Panera Bread 2008 Annual Report Download - page 60

Short-term Investments
The Company’s investments consist of trading securities that are stated at fair value, with gains or losses
resulting from changes in fair value recognized currently in earnings as other (income) expense, net. Management
designates the appropriate classification of its investments at the time of purchase based upon its intended holding
period. See Note 4 and Note 5 for further information with respect to the Company’s short-term investments.
Trade and Other Accounts Receivable
Trade accounts receivable consists primarily of amounts due to the Company from its franchisees for
purchases of fresh dough from the Company’s fresh dough facilities, royalties due to the Company from franchisee
sales, and receivables from credit card sales. The Company does not require collateral and maintains reserves for
potential uncollectible accounts based on historical losses and existing economic conditions, when relevant. The
allowance for doubtful accounts at December 30, 2008 and December 25, 2007 was $0.2 million and $0.07 million,
respectively.
As of December 30, 2008, other accounts receivable consisted primarily of tenant allowances due from
landlords of $2.4 million and a $3.9 million receivable from the Company’s Canadian franchisee representing the
total cost of the three bakery-cafes Panera developed on behalf of the franchisee (see Note 13 for further
explanation). Other accounts receivable consisted primarily of $8.6 million of tenant allowances due from
landlords at December 25, 2007.
Inventories
Inventories, which consist of food products, paper goods and supplies, and promotional items, are valued at the
lower of cost or market, determined under the first-in, first-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 related reasonably assured lease term. Costs incurred in
connection with the development of internal-use software are capitalized in accordance with Statement of Position
(“SOP”) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and
amortized over the expected useful life of the asset. The estimated useful lives used for financial statement purposes
are:
Leasehold improvements ............................................... 15-20 years
Machinery and equipment . . . ........................................... 3-10 years
Furniture and fixtures ................................................. 2-7years
External signage ..................................................... 3-6years
Interest, to the extent it is incurred, is capitalized when incurred in connection with the construction of new
locations or facilities. The capitalized interest is recorded as part of the asset to which it relates and is amortized over
the asset’s estimated useful life. Interest costs capitalized were approximately $0.1 million for fiscal year ended
December 30, 2008. No interest was incurred for such purposes for the fiscal years ended December 25, 2007 and
December 26, 2006.
Upon retirement or sale, the cost of assets disposed and their related accumulated depreciation are removed
from the accounts. Any resulting gain or loss is credited or charged to operations. Maintenance and repairs are
charged to expense when incurred, while betterments are capitalized. The total amounts expensed for maintenance
and repairs were $27.4 million, $21.7 million, and $14.4 million for the fiscal years ended December 30, 2008,
December 25, 2007, and December 26, 2006, respectively.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)