Panera Bread 2003 Annual Report Download - page 37

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Panera Bread Company operates a retail bakery-cafe business and franchising business under the concept
names ""Panera Bread Company'' and ""Saint Louis Bread Company.'' As of December 27, 2003, the
Company's retail operations consist of 173 Company-owned bakery-cafes and 429 franchise-operated bakery-
cafes. The Company specializes in meeting consumer dining needs by providing high quality food, including
fresh baked goods, made-to-order sandwiches on freshly baked breads, soups, salads, custom roasted coÅees,
and other cafe beverages, and targets suburban dwellers and workers by oÅering a premium specialty bakery
and cafe experience with a neighborhood emphasis. Bakery-cafes are principally located in suburban, strip
mall, and regional mall locations and currently operate in 35 states. Bakery-cafes use fresh dough for their
sourdough and artisan breads and bagels. Fresh dough is supplied daily by the Company's fresh dough
facilities for both Company-owned and franchise-operated bakery-cafes. As of December 27, 2003, the
Company had 16 fresh dough facilities.
2. Summary of SigniÑcant Accounting Policies
Adoption of SFAS 143
EÅective December 29, 2002, the Company adopted the provisions of SFAS 143, ""Accounting for Asset
Retirement Obligations.'' SFAS 143 addresses Ñnancial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement
requires the Company to record an estimate for costs of retirement obligations that may be incurred at the end
of lease terms of existing bakery-cafes or other facilities.
Beginning December 29, 2002, the Company recognizes the future cost to comply with lease obligations
at the end of a lease as it relates to tangible long-lived assets in accordance with the provisions of SFAS 143. A
liability for the fair value of an asset retirement obligation along with a corresponding increase to the carrying
value of the related long-lived asset is recorded at the time a lease agreement is executed. The Company
amortizes the amount added to property and equipment and recognizes accretion expense in connection with
the discounted liability over the life of the respective lease. The estimated liability is based on experience in
closing bakery-cafes and the related external cost associated with these activities. Revisions to the liability
could occur due to changes in estimated retirement costs or changes in estimated lease term.
Upon adoption of SFAS 143, the Company recorded a discounted liability of approximately $0.8 million,
increased net property and equipment by approximately $0.4 million, and recognized a one-time cumulative
eÅect charge of approximately $0.2 million (net of deferred tax beneÑt of approximately $0.1 million). The
liability is included in other long-term liabilities in the Consolidated Balance Sheets. The eÅects on earnings
from continuing operations before cumulative eÅect of accounting change for the years ended December 27,
2003, December 28, 2002, and December 29, 2001, assuming adoption of SFAS 143 as of December 31, 2000,
were not material to net income or related per share amounts.
Basis of Presentation and Principles of Consolidation
For the years ended December 27, 2003 and December 28, 2002, the consolidated Ñnancial statements
consist of the accounts of Panera Bread Company, its wholly owned subsidiaries Panera, LLC and
Pumpernickel, Inc., and its indirect consolidated subsidiaries Pumpernickel Associates, LLC, Panera
Enterprises, Inc., and Artisan Bread, LLC, which has a majority interest in Cap City Bread, LLC operating
27 bakery-cafes. All intercompany balances and transactions have been eliminated in consolidation.
Certain reclassiÑcations have been made to conform previously reported data to the current presentation.
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