Panera Bread 2015 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2015 Panera Bread annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
55
balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition
and measurement guidance for debt issuance costs were not affected by this update. The Company early adopted ASU 2015-03
during the thirteen weeks ended June 30, 2015. As a result of the retrospective adoption, the Company reclassified unamortized
debt issuance costs of $0.2 million as of December 30, 2014 from Deposits and other to Long-term debt in the Consolidated
Balance Sheets. Adoption of this standard did not impact the Company's results of operations or cash flows in either the current
or previous interim and annual reporting periods.
In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This update requires management of the
Company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. This update
is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption
is permitted. The Company is currently evaluating the effect of the standard but its adoption is not expected to have an impact on
the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This update provides a
comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or
services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows
arising from customer contracts. In August 2015, the FASB issued ASU 2015-14 delaying the effective date for adoption. The
update is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted.
The update permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the
effect this guidance will have on the Company's consolidated financial statements and related disclosures. The Company has not
yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment
(Topic 360)”. This update was issued to clarify the reporting for discontinued operations and disclosures for disposals of components
of an entity. This update is effective for annual and interim periods beginning after December 15, 2014. The adoption of this update
did not have a material effect on the Company’s consolidated financial statements or related disclosures; however, it may impact
the reporting of future discontinued operations if and when they occur.
3. Business Combinations and Divestitures
Refranchising Initiative
In February 2015, the Company announced a plan to refranchise approximately 50 to 150 Company-owned bakery-cafes by the
end of fiscal 2015.
On March 3, 2015, the Company sold substantially all of the assets of one bakery-cafe to an existing franchisee for cash proceeds
of approximately $3.2 million, which resulted in a gain on sale of approximately $2.6 million.
The Company recognized impairment losses of $3.8 million during the thirteen weeks ended March 31, 2015 related to certain
under-performing bakery-cafes in one of the refranchised markets for which the Company had signed letters of intent, which were
excluded from the proposed sale.
On July 14, 2015, the Company sold substantially all of the assets of 29 bakery-cafes in the Boston market to an existing franchisee
for a purchase price of approximately $19.6 million, including $0.5 million for inventory on hand, with $2.0 million held in escrow
for certain holdbacks, and recognized a loss on sale of $0.6 million. The holdback amount is primarily to satisfy any indemnification
obligations of the Company and will be held in escrow until July 14, 2017, the two-year anniversary of the transaction closing
date, with the remaining balance of the holdback amount reverting to the Company.
On October 7, 2015, the Company sold substantially all of the assets of 45 bakery-cafes in the Seattle and Northern California
markets to a new franchisee for a purchase price of approximately $26.8 million, including $0.9 million for inventory on hand,
and recognized a loss on sale of $1.6 million.
During the thirteen weeks ended December 29, 2015, eight Company-owned bakery-cafes that the Company concluded no longer
met all of the criteria required to be classified as held for sale were reclassified to held and used at their depreciated carrying value,
assuming depreciation had not ceased while classified as held for sale.