)
|
—
|
|
|
19.3
|
|
||
Straight-line rent(2)
|
—
|
|
|
5.1
|
|
||
Landlord contributions(2)
|
—
|
|
|
2.7
|
|
||
Other(3)
|
18.0
|
|
|
29.9
|
|
||
|
$
|
100.6
|
|
|
$
|
141.1
|
|
(1)
|
Dividends included the current dividend payable on dividends previously accrued related to restricted share awards that will vest in the next year. Other liabilities contain the dividends accrued related to restricted shares that will vest after one year. No dividends were declared in the fourth quarter of fiscal 2020, refer to Note 15 - Shareholders’ Deficit for further details.
|
(2)
|
Deferred sale leaseback gains at June 26, 2019 related to the current portion of the deferred gain on the sale leaseback transactions executed during the fiscal 2019. Upon the adoption of ASC 842, in fiscal 2020, the Deferred sale leaseback gains were eliminated as a cumulative effect adjustment to Retained earnings. Additionally, Straight-line rent and Landlord contributions balances were reclassified as a decrease to Operating lease assets upon the adoption of ASC 842. Refer to Note 4 - Leases for further details.
|
(3)
|
Other primarily consisted of accruals for utilities and services, banquet deposits for Maggiano’s events, rent-related expenses, charitable donations, certain exit-related lease accruals and other various accruals. Accrual balances for certain exit-related lease accruals and rent-related expenses were reclassified as a decrease to Operating lease assets upon the adoption of ASC 842. Refer to Note 4 - Leases for further details.
|
|
June 24, 2020
|
|
June 26, 2019
|
||||
Insurance
|
$
|
33.7
|
|
|
$
|
36.8
|
|
Deferred payroll taxes(1)
|
12.9
|
|
|
—
|
|
||
Deferred franchise fees
|
11.6
|
|
|
14.8
|
|
||
Unrecognized tax benefits
|
2.1
|
|
|
2.1
|
|
||
Straight-line rent(2)
|
—
|
|
|
57.2
|
|
||
Landlord contributions(2)
|
—
|
|
|
32.9
|
|
||
Unfavorable leases(2)
|
—
|
|
|
2.8
|
|
||
Other
|
6.8
|
|
|
6.4
|
|
||
|
$
|
67.1
|
|
|
$
|
153.0
|
|
(1)
|
Deferred payroll taxes related to the fiscal 2020 deferment of the employer portion of certain social security taxes as allowed by the CARES Act. Refer to Note 9 - Income Taxes for more information.
|
(2)
|
Straight-line rent, Landlord contributions and Unfavorable leases balances were reclassified as a decrease to Operating lease assets upon the adoption of ASC 842. Refer to Note 4 - Leases for more details.
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Stock-based compensation expenses
|
$
|
14.7
|
|
|
$
|
16.4
|
|
|
$
|
14.2
|
|
Tax benefit related to stock-based compensation expenses
|
2.5
|
|
|
3.0
|
|
|
4.3
|
|
|
Number of
Options |
|
Weighted
Average Exercise Price |
|
Weighted
Average Remaining Contractual Life (Years) |
|
Aggregate
Intrinsic Value |
|||||
Stock options outstanding at June 26, 2019
|
2.5
|
|
|
$
|
41.33
|
|
|
|
|
|
||
Granted
|
0.3
|
|
|
35.33
|
|
|
|
|
|
|||
Exercised
|
0.0
|
|
|
29.07
|
|
|
|
|
|
|||
Forfeited or canceled
|
(0.1
|
)
|
|
44.75
|
|
|
|
|
|
|||
Stock options outstanding at June 24, 2020
|
2.7
|
|
|
$
|
40.68
|
|
|
4.8
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|||||
Stock options exercisable at June 24, 2020
|
1.0
|
|
|
$
|
45.32
|
|
|
3.4
|
|
$
|
0.0
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Weighted average fair values of option grants
|
$
|
6.92
|
|
|
$
|
8.25
|
|
|
$
|
4.51
|
|
Expected volatility
|
33.4
|
%
|
|
27.2
|
%
|
|
25.2
|
%
|
|||
Risk-free interest rate
|
1.3
|
%
|
|
2.9
|
%
|
|
1.9
|
%
|
|||
Expected lives
|
5 years
|
|
|
5 years
|
|
|
6 years
|
|
|||
Dividend yield
|
3.2
|
%
|
|
3.5
|
%
|
|
4.4
|
%
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Intrinsic value of options exercised
|
$
|
0.6
|
|
|
$
|
1.8
|
|
|
$
|
2.5
|
|
Tax benefit realized on options exercised
|
0.1
|
|
|
0.4
|
|
|
0.6
|
|
|
Number of
Restricted Share Awards |
|
Weighted
Average Grant Date Fair Value Per Award |
|||
Restricted share awards outstanding at June 26, 2019
|
1.0
|
|
|
$
|
39.48
|
|
Granted
|
0.4
|
|
|
37.86
|
|
|
Vested
|
(0.2
|
)
|
|
50.61
|
|
|
Forfeited
|
(0.1
|
)
|
|
38.77
|
|
|
Restricted share awards outstanding at June 24, 2020
|
1.1
|
|
|
$
|
37.17
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Fair value of restricted share awards vested
|
$
|
6.6
|
|
|
$
|
8.6
|
|
|
$
|
4.3
|
|
|
|
|
|
|
Impairment Charges
|
||||||||||
|
Pre-Impairment Carrying Value
|
|
Fifty-Two Week Periods Ended
|
||||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 24, 2020
|
|
June 26, 2019
|
||||||||
Underperforming restaurants
|
|
|
|
|
|
|
|
||||||||
Long-lived assets
|
$
|
16.7
|
|
|
$
|
10.3
|
|
|
$
|
16.7
|
|
|
$
|
10.3
|
|
Reacquired franchise rights assets
|
0.2
|
|
|
0.5
|
|
|
0.2
|
|
|
0.5
|
|
||||
Operating lease assets
|
18.5
|
|
|
—
|
|
|
2.1
|
|
|
—
|
|
||||
Finance lease assets
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Total underperforming restaurants
|
$
|
35.5
|
|
|
$
|
10.8
|
|
|
$
|
19.1
|
|
|
$
|
10.8
|
|
Closed restaurants
|
|
|
|
|
|
|
|
||||||||
Operating lease assets
|
$
|
6.4
|
|
|
$
|
—
|
|
|
$
|
1.8
|
|
|
$
|
—
|
|
Finance lease assets
|
5.8
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
||||
Total closed restaurants
|
$
|
12.2
|
|
|
$
|
—
|
|
|
$
|
3.2
|
|
|
$
|
—
|
|
|
June 24, 2020
|
|
June 26, 2019
|
||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
3.875% notes
|
$
|
299.0
|
|
|
$
|
282.8
|
|
|
$
|
298.6
|
|
|
$
|
296.3
|
|
5.000% notes
|
346.7
|
|
|
330.8
|
|
|
345.9
|
|
|
356.2
|
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Income taxes, net of (refunds)(1)
|
$
|
(7.2
|
)
|
|
$
|
106.2
|
|
|
$
|
56.0
|
|
Interest, net of amounts capitalized
|
53.1
|
|
|
55.5
|
|
|
53.1
|
|
(1)
|
Income taxes, net of (refunds) for the fiscal year ended June 24, 2020 included the receipt of a refund in fiscal 2020, partially offset by current year payments. Income taxes, net of (refunds) for the fiscal year ended June 26, 2019 included payments made for income tax liabilities resulting from sale leaseback transactions completed in fiscal 2019. Refer to Note 4 - Leases and Note 9 - Income Taxes for further details.
|
|
Fiscal Years Ended
|
||||||||||
|
June 24, 2020
|
|
June 26, 2019
|
|
June 27, 2018
|
||||||
Retirement of fully depreciated assets
|
$
|
32.3
|
|
|
$
|
28.9
|
|
|
$
|
32.9
|
|
Dividends declared but not paid
|
1.2
|
|
|
15.6
|
|
|
17.0
|
|
|||
Accrued capital expenditures
|
7.1
|
|
|
9.3
|
|
|
11.3
|
|
|||
Capital lease additions(1)
|
—
|
|
|
15.1
|
|
|
7.9
|
|
(1)
|
Capital lease additions for the fiscal year ended June 24, 2020 are now disclosed as part of the finance lease disclosures in Note 4 - Leases, “Consolidated Statement of Cash Flows Disclosure of Lease Amounts” section.
|
|
Fiscal Year Ended June 24, 2020
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Revenues
|
$
|
786.0
|
|
|
$
|
869.3
|
|
|
$
|
860.0
|
|
|
$
|
563.2
|
|
Income (loss) before income taxes
|
$
|
16.8
|
|
|
$
|
29.0
|
|
|
$
|
27.2
|
|
|
$
|
(68.1
|
)
|
Net income (loss)
|
$
|
14.9
|
|
|
$
|
27.9
|
|
|
$
|
30.8
|
|
|
$
|
(49.2
|
)
|
Basic net income (loss) per share
|
$
|
0.40
|
|
|
$
|
0.75
|
|
|
$
|
0.83
|
|
|
$
|
(1.20
|
)
|
Diluted net income (loss) per share
|
$
|
0.39
|
|
|
$
|
0.73
|
|
|
$
|
0.81
|
|
|
$
|
(1.20
|
)
|
Basic weighted average shares outstanding
|
37.5
|
|
|
37.4
|
|
|
37.2
|
|
|
40.9
|
|
||||
Diluted weighted average shares outstanding
|
38.1
|
|
|
38.1
|
|
|
37.8
|
|
|
40.9
|
|
|
Fiscal Year Ended June 26, 2019
|
||||||||||||||
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Revenues
|
$
|
753.8
|
|
|
$
|
790.7
|
|
|
$
|
839.3
|
|
|
$
|
834.1
|
|
Income before income taxes
|
$
|
32.1
|
|
|
$
|
35.0
|
|
|
$
|
55.5
|
|
|
$
|
49.2
|
|
Net income
|
$
|
26.4
|
|
|
$
|
32.0
|
|
|
$
|
49.8
|
|
|
$
|
46.7
|
|
Basic net income per share
|
$
|
0.65
|
|
|
$
|
0.84
|
|
|
$
|
1.33
|
|
|
$
|
1.25
|
|
Diluted net income per share
|
$
|
0.64
|
|
|
$
|
0.83
|
|
|
$
|
1.31
|
|
|
$
|
1.22
|
|
Basic weighted average shares outstanding
|
40.4
|
|
|
38.1
|
|
|
37.5
|
|
|
37.5
|
|
||||
Diluted weighted average shares outstanding
|
41.1
|
|
|
38.8
|
|
|
38.1
|
|
|
38.3
|
|
•
|
evaluating the Company’s discount rate, by comparing it against a discount rate that was independently developed using publicly available third-party market data for comparable entities, and;
|
•
|
assessing the Company’s calculated fair values of its reporting units on a combined basis compared to the Company’s market capitalization.
|
•
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
|
Exhibit
|
|
Description
|
|
Certificate of Incorporation of the Registrant, as amended(1)
|
|
|
Bylaws of the Registrant(2)
|
|
|
Form of 3.875% Note due 2023(3)
|
|
|
Indenture dated as of April 30, 2013 between Registrant and Wilmington Trust, National Association, as Trustee(4)
|
|
|
Second Supplemental Indenture dated as of May 15, 2013 between the Registrant and Wilmington Trust, National Association(3)
|
|
|
Form of 5.000% Senior Note due 2024(5)
|
|
|
Senior Notes Indenture dated as of September 23, 2016, by and among the Registrant, the Guarantors named therein and U.S. Bank National Association, as trustee(5)
|
|
|
Description of Registered Securities(6)
|
|
|
Registrant’s Stock Option and Incentive Plan, as amended(7)
|
|
|
Registrant’s 1999 Stock Option and Incentive Plan for Non-Employee Directors and Consultants(8)
|
|
|
Credit Agreement dated as of March 12, 2015(9)
|
|
|
Second Amendment to Credit Agreement dated September 13, 2016(10)
|
|
|
Third Amendment to Credit Agreement dated April 30, 2018(11)
|
|
|
Fourth Amendment to Credit Agreement dated December 5, 2019(12)
|
|
|
Fifth Amendment to Credit Agreement dated March 31, 2020*
|
|
|
Sixth Amendment to Credit Agreement dated May 6, 2020(13)
|
|
|
Seventh Amendment to Credit Agreement dated July 23, 2020(14)
|
|
|
CEO Severance and Change in Control Agreement(15)
|
|
|
Executive Severance Benefits Plan and Summary Plan Description(15)
|
|
|
NEO Change in Control Severance Agreement(15)
|
|
|
Registrant’s Performance Share Plan Description(6)
|
|
|
Registrant’s Terms of Stock Option Award(6)
|
|
|
Registrant’s Terms of Retention Stock Unit Award(6)
|
|
|
Registrant’s Terms of Restricted Stock Unit Award(6)
|
|
|
Registrant’s Terms of Special Equity Award(16)
|
|
|
Registrant’s Terms of Board of Directors Restricted Stock Unit Award*
|
|
|
Subsidiaries of the Registrant*
|
|
|
Consent of Independent Registered Public Accounting Firm*
|
|
|
Certification by Wyman T. Roberts, President and Chief Executive Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*
|
|
|
Certification by Joseph G. Taylor, Executive Vice President and Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)*
|
|
|
Certification by Wyman T. Roberts, President and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|
|
|
Certification by Joseph G. Taylor, Executive Vice President and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|
|
101.INS
|
|
Inline XBRL Instance Document
|
101.SCH
|
|
Inline XBRL Schema Document
|
101.CAL
|
|
Inline XBRL Calculation Linkbase Document
|
101.DEF
|
|
Inline XBRL Definition Linkbase Document
|
101.LAB
|
|
Inline XBRL Label Linkbase Document
|
101.PRE
|
|
Inline XBRL Presentation Linkbase
|
104
|
|
The cover page from the Registrant's Annual Report on Form 10-K for the fiscal year ended June 24, 2020 is formatted in Inline XBRL
|
(1)
|
Annual report on Form 10-K for year ended June 28, 1995
|
(2)
|
Annual report on Form 10-K for year ended June 27, 2018
|
(3)
|
Current report on Form 8-K dated May 15, 2013
|
(4)
|
Registration statement on Form S-3 filed April 30, 2013, SEC File No. 333-188252
|
(5)
|
Current report on Form 8-K dated September 23, 2016
|
(6)
|
Annual report on Form 10-K for year ended June 26, 2019
|
(7)
|
Proxy Statement of Registrant filed on October 5, 2018
|
(8)
|
Quarterly report on Form 10-Q for quarter ended December 28, 2005
|
(9)
|
Current report on Form 8-K dated March 12, 2015
|
(10)
|
Quarterly report on Form 10-Q for quarter ended September 28, 2016
|
(11)
|
Quarterly report on Form 10-Q for quarter ended March 28, 2018
|
(12)
|
Quarterly report on Form 10-Q for quarter ended December 25, 2019
|
(13)
|
Current report on Form 8-K dated May 6, 2020
|
(14)
|
Current report on Form 8-K dated July 23, 2020
|
(15)
|
Quarterly report on Form 10-Q for quarter ended March 29, 2017
|
(16)
|
Annual report on Form 10-K for year ended June 28, 2017
|
Date: August 21, 2020
|
By:
|
/S/ JOSEPH G. TAYLOR
|
|
|
Joseph G. Taylor,
|
|
|
Executive Vice President and Chief Financial Officer
|
Name
|
|
Title
|
/S/ WYMAN T. ROBERTS
|
|
President and Chief Executive Officer of Brinker International, Inc. and President of Chili’s Grill & Bar (Principal Executive Officer) and Director
|
Wyman T. Roberts
|
|
|
|
|
|
/S/ JOSEPH G. TAYLOR
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
Joseph G. Taylor
|
|
|
|
|
|
/S/ JOSEPH M. DEPINTO
|
|
Chairman of the Board
|
Joseph M. DePinto
|
|
|
|
|
|
/S/ FRANCES L. ALLEN
|
|
Director
|
Frances L. Allen
|
|
|
|
|
|
/S/ CYNTHIA L. DAVIS
|
|
Director
|
Cynthia L. Davis
|
|
|
|
|
|
/S/ HARRIET EDELMAN
|
|
Director
|
Harriet Edelman
|
|
|
|
|
|
/S/ WILLIAM T. GILES
|
|
Director
|
William T. Giles
|
|
|
|
|
|
/S/ JAMES C. KATZMAN
|
|
Director
|
James C. Katzman
|
|
|
|
|
|
/S/ ALEXANDRE G. MACEDO
|
|
Director
|
Alexandre G. Macedo
|
|
|
|
|
|
/S/ GEORGE R. MRKONIC
|
|
Director
|
George R. Mrkonic
|
|
|
|
|
|
/S/ PRASHANT N. RANADE
|
|
Director
|
Prashant N. Ranade
|
|
|
|
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
Title:
|
Vice President, Treasurer and Assistant Secretary
|
Title:
|
Vice President, Treasurer and Assistant Secretary
|
Title:
|
Vice President, Treasurer and Assistant Secretary
|
Title:
|
Executive Vice President and Chief Financial Officer
|
|
JPMORGAN CHASE BANK, N.A.
By: /s/ Alexander Vardaman
Name: Alexander Vardaman
Title: Authorized Officer
|
|
WELLS FARGO BANK, N.A.
By: /s/ Darcy McLaren
Name: Darcy McLaren
Title: Director
|
|
MUFG BANK, LTD.
By: /s/ Christine Howatt_________
Name: Christine Howatt
Title: Authorized Signatory
|
|
TRUIST BANK (as successor by merger to SunTrust Bank)
By: /s/ Chris Hursey
Name: Chris Hursey
Title: Director
|
|
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Kara P. Duzee
Name: Kara P. Van Duzee
Title: Vice President
|
|
BARCLAYS BANK PLC
By: /s/ Christopher M. Aitkin
Name: Christopher M. Aitkin
Title: Vice President
|
|
REGIONS BANK
By: /s/ Ryan Fischer
Name: Ryan Fischer
Title: Managing Director
|
|
ASSOCIATED BANK NATIONAL ASSOCIATION
By: /s/ Dean H. Rosencrans
Name: Dean H. Rosencrans
Title: Senior Vice President
|
|
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Brendan McGuire
Name: Brendan McGuire
Title: Executive Vice President
|
ARTICLE I.
|
DEFINITIONS AND ACCOUNTING TERMS 1
|
Section 1.01.
|
Certain Defined Terms 1
|
Section 1.02.
|
Computation of Time Periods 26
|
Section 1.03.
|
Accounting Terms 26
|
Section 1.04.
|
Miscellaneous 26
|
Section 1.05.
|
Other Interpretive Provisions 27
|
Section 1.06.
|
Interest Rates 27
|
ARTICLE II.
|
AMOUNTS AND TERMS OF THE ADVANCES 28
|
Section 2.01.
|
The Advances 28
|
Section 2.02.
|
Requests for Advances 28
|
Section 2.03.
|
Borrowings; Advances; Termination of Eurodollar Rate Advances 28
|
Section 2.04.
|
Conversions and Continuations of Borrowings 31
|
Section 2.05.
|
Optional Termination and Reduction of the Commitments 32
|
Section 2.06.
|
Repayment and Prepayment of Advances; Notes 33
|
Section 2.07.
|
Interest on Advances 34
|
Section 2.08.
|
Interest Rate Determination 35
|
|
i
|
|
Section 2.09.
|
Fees 35
|
Section 2.10.
|
Payments; Computations; Interest on Overdue Amounts 35
|
Section 2.11.
|
Consequential Losses on Eurodollar Rate Advances 36
|
Section 2.12.
|
Increased Costs 37
|
Section 2.13.
|
Replacement of Banks 37
|
Section 2.14.
|
Illegality and Unavailability 38
|
Section 2.15.
|
Taxes 41
|
Section 2.16.
|
Payments Pro Rata 44
|
Section 2.17.
|
Increase in Commitments 44
|
Section 2.18.
|
Defaulting Banks 45
|
ARTICLE III.
|
CONDITIONS 47
|
Section 3.01.
|
Conditions Precedent to Effectiveness 47
|
Section 3.02.
|
Conditions Precedent to Each Borrowing 48
|
Section 3.03.
|
Administrative Agent 49
|
ARTICLE IV.
|
GUARANTY 49
|
Section 4.01.
|
Guaranty 49
|
Section 4.02.
|
Payment 49
|
Section 4.03.
|
Waiver 49
|
|
ii
|
|
Section 4.04.
|
Acknowledgments and Representations 50
|
Section 4.05.
|
Subordination 50
|
Section 4.06.
|
Guaranty Absolute 50
|
Section 4.07.
|
No Waiver; Remedies 50
|
Section 4.08.
|
Continuing Guaranty 51
|
Section 4.09.
|
Limitation 51
|
Section 4.10.
|
Effect of Bankruptcy 51
|
Section 4.11.
|
Keepwell 51
|
ARTICLE V.
|
REPRESENTATIONS AND WARRANTIES 52
|
Section 5.01.
|
Corporate Existence 52
|
Section 5.02.
|
Corporate Power 52
|
Section 5.03.
|
Enforceable Obligations 52
|
Section 5.04.
|
Financial Statements 53
|
Section 5.05.
|
Litigation 53
|
Section 5.06.
|
Margin Stock; Use of Proceeds 53
|
Section 5.07.
|
Investment Company Act 53
|
Section 5.08.
|
ERISA 53
|
Section 5.09.
|
Taxes 54
|
|
iii
|
|
Section 5.10.
|
Environmental Condition 54
|
Section 5.11.
|
Ownership of the Guarantors 54
|
Section 5.12.
|
Solvency 54
|
Section 5.13.
|
Disclosure 54
|
Section 5.14.
|
Anti-Corruption Laws and Sanctions 55
|
Section 5.15.
|
EEA Financial Institution 55
|
Section 5.16.
|
Use of Plan Assets 55
|
Section 5.17.
|
Covered Entities 55
|
ARTICLE VI.
|
AFFIRMATIVE COVENANTS 55
|
Section 6.01.
|
Compliance with Laws, Etc 55
|
Section 6.02.
|
Reporting Requirements 56
|
Section 6.03.
|
Use of Proceeds 58
|
Section 6.04.
|
Maintenance of Insurance 58
|
Section 6.05.
|
Preservation of Corporate Existence, Etc 58
|
Section 6.06.
|
Payment of Taxes, Etc 58
|
Section 6.07.
|
Visitation Rights 59
|
Section 6.08.
|
Compliance with ERISA and the Code 59
|
Section 6.09.
|
Additional Guarantors 59
|
|
iv
|
|
Section 6.10.
|
Collateral Requirement 59
|
ARTICLE VII.
|
NEGATIVE COVENANTS 60
|
Section 7.01.
|
Financial Covenants 60
|
Section 7.02.
|
Negative Pledge 61
|
Section 7.03.
|
Merger, Sale of Assets and Sale-Leasebacks 61
|
Section 7.04.
|
Agreements to Restrict Dividends, Certain Transfers and Liens 62
|
Section 7.05.
|
Transactions with Affiliates 63
|
Section 7.06.
|
Change of Business 63
|
Section 7.07.
|
Limitation on Advances and Investments 63
|
Section 7.08.
|
Accounting Practices 63
|
Section 7.09.
|
Debt 64
|
Section 7.10.
|
Restricted Payments 64
|
ARTICLE VIII.
|
DEFAULTS 65
|
Section 8.01.
|
Defaults 65
|
Section 8.02.
|
Application of Funds 67
|
ARTICLE IX.
|
THE ADMINISTRATIVE AGENT 68
|
Section 9.01.
|
Authorization and Action 68
|
Section 9.02.
|
Administrative Agent’s Reliance, Etc 69
|
|
v
|
|
Section 9.03.
|
Knowledge of Defaults 69
|
Section 9.04.
|
Rights of the Administrative Agent as a Bank 70
|
Section 9.05.
|
Bank Credit Decision 70
|
Section 9.06.
|
Successor Administrative Agent 71
|
Section 9.07.
|
Joint Lead Arrangers and Bookrunners, Syndication Agents and Documentation Agents 71
|
Section 9.08.
|
INDEMNIFICATION 72
|
Section 9.09.
|
Collateral Matters 72
|
Section 9.10.
|
Certain ERISA Matters 73
|
Section 9.11.
|
Secured Cash Management Agreements, Secured Hedge Agreements, and Secured Bilateral Letters of Credit 74
|
ARTICLE X.
|
MISCELLANEOUS 75
|
Section 10.01.
|
Amendments, Etc 75
|
Section 10.02.
|
Notices, Etc 76
|
Section 10.03.
|
No Waiver; Remedies 76
|
Section 10.04.
|
Costs, Expenses and Taxes 76
|
Section 10.05.
|
Right of Set-off 78
|
Section 10.06.
|
Bank Assignments and Participations 79
|
Section 10.07.
|
Governing Law 81
|
Section 10.08.
|
Interest 81
|
|
vi
|
|
Section 10.09.
|
Execution in Counterparts 83
|
Section 10.10.
|
Survival of Agreements, Representations and Warranties, Etc 83
|
Section 10.11.
|
The Borrower’s Right to Apply Deposits 83
|
Section 10.12.
|
Confidentiality 83
|
Section 10.13.
|
Binding Effect 84
|
Section 10.14.
|
ENTIRE AGREEMENT 84
|
Section 10.15.
|
USA PATRIOT ACT 85
|
Section 10.16.
|
No Fiduciary Relationship 85
|
Section 10.17.
|
Severability 85
|
Section 10.18.
|
Waiver of Jury Trial 86
|
Section 10.19.
|
Electronic Execution of Assignments and Certain Other Documents 86
|
Section 10.20.
|
Acknowledgement and Consent to Bail-In of EEA Financial Institutions 86
|
Section 10.21.
|
Acknowledgement Regarding Any Supported QFCs 87
|
|
vii
|
|
|
viii
|
|
Rating Level
|
Ratings (Moody’s/ S&P)
|
Facility Fee Rate
(bps per annum) |
Eurodollar Rate Spread
(bps per annum) after the end of the Limitation Period |
Eurodollar Rate Spread
(bps per annum) during the Limitation Period |
Base Rate Spread
(bps per annum) after the end of the Limitation Period |
Base Rate Spread
(bps per annum) during the Limitation Period |
Rating Level 1
|
≥ Baa1 or BBB+
|
12.5
|
100.0
|
125.0
|
0.0
|
25.0
|
Rating Level 2
|
Baa2 or BBB
|
15.0
|
110.0
|
135.0
|
10.0
|
35.0
|
Rating Level 3
|
Baa3 or BBB-
|
20.0
|
117.5
|
142.5
|
17.5
|
42.5
|
Rating Level 4
|
Ba1 or BB+
|
25.0
|
137.5
|
162.5
|
37.5
|
62.5
|
Rating Level 5
|
< Ba1 and BB+ or unrated
|
30.0
|
170.0
|
195.0
|
70.0
|
95.0
|
(a)
|
for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate as administered by ICE Benchmark Administration or any other Person that takes over the administration of such rate for U.S. Dollars for a period equal in length to such Interest Period (“LIBOR”) as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time in its reasonable discretion) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period;
|
(b)
|
for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to LIBOR, at or about 11:00 a.m., London time determined two London Banking Days prior to such date for U.S. Dollar deposits with a term of one month commencing that day; and
|
(c)
|
if the Eurodollar Rate shall be less than 0.75%, such rate shall be deemed to be 0.75% for purposes of this Agreement.
|
(a)
|
any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Advance, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;
|
(b)
|
any Interest Period pertaining to a Eurodollar Rate Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;
|
(c)
|
no Interest Period shall extend beyond the Termination Date; and
|
(d)
|
Interest Periods commencing on the same date for Eurodollar Rate Advances comprising the same Borrowing shall be of the same duration.
|
(a)
|
direct obligations of, or obligations the principal of and interest on which are guaranteed or insured by, the United States of America or any agency or instrumentality thereof;
|
(b)
|
(i) negotiable or nonnegotiable certificates of deposit, time deposits, bankers’ acceptances or other similar banking arrangements maturing within twelve (12) months from the date of acquisition thereof (“bank debt securities”), issued by (A) any Bank or any Affiliate of any Bank or (B) any other foreign or domestic bank, trust company or financial institution which has a combined capital surplus and undivided profit of not less than $100,000,000 or the U.S. Dollar equivalent thereof, if at the time of deposit or purchase, such bank debt securities are rated not less than “BB” (or the then equivalent) by the rating service of S&P or of Moody’s, (ii) commercial paper issued by (A) any Bank or any Affiliate of any Bank or (B) any other Person if at the time of purchase such commercial paper is rated not less than “A-2” (or the then equivalent) by the rating service of S&P or not less than “P-2” (or the then equivalent) by the rating service of Moody’s, or upon the discontinuance of both of such services, such other nationally recognized rating service or services, as the case may be, as shall be selected by the Borrower or a Guarantor, (iii) debt or other securities issued by (A) any Bank or Affiliate of any Bank or (B) or any other Person, if at the time of purchase such Person’s debt or equity securities are rated not less than “BB” (or the then equivalent) by the rating service of S&P or of Moody’s, or upon the discontinuance of both such services, such other nationally recognized rating service or services, as the case may be, as shall be selected by the Borrower or a Guarantor and (iv) marketable securities of a class registered pursuant to Section 12(b) or (g) of the Exchange Act;
|
(c)
|
repurchase agreements relating to investments described in clauses (a) and (b) above with a market value at least equal to the consideration paid in connection therewith, with any Person who has a combined capital surplus and undivided profit of not less than $100,000,000 or the U.S. Dollar equivalent thereof, if at the time of entering into such agreement the debt securities of such Person are rated not less than “BBB” (or the then equivalent) by the rating service of S&P or of Moody’s, or upon
|
(d)
|
shares of any mutual fund registered under the Investment Company Act of 1940 which invests solely in underlying securities of the types described in clauses (a), (b) and (c) above.
|
(a)
|
for taxes, assessments or governmental charges or levies on property of such Person incurred in the ordinary course of business to the extent the failure to pay such taxes, assessments or governmental charges or levies would not be in breach of Sections 6.01 and 6.06;
|
(b)
|
imposed by law, such as landlords’, carriers’, warehousemen’s and mechanics’ liens and other similar Liens arising in the ordinary course of business securing obligations
|
(c)
|
arising in the ordinary course of business (i) out of pledges or deposits under workers’ compensation laws, unemployment insurance, old age pensions or other social security or retirement benefits, or similar legislation or to secure public or statutory obligations of such Person or (ii) which were not incurred in connection with the borrowing of money and do not in the aggregate materially detract from the value or use of the assets of the Borrower and its Subsidiaries in the operation of their business;
|
(d)
|
securing Debt existing on the Fifth Amendment Effective Date and listed on the attached Schedule III or reflected in the financial statements referenced in Section 5.04, provided that the Debt secured by such Liens shall not be renewed, refinanced or extended if the amount of such Debt so renewed is greater than the outstanding amount of such Debt on the Fifth Amendment Effective Date ;
|
(e)
|
constituting easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of such Person;
|
(f)
|
securing judgments against such Person which are being appealed;
|
(g)
|
on real property acquired by such Person after the Second Amendment Effective Date and securing only Debt of such Person incurred to finance the purchase price of such property, provided that any such Lien is created within one hundred eighty (180) days of the acquisition of such property;
|
(h)
|
other than those Liens otherwise permitted above, Liens securing Debt of the Borrower and its Subsidiaries in an aggregate outstanding amount at any time not to exceed $25,000,000;
|
(i)
|
Liens existing on property owned by a Person whose Equity Interests, or all or substantially all of whose assets, were acquired by the Borrower or one of its Subsidiaries after the Second Amendment Effective Date at the time of such acquisition; provided that such Liens are not created in connection with or in contemplation of such acquisition and do not attach to any other assets or assets of any other Person, as applicable;
|
(j)
|
Liens granted pursuant to the terms of the Credit Documents;
|
(k)
|
Liens granted in cash collateral (including any associated deposit or securities accounts) to secure obligations incurred in connection with the issuance of letters of credit, bank guaranties, bankers acceptances and similar instruments; or
|
(l)
|
Liens granted in Principal Properties to secure obligations incurred in connection with Sale-Leaseback Transactions otherwise permitted to be consummated in accordance with the terms of this Agreement.
|
BORROWER:
BRINKER INTERNATIONAL, INC.
By:__________________________
Name:
Title:
|
GUARANTORS:
BRINKER RESTAURANT CORPORATION
By:__________________________
Name:
Title:
|
|
|
|
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A.
|
By:__________________________
Name:
Title:
|
|
|
BANK OF AMERICA, N.A.
By:__________________________
Name:
Title:
|
|
JPMORGAN CHASE BANK, N.A.
By:__________________________
Name:
Title:
|
|
WELLS FARGO BANK, N.A.
By:__________________________
Name:
Title:
|
|
MUFG BANK, LTD.
By:__________________________
Name:
Title:
|
|
TRUIST BANK (as successor by merger to SunTrust Bank)
By:__________________________
Name:
Title:
|
|
U.S. BANK NATIONAL ASSOCIATION
By:__________________________
Name:
Title:
|
|
BARCLAYS BANK PLC
By:__________________________
Name:
Title:
|
|
REGIONS BANK
By:__________________________
Name:
Title:
|
|
ASSOCIATED BANK NATIONAL ASSOCIATION
By:__________________________
Name:
Title:
|
|
PNC BANK, NATIONAL ASSOCIATION
By:__________________________
Name:
Title:
|
Subsidiary
|
Amount
|
Description
|
Maturity
|
Brinker Restaurant Corporation
(consolidated) (includes $11,609,766 for Brinker Texas, Inc. and $1,723,614 for Brinker Florida, Inc.)
|
$81,074,424
|
Liens on assets acquired with respect to Capitalized Lease Obligations
|
Various dates through 2042
|
Company
|
Amount
|
Description
|
|
|
|
Las Nuevas Delicias Gastronomicas, S. De R.L. De C.V.
|
$0.00
|
Mexico joint venture with CMR, S.A.B. de C.V.
|
Merchant Customer Exchange
|
$0.00
|
Investment in Merchant Customer Exchange
|
Description
|
Amount
|
||
5.00% Notes due 2024 pursuant to the Indenture dated September 23, 2016, among Brinker International, Inc., the guarantors party thereto and U.S. Bank National Association, as Trustee
|
$350,000,000
|
||
3.875% Notes due 2023 pursuant to the Indenture dated April 30, 2013, between Brinker International, Inc. and Wilmington Trust, National Association, as Trustee
|
$300,000,000
|
||
Capitalized Lease Obligations of Brinker Restaurant Corporation (consolidated) (includes $11,609,766 for Brinker Texas, Inc. and $1,723,614 for Brinker Florida, Inc.) with various maturity dates through 2042
|
$81,074,424
|
||
Undrawn standby letters of credits
|
$27,188,260
|
Bank
|
Commitment
|
Bank of America, N.A.
|
$160,000,000.00
|
JPMorgan Chase Bank, N.A.
|
$160,000,000.00
|
Wells Fargo Bank, National Association
|
$160,000,000.00
|
MUFG Bank, Ltd.
|
$125,000,000.00
|
Truist Bank (as successor by merger to SunTrust Bank)
|
$140,000,000.00
|
U.S. Bank National Association
|
$75,000,000.00
|
Barclays Bank PLC
|
$50,000,000.00
|
Regions Bank
|
$50,000,000.00
|
PNC Bank, National Association
|
$50,000,000.00
|
Associated Bank, National Association
|
$30,000,000.00
|
Total
|
$1,000,000,000.00
|
a.
|
Change in Control. The term “Change in Control” means:
|
i.
|
a sale, transfer or other conveyance of all or substantially all of the assets of the Company on a consolidated basis; or
|
ii.
|
the acquisition of beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) by any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, directly or indirectly, of securities representing 50% or more of the total number of votes that may be cast for the election of directors of the Company; or
|
iii.
|
the failure at any annual or special meetings of the Company’s shareholders held during the three-year period following a “solicitation in opposition,” as defined in Rule 14a-6 promulgated under the Exchange Act, of a majority of the persons nominated by the Company in the proxy materials mailed to shareholders by the management of the Company to win election to seats on the Board (such majority calculated based upon the total number of persons nominated by the Company failing to win election to seats on the Board divided by the total number of Board members of the Board as of the beginning of such three-year period), excluding only those who die, retire voluntarily, are disabled
|
b.
|
Committee. The term “Committee” means the Governance and Nominating Committee of the Board.
|
c.
|
Disability. The term “Disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
|
d.
|
Separation from Service. The term “Separation from Service” means the Participant incurs a “separation from service” (within the meaning of Section 409A of the Code) from the Company and all Related Companies.
|
e.
|
Plan Definitions. Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in these Award Terms will have the meaning set forth in the Plan.
|
i.
|
the one (1) year anniversary of the Award Date;
|
ii.
|
the four (4) year anniversary of the Award Date;
|
iii.
|
the Participant’s Separation from Service;
|
iv.
|
one (1) year after the Participant’s Separation from Service; or
|
v.
|
two (2) years after the Participant’s Separation from Service.
|
i.
|
Each deferral election must be in writing to the Company;
|
ii.
|
Each deferral election must be made at least twelve (12) months prior to the Scheduled Payment Date or subsequent Deferred Payment Date, as applicable;
|
iii.
|
Each deferral election must apply to all of the Restricted Stock Units;
|
iv.
|
Each deferral election shall satisfy the requirements of Section 409A(a)(4)(C) of the Code;
|
v.
|
Each deferral election shall apply only to a payment election made pursuant to Sections 3.a(ii), 3.a(iv), or 3.a(v) above;
|
vi.
|
Each deferral election shall not take effect until at least twelve (12) months after the date on which such deferral election is made; and
|
vii.
|
Each such subsequent election shall defer distribution or payment for a period of five (5) years from the Scheduled Payment Date or subsequent Deferred Payment Date, as applicable.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Brinker International, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 21, 2020
|
By:
|
/S/ WYMAN T. ROBERTS
|
|
|
Wyman T. Roberts,
|
|
|
President and Chief Executive Officer
|
|
|
of Brinker International, Inc.
|
|
|
and President of Chili’s Grill & Bar
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of Brinker International, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 21, 2020
|
By:
|
/S/ JOSEPH G. TAYLOR
|
|
|
Joseph G. Taylor,
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
Date: August 21, 2020
|
By:
|
/S/ WYMAN T. ROBERTS
|
|
|
Wyman T. Roberts,
|
|
|
President and Chief Executive Officer
|
|
|
of Brinker International, Inc.
|
|
|
and President of Chili’s Grill & Bar
|
|
|
(Principal Executive Officer)
|
Date: August 21, 2020
|
By:
|
/S/ JOSEPH G. TAYLOR
|
|
|
Joseph G. Taylor,
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|