Panera Bread 2013 Annual Report Download - page 60

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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$0.3 million for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on April 9, 2014, the one
year anniversary of the transaction closing date, with any remaining holdback amounts reverting to the prior franchisee. The
Consolidated Statements of Comprehensive Income include the results of operations for the bakery-cafe from the date of its
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: $0.4 million to property and equipment; $1.0 million
to intangible assets, which represents the fair value of re-acquired territory rights and the favorable lease agreement and are expected
to be amortized on average over approximately 12 years; and $1.3 million to goodwill. The fair value measurement of tangible
and intangible assets as of the acquisition date was 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-cafe 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.
North Carolina Franchisee Acquisition
On March 28, 2012, the Company acquired substantially all the assets and certain liabilities of 16 bakery-cafes and the related
area development rights from its Raleigh-Durham, North Carolina franchisee for a purchase price of $48.0 million. The Company
paid approximately $44.4 million of the purchase price on March 27, 2012 and paid the remaining $3.6 million with interest during
the fiscal year ended December 31, 2013. The Consolidated Statements of Comprehensive Income include the results of operations
from the operating bakery-cafes from the date of their acquisition.
The acquired business contributed revenues of $36.0 million and net income of approximately $2.9 million for the period from
March 28, 2012 through December 25, 2012. The supplemental pro forma information set forth in the following table 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 29, 2010, nor is it indicative of any future results (in thousands):
Pro Forma for the Fiscal Year Ended
December 25, 2012 December 27, 2011
Bakery-cafe sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,888,914 $ 1,632,295
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,763 137,297
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 Raleigh-Durham, North Carolina 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 29, 2010, 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: $0.1 million to accounts receivable; $0.3 million to
inventories; $6.4 million to property and equipment; $29.1 million to intangible assets, which represent the fair value of re-acquired
territory rights and favorable lease agreements that the Company estimated to have an average useful life of approximately 12
years; $1.4 million to liabilities; and $13.5 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. In addition, the Company recorded a $0.1 million measurement period adjustment increasing goodwill during the
fiscal year ended December 25, 2012.
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