Panera Bread 2008 Annual Report Download - page 43

raising our sales hurdles for new bakery-cafes to adjust to the contraction in margins we have experienced. We
expect to do this by focusing our real estate decision-making process to only build bakery-cafes that can deliver a
50 percent or greater probability against our revised return on investment goals and bakery-cafes that reach mature
returns in a shorter amount of time. As margins improve and the rate of our return on invested capital improves, we
will once again consider expanding development as appropriate.
We used $2.7 million, $71.0 million, and $9.1 million of cash flows for acquisitions, net of cash acquired as
applicable, in fiscal 2008, 2007, and 2006, respectively. In fiscal 2008, we made required payments of the remaining
acquisition purchase price of $2.5 million, including accrued interest, for certain acquisitions completed in the first
half of fiscal 2007 and we paid additional purchase price of $0.2 million related to the settlement of certain purchase
price adjustments for the fiscal first quarter 2007 Paradise acquisition. As of December 30, 2008, we had no
contingent or accrued purchase price remaining from previously completed acquisitions. In fiscal 2007, we made
required payments of the remaining acquisition purchase price of $9.6 million, including accrued interest, for
certain acquisitions completed in late fiscal 2006 and the first half of fiscal 2007. Additionally, we paid $61.4 million
for the acquisitions of 51 percent of the outstanding stock of Paradise, then owner and operator of 22 bakery-cafes
and one commissary, and franchisor of 22 bakery-cafes and one commissary, and 36 bakery-cafes, as well as two
bakery cafes then under construction, from franchisees. As of December 25, 2007, we had a total of $2.5 million of
accrued purchase price affiliated with acquisitions completed in fiscal 2007, which was paid in fiscal 2008. In fiscal
2006, we acquired 13 bakery-cafes, as well as one bakery-cafe then under construction. See Note 3 to the
consolidated financial statements for further information with respect to our acquisition activity in fiscal 2008,
2007, and 2006.
Historically, we invested a portion of our cash balances on hand in a private placement of units of beneficial
interest in the Columbia Strategic Cash Portfolio, or Columbia Portfolio, which is an enhanced cash fund previously
sold as an alternative to traditional money-market funds. These investments are subject to credit, liquidity, market
and interest rate risk. For example, the Columbia Portfolio includes investments in certain asset backed securities
and structured investment vehicles that are collateralized by sub-prime mortgage securities or related to mortgage
securities, among other assets. As a result of adverse market conditions that have unfavorably affected the fair value
and liquidity of collateral underlying the Columbia Portfolio, it was overwhelmed with withdrawal requests from
investors and the Columbia Portfolio was closed with a restriction placed upon the cash redemption ability of its
holders in the fourth quarter of 2007. We assessed the fair value of the underlying collateral for the Columbia
Portfolio through review of current investment ratings, as available, coupled with the evaluation of the liquidation
value of assets held by each investment and their subsequent distribution of cash. We then utilized this assessment of
the underlying collateral from multiple indicators of fair value, which were then adjusted to reflect the expected
timing of disposition and market risks to arrive at an estimated fair value of the Columbia Portfolio units of $0.650
per unit, or $4.1 million, as of December 30, 2008 and $0.960 per unit, or $23.2 million, as of December 25, 2007.
During fiscal 2008, we received $17.2 million of cash redemptions at an average net asset value of $0.963 per unit,
which we classified as investment maturity proceeds provided by investing activities. In total, we recognized a net
realized and unrealized loss on the Columbia Portfolio units of $1.9 million in fiscal 2008 related to the fair value
measurements and redemptions received and included the net loss in net cash provided by operating activities.
Information and the markets relating to these investments remain dynamic, and there may be further declines in the
value of these investments, the value of the collateral held by these entities, and the liquidity of our investments. To
the extent we determine there is a further decline in fair value, we may recognize additional realized and/or
unrealized losses in future periods up to the aggregate amount of these investments. Between December 30, 2008
and February 27, 2009, we received an additional $0.9 million of cash redemptions of Columbia Portfolio units at an
average net asset value of $0.830 per unit. We have included $2.4 million of the remaining units of the Columbia
Portfolio in short-term investments in our consolidated financial statements at December 30, 2008, as we
reasonably believe this amount of redemptions will be received within the next twelve months based on the
redemptions received to-date and recent representations from the Columbia Portfolio management. However, the
Columbia Portfolio has not made any formal commitments on the availability or timing of future redemptions. The
remaining $1.7 million of the Columbia Portfolio units have been classified as long-term investments in our
consolidated financial statements at December 30, 2008.
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