BRINKER INTERNATIONAL INC

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations, and our current operating environment. For an understanding of the significant factors that influenced our performance during the thirteen week periods ended September 25, 2024 and September 27, 2023, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified.

Previous wording

The Company is principally engaged in the ownership, operation, development and franchising of the Chili’s® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy® (“Maggiano’s”) restaurant brands. As of March 27, 2024, we owned, operated or franchised 1,618 restaurants, consisting of 1,176 Company-owned restaurants and 442 franchised restaurants, located in the United States, 27 other countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units.

Current wording

We own, develop, operate, and franchise the Chili’s® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy® (“Maggiano’s”) restaurant brands. As of September 25, 2024 we owned, operated or franchised 1,625 restaurants, consisting of 1,170 Company-owned restaurants and 455 franchised restaurants, located in the United States, 28 other countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units.

Previous wording

Our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs during fiscal 2023 and to a lesser extent during fiscal 2024.

Current wording

During the recent years, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs. Geopolitical and other macroeconomic events have led, and in the future may lead to, wage inflation, staffing challenges, product cost inflation and/or disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operation. Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing the average amount guests spend in our restaurants.

Previous wording

In dining rooms, we use tabletop devices to engage our guests at the table. These devices provide functionality for guests to pay at the table, order or re-order, engage in digital entertainment, to provide guest feedback and interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency. We customize offerings for these guests based on their purchase behavior. Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests. Third-party delivery orders for our restaurants are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. The operating results for our virtual brand, It’s Just Wings®, are included in the results of our Chili’s brand.

Current wording

In dining rooms, we use tabletop devices with functionality for guests to pay at the table, provide guest feedback and interact with our My Chili’s Rewards® program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency and allows us to communicate and advertise to our guests through email and text. Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests.

Previous wording

Maggiano’s - At Maggiano’s, we are focused on making our guests feel special. This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special occasions. We have focused on increasing our carry-out and delivery business in recent years by creating partnerships with delivery service providers that have made our restaurants more accessible to guests and helped create an additional significant revenue channel. Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Current wording

Maggiano’s - At Maggiano’s, we are focused on making our guests feel special. This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings, and many more special occasions. While our dining rooms support the majority of our business, we also offer carry-out and delivery options through partnerships with delivery service providers that have made our restaurants more accessible to guests. Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year.

Previous wording

Franchise Partnerships -Our franchisees continue to grow our brands around the world, with 16 new restaurant openings and two new development agreements during the thirty-nine week period ended March 27, 2024. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners.

Current wording

Franchise Partnerships - During the thirteen week period ended September 25, 2024, there were 14 new franchise restaurant openings. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners.

Previous wording

Company Development - The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end:

Current wording

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

Previous wording

At March 27, 2024, we own property for 50 of the 1,176 Company-owned restaurants and one closed restaurant. The net book values associated with these restaurants included land of $42.4 million and buildings of $12.8 million.

Current wording

At September 25, 2024, we own property for 50 of the 1,170 Company-owned restaurants and one closed restaurant. The net book values associated with these restaurants included land of $41.7 million and buildings of $13.5 million.

Previous wording

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

Current wording

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

Previous wording

(1)Franchise revenues increased in the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023 primarily due to higher franchise advertising fees. Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.2 million and $2.9 million and $644.3 million and $8.5 million, respectively, for the thirteen and thirty-nine week periods ended March 27, 2024 compared to $213.6 million and $2.5 million and $639.9 million and $7.5 million, respectively, in for the thirteen and thirty-nine week periods ended March 29, 2023.

Current wording

(1)Franchise revenues increased in the thirteen week periods ended September 25, 2024 compared to September 27, 2023 primarily due to higher royalties and franchise advertising revenues. Our Chili’s and Maggiano’s franchisees generated sales of approximately $225.7 million and $3.2 million respectively, for the thirteen week period ended September 25, 2024 compared to $202.8 million and $2.4 million respectively, for the thirteen week period ended September 27, 2023.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

General and administrative expenses increased $5.5 million as follows:

Current wording

General and administrative expenses increased $9.4 million as follows:

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The change in the effective income tax rate in the thirteen week period ended September 25, 2024 to the thirteen week period ended September 27, 2023 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit.

Previous wording

Chili’s Total revenues increased by 3.8% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by lower traffic and unfavorable menu item mix. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Current wording

Chili’s Total revenues increased by 13.5% primarily due to favorable comparable restaurant sales driven by menu pricing, higher traffic, and favorable menu item mix. Refer to “Revenues” section above for further details about Chili’s revenues changes.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Maggiano’s Total revenues increased 0.8% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Current wording

Maggiano’s Total revenues increased 4.0% primarily due to favorable comparable restaurant sales driven by menu pricing and favorable menu item mix, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Net cash used in investing activities increased compared to the prior year. Increased spend on Chili’s capital maintenance, equipment and Maggiano’s remodels were partially offset by decreased spend on Chili’s remodels and new restaurant construction.

Current wording

Net cash used in investing activities increased compared to the prior year. Increased spend on Chili’s capital maintenance and equipment were partially offset by decreased spend on new restaurant construction.

Previous wording

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

Current wording

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

Previous wording

Net repayments of $110.0 million were made during the thirty-nine week period ended March 27, 2024 on the revolving credit facility. As of March 27, 2024, $848.7 million of credit was available under the revolving credit facility.

Current wording

During the thirteen week period ended September 25, 2024, net borrowings of $25.0 million were drawn on the revolving credit facility. As of September 25, 2024, $875.0 million of credit was available under the revolving credit facility.

Previous wording

The $900.0 million revolving credit facility matures on August 18, 2026 and bears interest of SOFR plus an applicable margin of 1.50% to 2.25% and an undrawn commitment fee of 0.25% to 0.35%, both based on a function of our debt-to-cash-flow ratio. As of March 27, 2024, our interest rate was 7.20% consisting of SOFR of 5.32% plus the applicable margin and spread adjustment of 1.88%.

Current wording

Our $900.0 million revolving credit facility, as amended, matures on August 18, 2026 and bears interest at a rate of SOFR plus an applicable margin of 1.60% to 2.35% and an undrawn commitment fee of 0.25% to 0.35%, both based on a function of our debt-to-cash-flow ratio. As of September 25, 2024, our interest rate was 6.46% consisting of SOFR of 4.86% plus the applicable margin and spread adjustment of 1.60%.

Previous wording

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

Current wording

Subsequent to the end of the first quarter, on October 1, 2024, our $350.0 million of 5.000% senior notes matured and were repaid using available capacity under our existing revolving credit facility. Refer to Note 6 - Debt for further information about our notes and revolving credit facility.

Previous wording

In the thirty-nine week period ended March 27, 2024, we repurchased 0.8 million shares of our common stock for $25.6 million, including 0.7 million shares purchased for $21.0 million as part of our share repurchase program and 0.1 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. As of March 27, 2024, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program.

Current wording

In the thirteen week period ended September 25, 2024, we repurchased 1.1 million shares of our common stock for $74.8 million, including 0.9 million shares purchased for $66.0 million as part of our share repurchase program and 0.2 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. As of September 25, 2024, approximately $117.0 million of share repurchase authorization remains under the current share repurchase program.

Previous wording

Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our existing revolving credit facility will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. We continue to monitor the macro environment and will adjust our overall approach to capital allocation, including share repurchases, as events and macroeconomic trends unfold.

Current wording

Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our existing revolving credit facility will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months, including the repayment of the $350.0 million senior notes which occurred on October 1, 2024.