Business Combinations and Divestitures

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 retained $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 $5.1 million. The Company paid approximately $4.6 million of the purchase price on July 26, 2011 and paid the remaining $0.5 million with interest during the fiscal year ended December 31, 2013. 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.

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. The Company paid approximately $39.8 million of the purchase price on April 19, 2011 and paid the remaining approximately $2.1 million with interest during the fiscal year ended December 25, 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 29, 2010, nor is it indicative of any future results (in thousands):



	Pro Forma for the Fiscal Year Ended
	December 27, 2011
Bakery-cafe sales, net	$	1,607,633
Net income	136,243

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 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: $0.4 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 date is based on significant inputs not observable in the market and thus represents a Level 3 measurement. In addition, the Company recorded a $0.2 million measurement period adjustment increasing goodwill during the fiscal year ended December 25, 2012.

Texas Divestiture

On February 9, 2011, the Company sold substantially all of the assets of two Paradise bakery-cafes to an existing Texas franchisee for a sale price of approximately $0.1 million, resulting in a nominal gain, which was classified in other (income) expense, net in the Consolidated Statements of Comprehensive Income.

Accrued Purchase Price Payments

During the fiscal years ended December 31, 2013, December 25, 2012, and December 27, 2011, the Company paid approximately $4.1 million, $2.1 million, and $5.0 million, respectively, including accrued interest, of previously accrued acquisition purchase price in accordance with the asset purchase agreements. There was $0.3 million and $4.1 million of accrued purchase price remaining as of December 31, 2013 and December 25, 2012, respectively.