Panera Bread 2009 Annual Report Download - page 61

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Rent Expense
The Company recognizes rent expense on a straight-line basis over the reasonably assured lease term as
defined in the accounting standard 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
The Company accounts for earnings per common share in accordance with the relevant accounting guidance in
the Company’s consolidated financial statements and accompanying notes, which requires companies to present
basic earnings per share and diluted earnings per share. 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.
Foreign Currency Translation
The Company has Canadian subsidiaries which have foreign operations and use their local currency as their
functional currency. Assets and liabilities are translated into U.S. dollars using the current exchange rate in effect at
the balance sheet date, while revenues and expenses are translated at the weighted-average exchange rate during the
fiscal period. The resulting translation adjustments are recorded as a separate component of accumulated other
comprehensive income (loss) in the Consolidated Statements of Stockholders’ Equity. Gains and losses resulting
from foreign currency transactions have not historically been significant and are included in other (income)
expense, net in the Consolidated Statements of Operations.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include short-term investments in
trading securities, accounts receivable, accounts payable, and other accrued expenses, approximate their fair values
due to their short maturities. The Company’s investments in trading securities are stated at fair value, with gains or
losses resulting from changes in fair value recognized currently in earnings as other (income) expense, net in the
Consolidated Statements of Operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the accounting standard for share
based payment, which requires the Company to measure and record compensation expense in the Company’s
consolidated financial statements for all stock-based compensation awards using a fair value method. The Company
maintains several stock-based incentive plans under which the Company may grant incentive stock options, non-
statutory stock options and stock settled appreciation rights (collectively, “option awards”) to certain directors,
officers, employees and consultants. The Company also may grant restricted stock and restricted stock units and the
55
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)