Chili's 2008 Annual Report Download - page 57

BRINKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. ASSETS HELD FOR SALE
In the first quarter of fiscal 2008, we announced our intention to sell the Macaroni Grill restaurant
brand and began presenting its results from operations as discontinued operations in our quarterly
financial statements during fiscal 2008 in accordance with the reporting provisions of SFAS No. 144,
‘‘Accounting for the Impairment or Disposal of Long-Lived Assets,’’ (‘‘SFAS 144’’). In August 2008, we
entered into an agreement with Mac Acquisition LLC, an affiliate of Golden Gate Capital, for the sale of a
majority interest in Macaroni Grill. Per terms of the agreement, we will receive proceeds of $131.5 million
in cash, of which $6.0 million will be contributed to the new entity for a 19.9% continuing ownership
interest in the brand. We will also provide corporate support services for the new entity for one year with
an option for one additional year. In accordance with SFAS 144, we have classified the results of Macaroni
Grill in continuing operations for fiscal 2008 and prior years as we will have significant continuing
involvement in the operations of Macaroni Grill after the sale. The transaction is expected to close in the
second quarter of fiscal 2009 subject to customary closing conditions.
During fiscal 2008, we recorded impairment charges of $152.7 million to write-down the net assets of
Macaroni Grill to their estimated fair value less costs to sell at June 25, 2008, which has been included in
other gains and charges in the consolidated statements of income. The assets to be sold totaled
approximately $134.1 million and consisted primarily of property and equipment of $113.6 million. The
associated liabilities totaled approximately $17.7 million and consisted primarily of straight-line rent
accruals of $13.2 million.
3. RESTAURANT ACQUISITIONS, DISPOSITIONS AND EQUITY METHOD INVESTMENTS
In November 2007, we entered into an agreement with CMR, S.A.B. de C.V. for a joint venture
investment in a new corporation to develop 50 Chili’s and Maggiano’s restaurants in Mexico. In fiscal 2008,
we made an $8.7 million capital contribution to the joint venture. We account for the investment under the
equity method of accounting and record our share of the net income or loss of the investee within
operating income since the operations of the joint venture are similar to our ongoing operations. For the
year ended June 25, 2008, this amount has been included in restaurant expense in our consolidated
statements of income due to the immaterial nature. At June 25, 2008, eight Chili’s restaurants were
operating in the joint venture.
In May 2007, we entered into an agreement with ERJ Dining IV, LLC to sell 76 company-owned
Chili’s restaurants for approximately $121.9 million. The assets and liabilities associated with these
restaurants were classified as held for sale in the consolidated balance sheet for the fiscal year ended
June 27, 2007. The sale was completed in November 2007 and we recorded a gain of $29.7 million in other
gains and charges in the consolidated statements of income. The net assets sold totaled approximately
$88.2 million and consisted primarily of property and equipment of $86.4 million and goodwill of
$2.7 million.
In January 2007, we entered into an agreement with Pepper Dining, Inc. to sell 95 company-owned
Chili’s restaurants for approximately $155.0 million. The sale was completed in June 2007 and we recorded
a gain of $17.1 million in other gains and charges in the consolidated statements of income. The net assets
sold totaled approximately $127.9 million and consisted primarily of property and equipment of
$126.1 million and goodwill of $3.9 million.
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