Chili's 2013 Annual Report Download - page 62

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10. FAIR VALUE DISCLOSURES
(a) Non-Financial Assets Measured on a Non-Recurring Basis
In fiscal 2013, assets primarily related to three underperforming restaurants including the company-owned
Chili’s in Brazil with a carrying value of $5.6 million were written down to their fair value of $0.3 million
resulting in an impairment charge of $5.3 million. In fiscal 2012, assets primarily related to three
underperforming restaurants with a carrying value of $4.7 million were written down to their fair value of $1.6
million resulting in an impairment charge of $3.1 million. We determined fair value based on projected
discounted future operating cash flows of the restaurants over their remaining service life using a risk adjusted
discount rate that is commensurate with the risk inherent in our current business model.
In fiscal 2013, one transferable liquor license with a carrying value of $0.3 million was written down to the
fair value of $0.1 million resulting in an impairment charge of $0.2 million. In fiscal 2012, certain transferable
liquor licenses with a carrying value of $6.7 million were written down to their fair value of $4.1 million
resulting in an impairment charge of $2.6 million. We determined fair value based on prices in the open market
for licenses in same or similar jurisdictions.
All impairment charges related to underperforming restaurants and liquor licenses were included in other
gains and charges in the consolidated statement of income for the periods presented.
The following table presents fair values for those assets measured at fair value on a non-recurring basis at
June 26, 2013 and June 27, 2012 (in thousands):
Fair Value Measurements Using
(Level 1) (Level 2) (Level 3) Total
Long-lived assets held for use:
At June 26, 2013 ....................... $0 $ 0 $ 333 $ 333
At June 27, 2012 ....................... $0 $ 0 $1,586 $1,586
Liquor licenses:
At June 26, 2013 ....................... $0 $ 100 $ 0 $ 100
At June 27, 2012 ....................... $0 $4,109 $ 0 $4,109
(b) Other Financial Instruments
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and
long-term debt. The fair value of cash and cash equivalents, accounts receivable and accounts payable
approximates their carrying amounts while the fair value of the 2.60% notes, 3.88% notes, and 5.75% notes is
based on quoted market prices. At June 26, 2013, the 2.60% notes had a carrying value of $249.8 million and a
fair value of $244.2 million and the 3.88% notes had a carrying value of $299.7 million and a fair value of $279.5
million. At June 27, 2012, the 5.75% notes had a carrying value of $289.7 million and a fair value of $310.2
million.
11. STOCK-BASED COMPENSATION
Our shareholders approved stock-based compensation plans including the Stock Option and Incentive Plan
and the Stock Option and Incentive Plan for Non-Employee Directors and Consultants (collectively, the “Plans”).
The total number of shares authorized for issuance to employees and non-employee directors and consultants
under the Plans is currently 35.3 million. The Plans provide for grants of options to purchase our common stock,
restricted stock, restricted stock units, performance shares and stock appreciation rights.
(a) Stock Options
Expense related to stock options issued to eligible employees under the Plans is recognized using a graded-
vesting schedule over the vesting period or to the date on which retirement eligibility is achieved, if shorter.
F-30