Panera Bread 2008 Annual Report Download - page 76

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Aggregate minimum requirements under non-cancelable operating leases, excluding contingent payments, as
of December 30, 2008, were as follows (in thousands):
2009 2010 2011 2012 2013 Thereafter Total
$77,115 77,011 76,328 75,904 75,486 507,178 $889,022
Rental expense under operating leases was approximately $77.9 million, $64.4 million, and $45.6 million in
fiscal 2008, 2007, and 2006, respectively, which included contingent (i.e. percentage rent) payments of $1.1 million,
$1.0 million, and $0.8 million, respectively.
In accordance with SFAS No. 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 30, 2008 and December 25, 2007 was $4.1 million and $2.9 million,
respectively, and is included in other long-term liabilities in the Consolidated Balance Sheets.
Lease Guarantees
The Company accounts for certain guarantees in accordance with FIN No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpre-
tation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. The Company has
guaranteed operating leases of 21 franchisee locations and 12 locations of its former Au Bon Pain division, or its
franchisees. Also, the Company’s 51 percent owned Paradise subsidiary has guaranteed nine operating leases on
behalf of its franchisees. These leases have terms expiring on various dates from January 31, 2009 to December 31,
2023 and have a potential amount of future rental payments of approximately $35.8 million as of December 30,
2008. The obligation from these leases will generally continue to decrease over time as these operating leases
expire. The Company has not recorded a liability for certain of these guarantees as they arose prior to the adoption of
FIN No. 45 and, unless modified, are exempt from its requirements. There is no liability reflected for those
guarantees issued after FIN No. 45’s effective date as the fair value determined by the Company’s analysis of each
lease guarantee and the facts and circumstances of the lease and the franchisee performance was insignificant and
the Company did not believe it was probable it would be required to perform under any guarantees at the time the
guarantee was issued. The Company has not had to make any payments related to any of these guaranteed leases. Au
Bon Pain or the applicable franchisees continue to have primary liability for these operating leases. Future
commitments as of December 30, 2008 under these leases were as follows (in thousands):
2009 2010 2011 2012 2013 Thereafter Total
$5,430 3,984 3,235 3,029 3,022 17,105 $35,805
During the first quarter of fiscal 2008, the Company recorded a reserve of $1.2 million relating to the
termination of operating leases for specific sites, which the Company determined not to develop. During fiscal
2008, the Company settled one lease and decreased the reserve by approximately $0.3 million. No other significant
changes were made to the accrual throughout fiscal 2008. As of December 30, 2008, the Company had approx-
imately $0.9 million accrued in its Consolidated Balance Sheets relating to the termination of these specific leases.
Employee Commitments
The Company has executed Confidential and Proprietary Information and Non-Competition Agreements
(“Non-Compete Agreements”) with certain employees. These Non-Compete 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 Non-Compete Agreement. 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 in accordance with the appropriate authoritative literature. As of December 30, 2008,
the total amount potentially owed employees under these Non-Compete Agreements was $10.4 million.
69
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)