Panera Bread 2012 Annual Report Download - page 59

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
51
Goodwill recorded in connection with this acquisition was attributable to the workforce of the acquired bakery-cafes and synergies
expected to arise from cost savings opportunities. All of the recorded goodwill is tax deductible and is included in the Company
Bakery-Cafe Operations segment.
Indiana Franchisee Acquisition
On July 26, 2011, the Company acquired substantially all the assets and certain liabilities of five Paradise Bakery & Café
(“Paradise”) bakery-cafes and the related area development rights from an Indiana franchisee for a purchase price of approximately
$5.1 million. Approximately $4.6 million of the purchase price was paid on July 26, 2011, with $0.5 million retained by the
Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on the second anniversary
of the transaction closing date, July 26, 2013, with any remaining holdback amounts reverting to the prior franchisee. As a result
of this acquisition, the Company gained control of the five bakery-cafes and further expanded Company-owned operations into
Indiana. The Consolidated Statements of Comprehensive Income include the results of operations from these five bakery-cafes
from the date of their acquisition. The pro forma impact of the acquisition on prior periods is not presented, as the impact was
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; $1.3 million to property
and equipment; $1.3 million to intangible assets, which represent the fair value of re-acquired territory rights that the Company
estimated to have an average useful life of approximately six years; $0.7 million to liabilities; and $3.1 million to goodwill. The
fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not
observable in the market and thus represents a Level 3 measurement.
Goodwill recorded in connection with this acquisition was attributable to the workforce of the acquired bakery-cafes and synergies
expected to arise from cost savings opportunities. All of the recorded goodwill is tax deductible and is included in the Company
Bakery-Cafe Operations segment.
Milwaukee Franchisee Acquisition
On April 19, 2011 the Company acquired substantially all the assets and certain liabilities of 25 bakery-cafes and the related area
development rights from a Milwaukee franchisee for a purchase price of approximately $41.9 million. Approximately $39.8
million of the purchase price was paid on April 19, 2011, and the remaining approximately $2.1 million was paid with interest in
fiscal 2012. As a result of this acquisition, the Company gained control of 25 bakery-cafes and expanded Company-owned
operations into Wisconsin. The Consolidated Statements of Comprehensive Income include the results of operations from the
operating bakery-cafes from the date of the acquisition.
The acquired business contributed revenues of $42.4 million and net income of approximately $0.7 million for the period from
April 20, 2011 through December 27, 2011. The supplemental pro forma information set forth in the table below has been prepared
for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on
December 30, 2009, nor is it indicative of any future results (in thousands):
Pro Forma for the Fiscal Year Ended
December 27, 2011 December 28, 2010
Bakery-cafe sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,607,633 $ 1,371,500
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,243 112,864
The pro forma amounts included in the table above reflect the application of the Company’s accounting policies and adjustment
of the results of the Milwaukee bakery-cafes to reflect the additional depreciation and amortization that would have been charged
assuming the fair value adjustments to property and equipment and intangible assets had been applied from December 30, 2009,
together with the consequential tax impacts.
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: $0.4 million to inventories; $9.3 million to property
and equipment; $23.3 million to intangible assets, which represents the fair value of re-acquired territory rights and favorable
lease agreements that the Company estimated to have an average useful life of approximately 13 years; $1.7 million to liabilities;
and $10.6 million to goodwill. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition