Panera Bread 2006 Annual Report Download - page 52

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for a purchase price of approximately $28.0 million in cash plus the assumption of certain liabilities including those
associated with bakery-cafe construction. The acquisition price was paid with cash on hand. The Consolidated
Statements of Operations include the results of operations from the bakery-cafes from the date of the acquisition.
The pro forma impact of the acquisition on prior periods is not presented as the impact is not material to reported
results. The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities
assumed in the acquisition at their estimated fair values with the remainder allocated to tax deductible goodwill as
follows: $0.3 million to inventories, $11.6 million to fixed assets, $3.1 million to intangible assets, which represents
the fair value of re-acquired territory rights, which was in accordance with EITF 04-1 effective for acquisitions in
reporting periods beginning after October 13, 2004, and favorable and unfavorable lease agreements, and
$13.0 million to goodwill.
On October 30, 2004, the Company’s wholly-owned subsidiary, Artisan Bread, LLC (“Artisan”), became the
owner of 100% of the membership interests in Cap City Bread, LLC (“LLC”). Prior to the completion of this
transaction, Artisan had owned approximately 78.5% of the membership interests in LLC and the remaining
membership interests had been owned by Capitol Dough, Inc. (“Capitol Dough”), a Missouri corporation owned by
Richard Postle, the Company’s former president (“Postle”), as a minority interest owner. As part of the transaction,
LLC redeemed certain of the membership interests held by Capitol Dough in exchange for the transfer to Capitol
Dough of LLC’s interest in 3 bakery-cafes at cost, one of which was under construction at the acquisition date
(“redemption transaction”). In addition to the redemption transaction, Artisan acquired the remaining membership
interests held by Capitol Dough in exchange for a cash purchase price of approximately $5.2 million (including
acquisition costs), which approximates fair value. Of this purchase price, approximately $4.3 million was paid in
cash at the acquisition date and the remaining purchase price was paid, with interest, in 2005. At the time of the
acquisition, LLC operated 36 bakery-cafes in the northern Virginia and central Pennsylvania markets. The results of
operations of these bakery-cafes have been included in the Company’s Consolidated Financial Statements since the
date of formation of LLC. Following the completion of the transaction, Artisan became the sole owner of LLC,
which then owned 34 bakery-cafes in the northern Virginia and central Pennsylvania markets. The 3 remaining
bakery-cafes transferred to Postle, one of which was under construction at the acquisition date, are owned and
operated by Postle and/or his affiliates as a franchisee. The pro forma impact of the acquisition on prior periods is
not presented as the impact is not material to reported results. The Company allocated the purchase price to the
membership interest and related intangibles acquired in the acquisition at their estimated fair values with any
remainder allocated to tax deductible goodwill as follows: $2.0 million to eliminate the minority interest balance,
$0.3 million to fixed assets, $0.2 million to intangible assets, which represents the fair value of favorable and
unfavorable lease agreements, and $2.7 million to goodwill.
4. Inventories
Inventories consist of the following (in thousands):
December 26,
2006
December 27,
2005
Food:
Fresh dough facilities:
Raw materials ........................................ $2,488 $1,941
Finished goods ....................................... 332 331
Bakery-cafes:
Raw materials ........................................ 4,721 3,989
Paper goods ............................................. 999 881
Retail merchandise ........................................ 174 216
$8,714 $7,358
47
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)