SEGMENT INFORMATION

9 Months Ended

Mar. 27, 2019

Our operating segments are Chili’s and Maggiano’s. The Chili’s segment includes the results of our company-owned Chili’s restaurants in the United States and Canada as well as the results from our domestic and international franchise business. The Maggiano’s segment includes the results of our company-owned Maggiano’s restaurants as well as the results from our domestic franchise business.

Company sales include revenues generated by the operation of company-owned restaurants including gift card redemptions. Franchise and other revenues include Royalties and Franchise fees and other revenues. Franchise fees and other revenues include advertising fees (effective in the first quarter of fiscal 2019), gift card breakage, Maggiano’s banquet service charge income, digital entertainment revenues, gift card equalization, gift card discount costs from third-party gift card sales, franchise and development fees, delivery fee income, merchandise income and retail royalty revenues. We do not rely on any major customers as a source of sales, and the customers and long-lived assets of our operating segments are predominantly in the United States. There were no material transactions amongst our operating segments.

Effective in the first quarter of fiscal 2019, we transitioned to ASC 606, from the previous Legacy GAAP guidance. Our Consolidated Financial Statements for the third quarter and year-to-date periods of fiscal 2019 reflect the application of ASC 606 guidance using the modified retrospective transition method, while our Consolidated Financial Statements for prior periods were prepared under Legacy GAAP. Please see Note 2 - Revenue Recognition for more details on the adoption of ASC 606.

Our chief operating decision maker uses Operating income as the measure for assessing performance of our segments. Operating income includes revenues and expenses directly attributable to segment-level results of operations. Company restaurant expenses include food and beverage costs, restaurant labor costs and restaurant expenses, including advertising expenses. The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:



	Thirteen Week Period Ended March 27, 2019
	ASC 606
	Chili’s			Maggiano’s		Other			Consolidated
Company sales	$	709.8		$	101.8	$	—		$	811.6
Royalties	13.4			0.1		—			13.5
Franchise fees and other revenues	9.5			4.7		—			14.2
Total revenues	732.7			106.6		—			839.3

Company restaurant expenses⁽¹⁾	604.1			91.2		0.1			695.4
Depreciation and amortization	29.8			3.9		2.7			36.4
General and administrative	10.5			1.3		29.0			40.8
Other gains and charges	(3.0		)	—		(0.5		)	(3.5		)
Total operating costs and expenses	641.4			96.4		31.3			769.1

Operating income (loss)	91.3			10.2		(31.3		)	70.2
Interest expense	0.6			—		14.7			15.3
Other, net	—			—		(0.6		)	(0.6		)
Income (loss) before provision for income taxes	$	90.7		$	10.2	$	(45.4	)	$	55.5



	Thirteen Week Period Ended March 28, 2018
	Legacy GAAP
	Chili’s			Maggiano’s		Other			Consolidated
Company sales	$	688.9		$	101.6	$	—		$	790.5
Franchise and other revenues	17.2			4.8		—			22.0
Total revenues	706.1			106.4		—			812.5

Company restaurant expenses⁽¹⁾	572.9			89.9		0.1			662.9
Depreciation and amortization	31.0			3.9		2.6			37.5
General and administrative	10.6			1.5		24.6			36.7
Other gains and charges	(0.1		)	—		2.8			2.7
Total operating costs and expenses	614.4			95.3		30.1			739.8

Operating income (loss)	91.7			11.1		(30.1		)	72.7
Interest expense	—			—		14.6			14.6
Other, net	—			—		(0.8		)	(0.8		)
Income (loss) before provision for income taxes	$	91.7		$	11.1	$	(43.9	)	$	58.9



	Thirty-Nine Week Period Ended March 27, 2019
	ASC 606
	Chili’s			Maggiano’s		Other			Consolidated
Company sales	$	1,990.7		$	310.7	$	—		$	2,301.4
Royalties	39.5			0.1		—			39.6
Franchise fees and other revenues	26.6			16.2		—			42.8
Total revenues	2,056.8			327.0		—			2,383.8

Company restaurant expenses ⁽¹⁾	1,734.3			275.2		0.5			2,010.0
Depreciation and amortization	89.8			11.8		7.9			109.5
General and administrative	28.4			4.5		77.1			110.0
Other gains and charges ⁽²⁾	(13.9		)	—		1.5			(12.4		)
Total operating costs and expenses	1,838.6			291.5		87.0			2,217.1

Operating income (loss)	218.2			35.5		(87.0		)	166.7
Interest expense	2.3			0.2		43.8			46.3
Other, net	—			—		(2.2		)	(2.2		)
Income (loss) before provision for income taxes	$	215.9		$	35.3	$	(128.6	)	$	122.6

Segment assets ⁽²⁾	$	1,052.4		$	154.8	$	56.9		$	1,264.1
Segment goodwill	$	125.4		$	38.4	$	—		$	163.8
Payments for property and equipment	$	96.1		$	8.1	$	23.8		$	128.0



	Thirty-Nine Week Period Ended March 28, 2018
	Legacy GAAP
	Chili’s		Maggiano’s		Other			Consolidated
Company sales	$	1,940.1	$	310.0	$	—		$	2,250.1
Franchise and other revenues	52.0		16.2		—			68.2
Total revenues	1,992.1		326.2		—			2,318.3

Company restaurant expenses⁽¹⁾	1,648.2		273.1		0.3			1,921.6
Depreciation and amortization	93.8		11.9		8.0			113.7
General and administrative	29.5		4.3		68.3			102.1
Other gains and charges	17.9		0.8		6.5			25.2
Total operating costs and expenses	1,789.4		290.1		83.1			2,162.6

Operating income (loss)	202.7		36.1		(83.1		)	155.7
Interest expense	—		—		42.8			42.8
Other, net	—		—		(2.3		)	(2.3		)
Income (loss) before provision for income taxes	$	202.7	$	36.1	$	(123.6	)	$	115.2

Payments for property and equipment	$	58.6	$	5.6	$	5.3		$	69.5

⁽¹⁾

Company restaurant expenses include Cost of sales, Restaurant labor, and Restaurant expenses including advertising expenses. With the adoption of ASC 606, for the thirteen and thirty-nine week periods ended March 27, 2019, advertising contributions received from Chili’s franchisees are recorded as Franchise fees and other revenues within Total revenues, which differs from the thirteen and thirty-nine week periods ended

March 28, 2018 that includes Chili’s franchise advertising contributions recorded on a net basis within Company restaurant expenses.

⁽²⁾

During the thirty-nine week period ended March 27, 2019 we completed sale leaseback transactions of 149 company-owned Chili’s restaurant properties. As part of this transaction, we sold the related restaurant fixed assets, net of accumulated depreciation, totaling $178.6 million. Additionally, Chili’s recognized $22.0 million of 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. Please see Note 3 - Sale Leaseback Transactions for further details.