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CHILI'S RESTAURANT ACQUISITION | 6 Months Ended
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Dec. 25, 2019
Business Combinations [Abstract] |
Chili's Restaurant Acquisition | On September 5, 2019, we completed the acquisition of certain assets and liabilities related to 116 previously franchised Chili’s restaurants located in the Midwest United States. Pro-forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of the acquired restaurants in the Consolidated Financial Statements (Unaudited). The total purchase price of $99.0 million, excluding post-closing adjustments, was funded with borrowings from our existing credit facility. We accounted for this acquisition as a business combination. The results of operations, and assets and liabilities, of these restaurants are included in the Consolidated Financial Statements (Unaudited) from the date of acquisition. The assets and liabilities of these restaurants are recorded at their preliminary fair values and are subject to revision as additional information about the fair value of assets acquired and liabilities assumed becomes available. We expect the final purchase price allocation to be completed in the third quarter of fiscal 2020. The acquired restaurants are expected to generate approximately $300.0 million of annualized revenues which will be partially offset by the loss of average annualized royalty and advertising revenues of approximately $22.0 million. During the thirteen and twenty-six week periods ended December 25, 2019, since the acquisition date, these restaurants generated Company sales of $70.9 million and $86.2 million, respectively. Net acquisition-related charges of $2.0 million and $1.5 million were recorded during the thirteen and twenty-six week periods ended December 25, 2019, respectively, to Other (gains) and charges in the Consolidated Statements of Comprehensive Income (Unaudited). In the thirteen week period ended December 25, 2019, the net charges consisted of $1.6 million of professional services, transaction and transition related costs, and a $0.4 million true-up associated with the ERJ-Brinker sublease market valuations. In the twenty-six week period ended December 25, 2019, the net charges consisted of $3.1 million of professional services, transaction and transition related costs associated with the purchase, and $1.0 million of related franchise straight-line rent balances, net of market leasehold improvement adjustments that were fully recognized at the date of the acquisition, partially offset by $2.6 million of franchise deferred revenues balance that were fully recognized at date of acquisition. The preliminary amounts recorded for the fair value of acquired assets and liabilities at the acquisition date are as follows:
| Fair Value September 5, 2019
Current assets(1) | $ | 7.3 |
Property and equipment | 60.6 |
Operating lease assets | 163.5 |
Reacquired franchise rights(2) | 6.5 |
Goodwill(3) | 24.2 |
Other assets | 1.1 |
Total assets acquired | 263.2 |
Current liabilities(4) | 10.2 |
Operating lease liabilities, less current portion | 158.3 |
Total liabilities assumed | 168.5 |
Net assets acquired(5) | $ | 94.7 |
(1) | Current assets included petty cash, inventory, and restaurant supplies.
(2) | Reacquired franchise rights have a weighted average amortization period of approximately 8 years.
(3) | Goodwill is expected to be deductible for tax purposes. The portion of the purchase price attributable to goodwill represents the benefits expected as a result of the acquisition, including sales and unit growth opportunities, and the benefit of the assembled workforce of the acquired restaurants.
(4) | Current liabilities included current portion of operating lease liabilities, gift card liability and accrued property tax.
(5) Net assets acquired at fair value are equal to the total purchase price of $99.0 million, less $1.6 million of closing adjustments and $2.8 million allocated to prepayment of leases entered into between us and the franchisee (refer to Note 3 - Leases for more information), partially offset by $0.1 million related to net favorable market valuation adjustment recognized on pre-existing subleases that were terminated on the transaction date.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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