Panera Bread 2006 Annual Report Download - page 56

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Beginning in fiscal 2003, the Company executed Confidential and Proprietary Information and Non-Com-
petition Agreements (Agreements) with certain employees. These Agreements contain a provision whereby
employees would be due a certain number of weeks of their salary if their employment was terminated by the
Company as specified in the Agreement. In accordance with SFAS No. 5, the Company has not recorded a liability
for these amounts potentially due employees. Rather, the Company will record a liability for these amounts when an
amount becomes due to an employee. As of December 26, 2006, the total amount potentially owed employees under
these Agreements was approximately $7.6 million.
The Company is subject to legal proceedings and claims which arise in the normal course of business. In the
opinion of management, the ultimate liabilities with respect to these actions will not have a material adverse effect
on the Company’s financial position, results of operations, or cash flow.
11. Income Taxes
The provision for income taxes attributable to income before income taxes in the consolidated statements of
operations is comprised of the following (in thousands):
December 26,
2006
December 27,
2005
December 25,
2004
Current:
Federal ................................... $34,766 $30,638 $15,634
State ..................................... 4,117 1,616 647
38,883 32,254 16,281
Deferred:
Federal ................................... (4,725) (2,166) 5,802
State ..................................... (331) (93) 92
(5,056) (2,259) 5,894
Tax Provision ................................ $33,827 $29,995 $22,175
A reconciliation of the statutory federal income tax rate to the effective tax rate as a percentage of income
before income taxes follows:
2006 2005 2004
Statutory rate provision........................................ 35.0 % 35.0 % 35.0 %
State income taxes, net of federal tax benefit and other ................ 1.5 1.5 1.5
36.5 % 36.5 % 36.5 %
51
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)