Chili's 2015 Annual Report Download - page 61

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. ACQUISITION OF CHILI’S RESTAURANTS
On June 1, 2013, we completed the acquisition of 11 Chili’s restaurants in Alberta, Canada from an existing
franchisee for $24.6 million in cash. The results of operations of the Canadian restaurants are included in our
consolidated financial statements from the date of acquisition. The assets and liabilities of the Canadian
restaurants were recorded at their respective fair values as of the date of acquisition based on a preliminary
estimate. During fiscal 2014, we completed the valuation of the assets and liabilities resulting in an adjustment of
approximately $8.4 million to goodwill.
The excess of the purchase price over the aggregate fair value of net assets acquired was allocated to
goodwill. The majority of the goodwill balance is deductible for tax purposes. The portion of the purchase price
attributable to goodwill represents benefits expected as a result of the acquisition, including sales and unit growth
opportunities. As a result of the acquisition, we incurred expenses of approximately $0.4 million during fiscal
2013, which are included in other gains and charges in our consolidated statement of comprehensive income.
Pro-forma financial information of the combined entities for periods prior to the acquisition is not presented due
to the immaterial impact of the financial results of the Canadian restaurants on our consolidated financial
statements.
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.
At June 24, 2015, 38 Chili’s restaurants were operating in the joint venture. We account for the Mexico joint
venture investment under the equity method of accounting and record our share of the net income or loss of the
investee within operating income since their operations are similar to our ongoing operations. These amounts
have been included in restaurant expense in our consolidated statements of comprehensive income due to the
immaterial nature of the amounts. The investment in the joint venture is included in other assets in our
consolidated balance sheets.
In fiscal 2011, we entered into a joint venture investment with BTTO Participacoes Ltda (“BTTO”) to
develop Chili’s restaurants in Brazil. In April 2012, we purchased BTTO’s interest in the joint venture and began
consolidating the entity’s results. In the fourth quarter of fiscal 2013, we fully impaired the property and
equipment and recorded a charge in other gains and charges in the consolidated statement of comprehensive
income. The restaurant was subsequently closed in July 2013.
(b) Other Dispositions
In April 2013, we sold our remaining ownership interest in Romano’s Macaroni Grill (“Macaroni Grill”) for
approximately $8.3 million in cash proceeds. This amount was recorded as a gain in other gains and charges in
the consolidated statement of comprehensive income in fiscal 2013.
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