Chili's 2012 Annual Report Download - page 59

• Methods used to distribute products or provide services
• The nature of the regulatory environment, if applicable
Our two brands have similar types of products, contracts, customers and employees and all operate as full-
service restaurants offering lunch and dinner in the casual-dining segment of the industry. In addition, we have
similar long-term average margins across our brands. Therefore, we believe we meet the criteria for aggregating
operating segments into a single reporting segment.
2. DISCONTINUED OPERATIONS
In June 2010, we completed the sale of On The Border for gross proceeds of approximately $180 million
and recorded a pre-tax gain of $16.5 million in income from discontinued operations, net of taxes, in the
consolidated statement of income in fiscal 2010. The assets sold totaled approximately $164.0 million and
consisted primarily of property and equipment of $146.7 million and goodwill of $5.8 million. The associated
liabilities totaled approximately $9.9 million and consisted primarily of straight-line rent accruals of $9.3 million.
As part of the sale, we entered into an agreement with OTB Acquisition whereby we provided corporate
support services for the new entity during fiscal 2011 until the agreement terminated in June 2011. The income
generated offset the internal cost of providing the services.
On The Border has been presented as discontinued operations in the consolidated financial statements in
fiscal 2010. Discontinued operations includes only the revenues and expenses which can be specifically
identified with On The Border and excludes any allocation of corporate costs, including general and
administrative expenses. The results of On The Border for fiscal 2010 consist of the following (in thousands):
Revenues ................................................................ $331,247
Income before income taxes from discontinued operations .......................... 51,488
Income tax expense ........................................................ 17,506
Net income from discontinued operations(a) ................................. $ 33,982
(a) Other gains and charges, net of taxes, was a gain of $8.4 million.
Other gains and charges in fiscal 2010 included a $16.5 million gain on the sale of On The Border, partially
offset by $2.9 million of charges related to long-lived asset impairments and lease termination charges primarily
associated with the closure of three underperforming restaurants.
3. INVESTMENTS AND OTHER DISPOSITIONS
(a) Investments
We have a joint venture agreement with CMR, S.A.B. de C.V. to develop 50 Chili’s restaurants in Mexico.
We made a $1.6 million capital contribution to the joint venture in fiscal 2011. At June 27, 2012, 28 Chili’s
restaurants were operating in the joint venture.
In fiscal 2011, we entered into an agreement with BTTO Participacoes Ltda (“BTTO”) for a joint venture
investment in a new company to develop five Chili’s restaurants in Brazil. We made capital contributions of $1.6
million and $1.3 million to the joint venture during fiscal 2012 and 2011, respectively. The first restaurant
opened in September 2011. We accounted for this investment under the equity method of accounting until April
2012 when we purchased BTTO’s interest in the joint venture for approximately $1.5 million and began
consolidating the entity’s results.
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