Panera Bread 2006 Annual Report Download - page 55

common area, and other operating costs. Many bakery-cafe leases provide for contingent rental (i.e., percentage
rent) payments based on sales in excess of specified amounts. Certain of the Company’s lease agreements provide
for scheduled rent increases during the lease terms or for rental payments commencing at a date other than the date
of initial occupancy.
Aggregate minimum requirements under non-cancelable operating leases, excluding contingent liabilities, as
of December 26, 2006, were as follows (in thousands):
2007 ............................................................... $ 52,853
2008 ............................................................... 52,938
2009 ............................................................... 52,440
2010 ............................................................... 52,212
2011 ............................................................... 51,911
Thereafter ........................................................... 398,802
$661,156
Rental expense under operating leases was approximately $45.6 million, $33.0 million, and $24.7 million in
2006, 2005, and 2004, respectively, which included contingent (i.e. percentage rent) payments of $0.8 million,
$0.8 million, and $0.6 million, respectively.
In accordance with SFAS 143, as interpreted by FIN No. 47, the Company has recognized asset retirement
obligations for the future cost to comply with lease obligations at the end of a lease as it relates to tangible long-lived
assets. The liability as of December 26, 2006 and December 27, 2005 was $2.2 million and $2.0 million,
respectively, and is included in other long-term liabilities in the Consolidated Balance Sheets.
The Company is the prime tenant for operating leases of 16 franchisee locations and a guarantor for operating
leases of 23 locations of the former Au Bon Pain Division, or its franchisees. These leases have terms expiring on
various dates from March 2007 to December 2018 and have a potential amount of future rental payments of
approximately $25.8 million. The obligation from these leases will continue to decrease over time as these
operating leases expire. As the guarantees were initiated prior to December 31, 2002, the Company has not recorded
a liability for these guarantees pursuant to the provisions of FASB Interpretation Number (FIN) 45, “Guarantor’s
Accounting and Disclosure Requirements For Guarantees, Including Indirect Guarantees of Indebtedness of Others,
an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” Also, the
Company has not had to make any payments related to the leases. Au Bon Pain or the respective franchisees
continue to have primary liability for these operating leases. Future commitments as of December 26, 2006 under
these leases were as follows (in thousands):
2007 ................................................................ $ 5,586
2008 ................................................................ 4,752
2009 ................................................................ 3,623
2010 ................................................................ 2,414
2011 ................................................................ 2,040
Thereafter ............................................................ 7,367
$25,782
In November 2002, the Company signed an agreement with Dawn Food Products, Inc. (“Dawn”) to provide
sweet goods for the period 2003-2007. The agreement was subsequently extended to May 2008. The agreement
with Dawn is structured as a cost plus agreement. For the years ended December 26, 2006, December 27, 2005, and
December 25, 2004, the Company paid $19.9 million, $15.8 million, and $17.2 million, respectively, under this
agreement.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)