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. Approximately $2.4 million of the purchase price was paid on April 9, 2013, with $0.3 million retained by the Company 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 is 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 Franchise 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. Approximately $44.4 million of the purchase price was paid on March 27, 2012, with $3.6 million retained by the Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on September 28, 2013, the 18 month 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 from the operating bakery-cafes from the date of their acquisition.

The following supplemental pro forma information is presented for comparative purposes only and is not indicative of what would have occurred had this acquisition been made on December 28, 2011 or any future results (in thousands):



	Pro Forma for the 26 Weeks Ended
	June 26, 2012
Bakery-cafe sales, net	$	917,494
Net income	85,638

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 represents the fair value of re-acquired territory rights and favorable lease agreements and are expected to be amortized on average over 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 represents a Level 3 measurement.

Goodwill recorded in connection with this acquisition is 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.