REVENUE RECOGNITION (Tables)

3 Months Ended

Sep. 26, 2018

The following table disaggregates revenue by operating segment and major source:



	Thirteen Weeks Ended September 26, 2018
	Chili's		Maggiano's		Total
Company sales	$	640.3	$	88.0	$	728.3
Royalties	12.9		—		12.9
Advertising fees	5.1		—		5.1
Franchise fees and other revenues	3.5		4.0		7.5
Total revenues	$	661.8	$	92.0	$	753.8

Changes in deferred development and franchise fees



	Deferred Development and Franchise Fees
Balance at June 27, 2018	$	—
Cumulative effect adjustment from adoption of ASC 606	18.1
Additions	0.2
Amount recognized to Franchise and other revenue	(0.5		)
Balance at September 26, 2018	$	17.8

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction



Fiscal Year	Development and Franchise Fees Revenue Recognition
2019	$	1.2
2020	1.4
2021	1.4
2022	1.4
2023	1.4
Thereafter	11.0
	$	17.8

Financial Statement Impact of Transition to ASC 606



	June 27, 2018			ASC 606 Cumulative Effect Adjustments			June 28, 2018
ASSETS
Other assets
Deferred income taxes, net ⁽¹⁾	$	33.6		$	2.5		$	36.1
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Gift card liability ⁽²⁾	119.1			(8.2		)	110.9
Other accrued liabilities ⁽³⁾	127.2			1.5			128.7
Other liabilities ⁽³⁾	131.7			16.6			148.3
Shareholders’ deficit
Retained earnings ^{(2) (3)}	(718.3		)	(7.4		)	(725.7		)


⁽¹⁾	Deferred income taxes, net adjustment relates to the net change in liabilities and equity as a result of the adoption of ASC 606 described in notes ⁽²⁾ and ⁽³⁾below.

⁽²⁾

Gift card liability is adjusted for the ASC 606 adoption impact of the change to recognize gift card breakage proportionate to the pattern of related gift card redemption. Under Legacy GAAP, gift card breakage was recognized when the likelihood of redemption was deemed remote. The cumulative effect of applying ASC 606 accounting to gift card balances outstanding at June 28, 2018 resulted in an $8.2 million decrease in Gift card liability due to the change in timing of recognition between ASC 606 and Legacy GAAP, and a corresponding $2.0 million decrease in Deferred income taxes, net, and a $6.2 million increase in Retained earnings.

⁽³⁾

Other liabilities $16.6 million and Other accrued liabilities $1.5 million adjustments relate to the deferral of previously recognized franchise and development fees received from franchisees, with a corresponding $4.5 million increase in Deferred income taxes, and a $13.6 million decrease to Retained earnings at June 28, 2018.

Condensed Statement of Comprehensive Income

Condensed Consolidated Statement of Income (Unaudited)



	Thirteen Week Period Ended September 26, 2018
	As Reported ASC 606 Amounts			Adjustments			Legacy GAAP Amounts
Revenues
Company sales	$	728.3		$	—		$	728.3
Franchise and other revenues	25.5			(4.8		)	20.7
Total revenues	753.8			(4.8		)	749.0
Operating costs and expenses
Company restaurants (excluding depreciation and amortization)
Cost of sales	191.9			—			191.9
Restaurant labor	256.3			—			256.3
Restaurant expenses	199.0			(5.1		)	193.9
Company restaurant expenses	647.2			(5.1		)	642.1
Depreciation and amortization	37.0			—			37.0
General and administrative	33.8			—			33.8
Other (gains) and charges	(11.1		)	—			(11.1		)
Total operating costs and expenses	706.9			(5.1		)	701.8
Operating income	46.9			0.3			47.2
Interest expense	15.6			—			15.6
Other (income), net	(0.8		)	—			(0.8		)
Income before provision for income taxes	32.1			0.3			32.4
Provision for income taxes	5.7			0.1			5.8
Net income	$	26.4		$	0.2		$	26.6

Basic net income per share	$	0.65		$	0.01		$	0.66

Diluted net income per share	$	0.64		$	0.01		$	0.65

Condensed Cash Flow Statement

Cash flows from operating activities (Unaudited)



	Thirteen Week Period Ended September 26, 2018
	As Reported ASC 606 Amounts			Adjustments			Legacy GAAP Amounts
Net income	$	26.4		$	0.2		$	26.6
Adjustments to reconcile Net income to net cash from operating activities:
Depreciation and amortization	37.0			—			37.0
Stock-based compensation	3.6			—			3.6
Deferred income taxes, net	(76.1		)	0.1			(76.0		)
Restructure charges and other impairments	1.9			—			1.9
Net (gain) loss on disposal of assets	(13.6		)	—			(13.6		)
Other	0.8			—			0.8
Changes in assets and liabilities:
Accounts receivable, net	7.9			—			7.9
Inventories	0.8			—			0.8
Prepaid expenses	(6.3		)	—			(6.3		)
Other assets	(0.5		)	—			(0.5		)
Accounts payable	(5.1		)	—			(5.1		)
Gift card liability	(4.6		)	(0.6		)	(5.2		)
Accrued payroll	(11.9		)	—			(11.9		)
Other accrued liabilities	12.5			0.3			12.8
Current income taxes	77.5			—			77.5
Other liabilities	(0.7		)	—			(0.7		)
Net cash provided by operating activities	$	49.6		$	—		$	49.6

Condensed Balance Sheet

Condensed Consolidated Balance Sheet



	September 26, 2018
	As Reported ASC 606 Amounts			Adjustments			Legacy GAAP Amounts
ASSETS
Current assets
Total current assets	$	151.0		$	—		$	151.0
Property and equipment, at cost
Net property and equipment	762.2			—			762.2
Other assets
Goodwill	164.0			—			164.0
Deferred income taxes, net	112.1			(2.6		)	109.5
Intangibles, net	23.6			—			23.6
Other	31.1			—			31.1
Total other assets	330.8			(2.6		)	328.2
Total assets	$	1,244.0		$	(2.6	)	$	1,241.4
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Current installments of long-term debt	$	7.4		$	—		$	7.4
Accounts payable	97.2			—			97.2
Gift card liability	106.3			7.6			113.9
Accrued payroll	62.6			—			62.6
Other accrued liabilities	159.5			(1.2		)	158.3
Income taxes payable	74.6			—			74.6
Total current liabilities	507.6			6.4			514.0
Long-term debt, less current installments	1,153.0			—			1,153.0
Deferred gain on sale leaseback transactions	251.0			—			251.0
Other liabilities	148.3			(16.6		)	131.7
Shareholders’ deficit
Common stock	17.6			—			17.6
Additional paid-in capital	503.9			—			503.9
Accumulated other comprehensive loss	(5.5		)	—			(5.5		)
Retained earnings	2,686.5			7.6			2,694.1
Less treasury stock, at cost	(4,018.4		)	—			(4,018.4		)
Total shareholders’ deficit	(815.9		)	7.6			(808.3		)
Total liabilities and shareholders’ deficit	$	1,244.0		$	(2.6	)	$	1,241.4