Panera Bread 2003 Annual Report Download - page 38

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Preparation of Financial Statements
The preparation of Ñnancial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that aÅect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Ñnancial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could diÅer from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity at the time of purchase of three
months or less to be cash equivalents.
Investments in Government Securities
Investments consist of United States Treasury notes and mortgage-backed government notes and are
classiÑed as short-term or long-term investments in the accompanying consolidated balance sheet based upon
their stated maturity dates which range from July 2004 to December 2006. One mortgage-backed government
note with a net carrying amount of $4.0 million matured in Ñscal 2003, the proceeds of which were used to
purchase similar investments.
Management designates the appropriate classiÑcation of its investments at the time of purchase based
upon its intended holding period and reevaluates such designation at each balance sheet date. At Decem-
ber 27, 2003, all investments are classiÑed as held-to-maturity as the Company has the intent and ability to
hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums to maturity using the eÅective interest method, which approximates fair value at
December 27, 2003.
Trade and Other Accounts Receivable
Trade accounts receivable at Ñscal year-end consist primarily of amounts due to the Company from its
32 franchise groups for purchases of fresh dough from the Company's fresh dough facilities and royalties due
to the Company from franchisee sales. The Company does not require collateral and maintains reserves for
potential uncollectible accounts, which in the aggregate have not exceeded management's expectation. Other
accounts receivable consist primarily of tenant allowances due from landlords for leasehold improvements
made by the Company.
Inventories
Inventories, which consist of food products, paper goods and supplies, smallwares, and promotional items,
are valued at the lower of cost or market, determined under the Ñrst-in, Ñrst-out method.
Property and Equipment
Property, equipment, and leaseholds are stated at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful lives or the remaining terms of the leases. The
estimated useful lives used for Ñnancial statement purposes are:
Leasehold improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10-15 years
Machinery and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-10 years
Furniture and ÑxturesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3-7 years
Signage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 years
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