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NOVEL CORONAVIRUS PANDEMIC | 12 Months Ended
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Jun. 24, 2020
Novel Coronavirus Pandemic [Abstract] |
NOVEL CORONAVIRUS PANDEMIC | In March 2020, the impact from the spreading COVID-19 pandemic was declared a National Public Health Emergency and resulted in a significant reduction in sales at our restaurants due to changes in consumer behavior as social distancing practices, dining room closures and other restrictions were mandated or encouraged by federal, state and local governments. We have not experienced material shortages or service disruptions in our supply chain or the availability of labor to operate restaurants. Both Chili’s and Maggiano’s have been able to continue to serve our guests off-premise due to our pre-pandemic strategic decision to enhance this business over the last three years including online ordering, mobile app, curbside service and third-party delivery. We have been carefully assessing the effect of COVID-19 on our business as conditions continue to evolve throughout the communities we serve. At this time, the ultimate impact of COVID-19 cannot be reasonably estimated due to the uncertainty about the extent and the duration of the spread of the virus and could lead to further reduced sales, capacity restrictions, restaurant closures, delays in our supply chain, or impair our ability to staff accordingly which could adversely impact our financial results. Additionally, at our corporate office, we have adopted an optional remote-work policy and other physical distancing policies and we do not anticipate these policies to have any adverse impact on our ability to continue to operate our business. Transitioning to an optional remote-work environment has not had a material adverse impact on our financial reporting system, internal controls or disclosure controls and procedures. Our fiscal 2020 results include the decline in Company sales, as compared to fiscal 2019 as a result of the COVID-19 pandemic. At the end of the third quarter of fiscal 2020, we temporarily closed all Company-owned restaurant dining and banquet rooms as we transitioned to an off-premise business model and temporarily delayed our expansion plans. Beginning on April 27, 2020, we began to reopen certain dining room locations as permitted by governments. At the end of fiscal 2020, as of June 24, 2020, 94.9% of our Company-owned restaurant dining rooms or patios were open in a limited capacity. Valuation of Goodwill and Indefinite-Lived Intangibles We perform our annual goodwill impairment tests in the second quarter of each fiscal year. Interim goodwill impairment tests are also required when events or circumstances change between annual tests that would more likely than not reduce the fair value of our reporting units below their carrying value. Although no triggering event had been identified in our regular goodwill impairment assessment performed at the end of the second quarter of fiscal 2020, we determined during the third of fiscal 2020 that the reduced cash flow projections and the significant decline in our market capitalization as a result of the COVID-19 pandemic could indicate that an impairment loss may have been incurred. Our assessment is based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, affected by the impact of the COVID-19 pandemic, (2) current discount rates, (3) the reduction in our market capitalization, (4) observable market data, and (5) changes to the regulatory environment. Based on our assessment as of March 25, 2020, we determined that our goodwill and indefinite-lived intangible assets were not impaired at that time. Additionally, we updated the assessment during the fourth quarter of fiscal 2020 and determined no triggering event existed based on improved market value and actual results compared to forecast for the third quarter of fiscal 2020. This assessment is predicated on our ability to continue to operate dining and banquet rooms, and generate off-premise sales at our restaurants. Management’s judgment about the short and long term impacts of the pandemic could change as additional facts become known and therefore affect these conclusions. We will continue to monitor and evaluate our results and evaluate the likelihood of any potential impairment charges at our restaurants and reporting units. Valuation of Long-lived Assets Our Net property and equipment and Operating lease assets have recorded values of $805.3 million and $1,054.6 million, respectively, as of June 24, 2020 in the Consolidated Balance Sheets. During the third quarter of fiscal 2020, we evaluated ASC 360-10-40 - Property, Plant, and Equipment - Impairment or Disposal of Long-Lived Assets, and determined as of March 25, 2020 there was no triggering event. During our regular semi-annual analysis in the fourth quarter of fiscal 2020, as of June 24, 2020, we recorded long-lived and operating lease asset impairments of $14.5 million 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. We will continue to evaluate our long-lived assets for potential impairment during this COVID-19 pandemic. Refer to Note 16 - Fair Value Measurements for more information. Rent Concessions In response to the COVID-19 pandemic, during the fourth quarter of fiscal 2020, certain landlords have provided temporary rent concessions. These concessions primarily relate to the deferral of certain rent payments until future periods. We accounted for these rent deferrals as modifications under ASC 842 which are included in our June 24, 2020 lease balances, refer to Note 4 - Leases for more information. COVID-19 Related Charges Certain charges, net of credits related to the COVID-19 pandemic were recorded in Other (gains) and charges in the Consolidated Statements of Comprehensive Income in fiscal 2020, 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

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