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FAIR VALUE MEASUREMENTS

12 Months Ended

Jun. 28, 2023

Non-Financial Assets

We review the carrying amounts of non-financial assets, primarily long-lived property and equipment, finance lease assets, operating lease assets, reacquired franchise rights, goodwill and transferable liquor licenses annually or when events or circumstances indicate that the fair value may not substantially exceed the carrying amount. We record an impairment charge for the excess of the carrying amount over the fair value. All impairment charges were included in Other (gains) and charges in the Consolidated Statements of Comprehensive Income for the periods presented. Refer to Note 14 - Other Gains and Charges for more information.

Intangibles, net in the Consolidated Balance Sheets includes both indefinite-lived intangible assets such as transferable liquor licenses and definite-lived intangible assets such as reacquired franchise rights and trademarks.

Definite-Lived Assets Impairment

Definite-lived assets include property and equipment, including finance lease assets, operating lease assets and reacquired franchise rights. During fiscal 2023, we impaired certain long-lived assets and operating lease assets primarily related to 38 underperforming Chili’s restaurants. During fiscal 2022, we impaired certain long-lived assets and operating lease assets primarily related to 30 underperforming Chili’s and two underperforming Maggiano’s restaurants.

We determined the fair value of these assets based on Level 3 fair value measurements. The table below presents the carrying values and related impairment charges recorded on these impaired restaurants for the periods presented:


					Impairment Charges
	Pre-Impairment Carrying Value				Fiscal Years Ended
	June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022
Underperforming restaurants
Long-lived assets	$	10.2	$	7.3	$	10.2	$	7.3
Reacquired franchise rights assets	0.3		—		0.3		—
Operating lease assets	21.4		13.0		1.5		1.0

Total underperforming restaurants	$	31.9	$	20.3	$	12.0	$	8.3

Indefinite-Lived Assets Impairment

The fair values of transferable liquor licenses are based on prices in the open market for licenses in the same or similar jurisdictions and are categorized as Level 2. Based on our annual reviews, in fiscal 2023 we determined there was a $0.1 million impairment and in fiscal 2022 we determined there was $0.2 million impairment.

Chili’s Restaurant Acquisitions

In fiscal 2022, we completed the acquisition of 68 Chili’s restaurants from three former franchisees. The preliminary fair value of assets acquired and liabilities assumed for these restaurants utilized Level 3 inputs. The fair values of intangible assets acquired were primarily based on significant inputs not observable in an active market, including estimates of replacement costs, future cash flows, and discount rates. Refer to Note 3 - Acquisitions for further details.

Other Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying amounts because of the short maturity of these items.

Long-Term Debt

The carrying amount of debt outstanding related to our revolving credit facility approximates fair value as the interest rate on this instrument approximates current market rates (Level 2). The fair values of our notes are based on quoted market prices and are considered Level 2 fair value measurements.

The 5.000%, 8.250% and 3.875% notes’ carrying amounts, which are net of unamortized debt issuance costs and discounts, and fair values are as follows, refer to Note 8 - Debt for further details:


	June 28, 2023				June 29, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
5.000% notes	$	349.0	$	343.5	$	348.2	$	329.0
8.250% notes(1)	344.3		348.3		—		—
3.875% notes(2)	—		—		299.7		295.4

(1)On June 27, 2023 we issued $350.0 million of 8.250% senior notes due July 2030 (the “2030 Notes”).

(2)On May 15, 2023 the 3.875% notes matured and were repaid in full using borrowings under our revolving credit facility.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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