Panera Bread 2010 Annual Report Download - page 60

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, which
approximates fair value, with their respective carrying values. In performing this analysis, management considers
such factors as current results, trends, future prospects, and other economic factors. The Company recognized an
impairment loss of $0.1 million and $0.6 million during the fiscal years ended December 28, 2010 and December 29,
2009, respectively, related to a distinct underperforming Company-owned bakery-cafe within each fiscal year. The
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 30, 2008.
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 28, 2010, the Company believes it has provided adequate reserves for its
self-insurance exposure. As of December 28, 2010 and December 29, 2009, self-insurance reserves were
$20.2 million and $15.9 million, respectively, and were included in accrued expenses in the Consolidated Balance
Sheets. The total amounts expensed for self-insurance were $35.6 million, $37.1 million, and $33.0 million, for the
fiscal years ended December 28, 2010, December 29, 2009, and December 30, 2008, respectively.
Income Taxes
The Company completes the provision for income taxes in accordance with the accounting standard for
income taxes in the Company’s consolidated financial statements and accompanying notes. 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.
In accordance with the authoritative guidance on income taxes, 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, which is a tax position that is more likely than not to be sustained
upon ultimate settlement with tax authorities assuming full knowledge of the position and all relevant facts. In the
normal course of business, the Company and its subsidiaries are examined by various Federal, State, foreign, and
other 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 unrecognized tax benefits 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)