Panera Bread 2013 Annual Report Download - page 45

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Employee Commitments
We have confidential and proprietary information and non-competition agreements, referred to as 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 us as specified in the non-compete agreement. We have not recorded
a liability for these amounts potentially due to employees. Rather, we 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 31, 2013, the total amount
potentially owed employees under these non-compete agreements was $21.6 million.
Impact of Inflation
Our profitability depends in part on our ability to anticipate and react to changes in food, supply, labor, occupancy, and other costs.
In the past, we have been able to recover a significant portion of inflationary costs and commodity price increases, including price
increases in fuel, proteins, dairy, wheat, tuna, and cream cheese among others, through increased menu prices. There have been,
and there may be in the future, delays in implementing such menu price increases, and competitive pressures may limit our ability
to recover such cost increases in their entirety. Historically, the effects of inflation on our consolidated results of operations have
not been materially adverse. However, inherent volatility experienced in certain commodity markets, such as those for wheat,
proteins, including chicken raised without antibiotics, and fuel may have an adverse effect on us in the future. The extent of the
impact will depend on our ability and timing to increase food prices.
A majority of our associates are paid hourly rates regulated by federal and state minimum wage laws. Although we have and will
continue to attempt to pass along any increased labor costs through food price increases, there can be no assurance that all such
increased labor costs can be reflected in our prices or that increased prices will be absorbed by consumers without diminishing to
some degree consumer spending at the bakery-cafes.
Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update No. 2013-11, “Income Taxes (Topic
740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit
Carryforward Exists”. This guidance requires an unrecognized tax benefit related to a net operating loss carryforward, a similar
tax loss or a tax credit carryforward to be presented as a reduction to a deferred tax asset, unless the tax benefit is not available at
the reporting date to settle any additional income taxes under the tax law of the applicable tax jurisdiction. The guidance is effective
for fiscal years and interim periods beginning after December 15, 2013, with early adoption permitted. The adoption of this
guidance is not expected to have a material effect on our consolidated financial statements.