Panera Bread 2008 Annual Report Download - page 64

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$72.6 million, $64.6 million, and $58.7 million for the fiscal years ended December 30, 2008, December 25, 2007,
and December 26, 2006, respectively.
Advertising Costs
National advertising fund and marketing administration contributions received from franchise-operated
bakery-cafes are consolidated with those from the Company in the Company’s consolidated financial statements.
Liabilities for unexpended funds received from franchisees are included in accrued expenses in the Consolidated
Balance Sheets. The Company’s contributions to the national advertising and marketing administration funds are
recorded as part of general and administrative expenses in the Consolidated Statements of Operations, while the
Company’s own local bakery-cafe media costs are recorded as part of other operating expenses in the Consolidated
Statements of Operations. The Company’s policy is to record advertising costs as expense in the period in which the
cost is incurred. The total amounts recorded as advertising expense were $12.5 million, $11.6 million, and
$11.3 million for the fiscal years ended December 30, 2008, December 25, 2007, and December 26, 2006,
respectively.
Pre-Opening Costs
All pre-opening costs directly associated with the opening of new bakery-cafe locations, which consists
primarily of pre-opening rent expense, labor and food costs incurred during in-store training and preparation for
opening, but exclude manager training costs which are included in other operating expenses in the Consolidated
Statements of Operations, are expensed when incurred.
Rent Expense
The Company recognizes rent expense on a straight-line basis over the reasonably assured lease term as
defined in SFAS No. 98, Accounting for Leases. The reasonably assured lease term for most bakery-cafe leases is
the initial non-cancelable lease term plus one renewal option period, which generally equates to 15 years. The
reasonably assured lease term on most fresh dough facility leases is the initial non-cancelable lease term plus one to
two renewal option periods, which generally equates to 20 years. In addition, 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. The Company includes any rent escalations and construction period and
other rent holidays in its determination of straight-line rent expense. Therefore, rent expense for new locations is
charged to expense beginning with the start of the construction period.
The Company records landlord allowances and incentives received which are not related to structural building
improvements as deferred rent, which is included in accrued expenses or deferred rent in the Consolidated Balance
Sheets based on their short-term or long-term nature. This deferred rent is amortized on a straight-line basis over the
reasonably assured lease term as a reduction of rent expense.
Earnings Per Share Data
Earnings per common share are computed in accordance with SFAS No. 128, Earnings Per Share, which
requires companies to present basic earnings per share and diluted earnings per share. Earnings per share is based on
the weighted average number of shares outstanding during the period after consideration of the dilutive effect, if
any, for common stock equivalents, including stock options, restricted stock, and other stock-based compensation.
Basic earnings per share are computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year. Diluted earnings per common share are computed by dividing net
income by the weighted average number of shares of common stock outstanding and dilutive securities outstanding
during the year.
57
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)