Panera Bread 2009 Annual Report Download - page 64

estimated fair values with the remainder allocated to tax deductible goodwill as follows: $0.3 million to inventories,
$8.7 million to property and equipment, $2.2 million to intangible assets, which represents the fair value of re-
acquired territory rights and favorable lease agreements, $0.3 million to liabilities, and $7.5 million to goodwill. As
a result of the acquisition, the Company incurred a contractual settlement charge of $0.7 million pursuant to the
relevant authoritative guidance, reflecting the termination of franchise agreements for certain bakery-cafes that
operated at a royalty rate lower than the Company’s current market royalty rates. The charge is reported as other
(income) expense, net in the Consolidated Statements of Operations.
On June 6, 2007, the Company sold substantially all of the assets of one bakery-cafe and the area development
rights for certain markets in Southern California to a new area developer, Pride Bakeries, LLC, for a sales price of
approximately $1.8 million, resulting in a gain of approximately $0.5 million, which is classified in other (income)
expense, net in the Consolidated Statements of Operations. Pride Bakeries, LLC, also agreed to develop 12
additional bakery-cafes in certain previously undeveloped Southern California markets.
On February 28, 2007, the Company purchased substantially all of the assets of four bakery-cafes, as well as
two bakery-cafes then under construction, and the area development rights for certain markets in California from its
area developer, R&S Bread Group, Inc., for a purchase price of approximately $5.1 million plus approximately
$0.02 million in acquisition costs. Approximately $4.6 million of the acquisition price was paid with cash on hand at
the time of closing, approximately $0.3 million plus accrued interest was paid in cash in fiscal 2007 and the
remaining approximately $0.2 million was paid with interest in fiscal 2008. The Consolidated Statements of
Operations include the results of operations from the operating 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 in the acquisition at their
estimated fair values with the remainder allocated to tax deductible goodwill as follows: $0.1 million to inventories,
$2.7 million to property and equipment, $1.2 million to intangible assets, which represents the fair value of re-
acquired territory rights and favorable and unfavorable lease agreements, and $1.1 million to goodwill.
On February 1, 2007, the Company purchased 51 percent of the outstanding stock of Paradise Bakery & Café,
Inc. (“Paradise”), then owner and operator of 22 bakery-cafes, 17 of which are in the Phoenix market, and one
commissary, and franchisor of 22 bakery-cafes and one commissary, for a purchase price of approximately
$21.1 million plus approximately $0.5 million in acquisition costs. Approximately $20.1 million of the acquisition
price was paid with cash on hand at the time of closing, approximately $0.6 million plus accrued interest was paid in
cash in fiscal 2007 and the remaining approximately $0.4 million was paid with interest in fiscal 2009. In addition,
the Company had the right to purchase the remaining 49 percent of the outstanding stock of Paradise after January 1,
2009 at a contractually determined value, which approximated fair value. Also, if the Company had not exercised its
right to purchase the remaining 49 percent of the outstanding stock of Paradise, the remaining Paradise owners had
the right to purchase the Company’s 51 percent ownership interest in Paradise after June 30, 2009 for $21.1 million.
In conjunction with the transaction, Paradise entered into a credit facility with the Company pursuant to which
Paradise borrowed $6.1 million from the Company with approximately $4.8 million of the borrowing paid directly
to Paradise’s third-party creditors and the remaining $1.3 million retained by Paradise for working capital purposes.
The Consolidated Statements of Operations include the results of operations of Paradise 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 any remainder allocated to tax deductible
goodwill as follows: $5.1 million to current assets, $5.8 million to intangible assets, which represents the fair value
of trademarks and favorable lease agreements, $16.6 million to goodwill, $7.4 million to other long-term assets,
$8.9 million to current liabilities, $2.0 million to long-term liabilities and $2.4 million to minority interest.
There were no business combinations consummated during the fiscal years ended December 29, 2009 and
December 30, 2008. Subsequent to the original allocation of purchase price for the aforementioned acquisitions to
the various tangible and intangible assets, the Company had approximately $0.1 million of adjustments during fiscal
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)