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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
52
beginning of the Company's first quarter of fiscal 2014 and did not have a material impact on the Company's consolidated financial
statements.
3. Business Combinations
Florida Bakery-cafe Acquisition
On April 9, 2013, the Company acquired substantially all the assets of one bakery-cafe from its Hallandale, Florida franchisee for
a purchase price of $2.7 million. The Company paid approximately $2.4 million of the purchase price on April 9, 2013 and paid
the remaining $0.3 million with interest during fiscal 2014. 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 represented
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
fiscal 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 28, 2011, nor is it indicative of any future results (in thousands):
Pro Forma for the
Fiscal Year Ended
December 25, 2012
Bakery-cafe sales, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,888,914
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,763
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 28, 2011, 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 was based on significant inputs not observable in the market and thus represented a Level 3
measurement. In addition, the Company recorded a $0.1 million measurement period adjustment increasing goodwill during fiscal
2012.