Panera Bread 2009 Annual Report Download - page 71

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by the Company pursuant to the terms of those plans and the applicable award agreements and not pursuant to
publicly announced share repurchase programs. See Note 16 for further information with respect to the Company’s
repurchase of the shares.
13. Commitments and Contingent Liabilities
Operating Lease Commitments
The Company is obligated under non-cancelable operating leases for its bakery-cafes, fresh dough facilities
and trucks, and support centers. Lease terms for its trucks are generally for five to seven years. Lease terms for its
bakery-cafes, fresh dough facilities, and support centers are generally for ten years with renewal options at certain
locations and generally require the Company to pay a proportionate share of real estate taxes, insurance, common
area, and other operating costs. Many bakery-cafe leases provide for contingent rental (i.e., percentage rent)
payments based on sales in excess of specified amounts. 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.
Aggregate minimum requirements under non-cancelable operating leases, excluding contingent payments, as
of December 29, 2009, were as follows (in thousands):
2010 2011 2012 2013 2014 Thereafter Total
$82,017 82,418 81,745 81,577 79,255 481,809 $888,821
Rental expense under operating leases was approximately $79.9 million, $77.9 million, and $64.4 million, in
fiscal 2009, fiscal 2008, and fiscal 2007, respectively, which included contingent (i.e. percentage rent) payments of
$0.8 million, $1.1 million, and $1.0 million, respectively.
In accordance with the accounting guidance for asset retirement obligations the Company complies with lease
obligations at the end of a lease as it relates to tangible long-lived assets. The liability as of December 29, 2009 and
December 30, 2008 was $4.3 million and $4.1 million, respectively, and is included in other long-term liabilities in
the Consolidated Balance Sheets.
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
2009, the Company made required lease payments on certain of these sites, settled one lease, and made a decision to
open two bakery-cafes resulting in a decrease in the reserve of approximately $0.5 million. The Company increased
its reserve by $0.4 million for the termination of operating leases for three additional sites it closed or determined
not to develop. No other significant changes were made to the accrual throughout fiscal 2009. As of December 29,
2009, the Company had approximately $0.8 million accrued in its Consolidated Balance Sheets relating to the
termination of these specific leases. 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 approximately $0.9 million accrued in its Consolidated Balance Sheets
relating to the termination of these specific leases.
Lease Guarantees
As of December 29, 2009, the Company guaranteed operating leases of 27 franchisee bakery-cafes and four
locations of the Company’s former Au Bon Pain division, or its franchisees, which the Company accounted for in
accordance with the accounting requirements for guarantees. These leases have terms expiring on various dates
from January 31, 2010 to December 31, 2018 and have a potential amount of future rental payments of
approximately $30.0 million as of December 29, 2009. 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 implementation of the accounting requirements for guarantees and, unless
65
PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)