Panera Bread 2008 Annual Report Download - page 62

undiscounted cash flows from the related long-lived assets of a bakery-cafe or fresh dough facility with their
respective carrying values. If impairment exists, the amount of impairment is determined by comparing anticipated
discounted cash flows from the related long-lived assets of a bakery-cafe or a fresh dough facility with their
respective carrying values. In performing this analysis, management considers such factors as current results,
trends, future prospects, and other economic factors. As of December 30, 2008, no impairment of long-lived assets
had been recognized. The Company recognized an impairment loss of $0.1 million during the fiscal year ended
December 25, 2007 related to one underperforming Company-owned bakery-cafe in the normal course of business.
This loss was recorded in other operating expenses in the Consolidated Statements of Operations. No impairment of
long-lived assets was recorded during the fiscal year ended December 26, 2006.
Self-Insurance Reserves
The Company is self-insured for a significant portion of its workers’ compensation, group health, and general,
auto, and property liability insurance with varying deductibles of as much as $0.5 million of individual claims,
depending on the type of claim. The Company also purchases aggregate stop-loss and/or layers of loss insurance in
many categories of loss. The Company utilizes third party actuarial experts’ estimates of expected losses based on
statistical analyses of historical industry data, as well as its own estimates based on the Company’s actual historical
data to determine required self-insurance reserves. The assumptions are closely reviewed, monitored, and adjusted
when warranted by changing circumstances. The estimated accruals for these liabilities could be affected if actual
experience related to the number of claims and cost per claim differs from these assumptions and historical trends.
Based on information known at December 30, 2008, the Company believes it has provided adequate reserves for its
self-insurance exposure. As of December 30, 2008 and December 25, 2007, self-insurance reserves were
$12.1 million and $8.9 million, respectively, and were included in accrued expenses in the Consolidated Balance
Sheets. The total amounts expensed for self-insurance were $33.0 million, $22.7 million, and $19.1 million, for the
fiscal years ended December 30, 2008, December 25, 2007, and December 26, 2006, respectively.
Income Taxes
The provision for income taxes is determined in accordance with the provisions of SFAS No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. Any effect on deferred tax assets and liabilities from a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company establishes additional provisions for income taxes when, despite the belief that tax positions are
fully supportable, there remain certain positions that do not meet the minimum probability threshold, as defined by
FASB issued Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes, which is a tax position
that is more likely than not to be sustained upon examination by the applicable taxing authority. In the normal course
of business, the Company and its subsidiaries are examined by various Federal, State and foreign tax authorities.
The Company regularly assesses the potential outcomes of these examinations and any future examinations for the
current or prior years in determining the adequacy of its provision for income taxes. The Company continually
assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax
liability and deferred taxes in the period in which the facts that give rise to a revision become known. The Company
classifies estimated interest and penalties related to the underpayment of income taxes as a component of income
taxes in the Consolidated Statements of Operations.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)