Chili's 2002 Annual Report Download - page 49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATIONS AND INVESTMENT IN UNCONSOLIDATED ENTITIES
In November 2001, the Company acquired from its franchise partner, Sydran Group, LLC and Sydran Food
Services III, L.P. (collectively, ‘‘Sydran’’), thirty-nine Chili’s restaurants for approximately $53.9 million. As part
of the acquisition, the Company assumed $35.5 million in capital lease obligations ($19.9 million principal plus
$15.6 million representing a debt premium) and recorded goodwill totaling approximately $52.5 million. The
operations of the restaurants are included in the Company’s consolidated results of operations from the date of
the acquisition.
In July 2001, the Company formed a partnership with Rockfish, a privately held Dallas-based restaurant
company with twelve locations currently in operation. The Company made a $12.3 million capital contribution to
Rockfish in exchange for an approximate 40% ownership interest in the legal entities owning and developing the
restaurant concept.
In June 2001, the Company acquired from its franchise partner, Hal Smith Restaurant Group, three On The
Border restaurants for approximately $6.6 million. Goodwill of approximately $2.9 million was recorded in
connection with the acquisition. The operations of the restaurants are included in the Company’s consolidated
results of operations from the date of the acquisition.
In April 2001, the Company acquired from its franchise partner, NE Restaurant Company, Inc.
(‘‘NERCO’’), forty Chili’s, three Chili’s sites under construction, and seven On The Border locations. Total
consideration was approximately $93.5 million, of which approximately $40.9 million represented the assumption
of mortgage loan obligations and approximately $9.0 million was for certain other liabilities and transaction costs.
Goodwill of approximately $20.5 million was recorded in connection with the acquisition. The operations of the
restaurants are included in the Company’s consolidated results of operations from the date of the acquisition.
In February 2001, the Company acquired the remaining 50% interest in the Big Bowl restaurant concept
from its joint venture partner for approximately $38.0 million. The Company originally invested $20.8 million in
the joint venture prior to February 1, 2001 and accounted for the joint venture under the equity method.
Goodwill of approximately $48.9 million was recorded in connection with the acquisition. The operations of the
restaurants are included in the Company’s consolidated results of operations from the date of the acquisition.
In February 2001, the Company sold its interest in the Wildfire restaurant concept for $5.0 million, of which
$4.0 million was included in accounts receivable in the Company’s consolidated balance sheet at June 27, 2001.
During fiscal 2002, the remaining balance of $4.0 million was collected.
The pro-forma effects of these acquisitions on the Company’s historical results of operations are not
material.
3. GOODWILL AND OTHER INTANGIBLES
The gross carrying amount of intellectual property rights subject to amortization totaled $6.4 million at
June 26, 2002 and June 27, 2001. Accumulated amortization related to these intangible assets totaled
approximately $1.2 million and $960,000 at June 26, 2002 and June 27, 2001, respectively. The carrying amount of
reacquired development rights not subject to amortization totaled $4.4 million at June 26, 2002 and June 27,
2001.
The changes in the carrying amount of goodwill for the fiscal year ended June 26, 2002 are as follows (in
thousands):
Balance, June 27, 2001 .......................................... $138,127
Goodwill arising from acquisitions .............................. 55,473
Other adjustments.......................................... 299
Balance, June 26, 2002 .......................................... $193,899
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