Panera Bread 2008 Annual Report Download - page 71

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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 availability 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
fiscal 2007. As such, the Company classified the Columbia Portfolio units in short-term investments rather than
cash and cash equivalents in the Consolidated Balance Sheets as of December 25, 2007.
As the Columbia Portfolio units are no longer trading and, therefore, have little or no price transparency, the
Company 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. The Company 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 the date of adoption,
December 26, 2007. Based on the valuation methodology used to determine the fair value, the Columbia Portfolio is
classified within Level 3 of the fair value hierarchy. Realized and unrealized gains/(losses) relating to the Columbia
Portfolio are classified in other (income) expense, net in the Consolidated Statements of Operations. The following
table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial asset for the periods
indicated (in thousands):
For the Fiscal Year
Ended
December 30, 2008
Beginning balance ................................................ $23,198
Net realized and unrealized losses(1) .................................. (1,910)
Redemptions .................................................... (17,162)
Ending balance .................................................. $ 4,126
(1) Includes $2.0 million of losses attributable to the change in unrealized losses relating to the units of the
Columbia Portfolio still held as of December 30, 2008.
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 the Company’s
investments. To the extent the Company determines there is a further decline in fair value, it may recognize
additional realized and unrealized losses in future periods up to the aggregate amount of these investments. Between
December 30, 2008 and February 27, 2009, the Company has received an additional $0.9 million of cash
redemptions of Columbia Portfolio units at an average net asset value of $0.830. The Company included
$2.4 million of the remaining fair value of its Columbia Portfolio units in short-term investments in the
Consolidated Balance Sheets at December 30, 2008, as the Company reasonably believes the cash 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 fair value of the Company’s
Columbia Portfolio units have been classified as long-term investments in the Consolidated Balance Sheets at
December 30, 2008.
5. Short-term Investments
At December 30, 2008 and December 25, 2007, the Company’s short-term investments were carried at fair
value in the Consolidated Balance Sheets and consisted of a $2.4 million and $23.2 million private placement of
units of beneficial interest in the Columbia Strategic Cash Portfolio (the “Columbia Portfolio”), which is an
64
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)