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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
57
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 30, 2014 and December 31, 2013 was $19.8
million and $10.2 million, respectively, and is included in other long-term liabilities in the Consolidated Balance Sheets.
In connection with the Company’s relocation of its St. Louis, Missouri support center in fiscal 2010, it simultaneously entered
into a capital lease for certain personal property and purchased municipal industrial revenue bonds of a similar amount from St.
Louis County, Missouri. As of December 30, 2014 and December 31, 2013, the Company held industrial revenue bonds and had
recorded a capital lease of $1.1 million and $1.3 million in the Consolidated Balance Sheets, respectively.
The following table summarizes sale-leaseback transactions for the periods indicated (dollars in thousands):
For the fiscal year ended
December 30,
2014
December 31,
2013
December 25,
2012
Number of bakery-cafes sold and leased back . . . . . . . . . . . . . . . . . . . . . . . . 632
Proceeds from sale-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,900 $ 6,132 $ 4,538
The leases have been classified as either capital or operating leases, depending on the substance of the transaction, and have initial
terms of 15 years, with renewal options of up to 20 years. The Company realized gains on these sales totaling $0.3 million, $0.3
million, and $1.0 million during fiscal 2014, fiscal 2013, and fiscal 2012, respectively, which have been deferred and are being
recognized on a straight-line basis over the reasonably assured lease term for the leases.
Lease Guarantees
As of December 30, 2014, the Company guaranteed the operating leases of 23 franchisee or affiliate locations, which the Company
accounted for in accordance with the accounting requirements for guarantees. These guarantees are primarily a result of the
Company's sales of Company-owned bakery-cafes to franchisees and affiliates, pursuant to which the Company exercised its right
to assign the lease or sublease for the bakery-cafe but remains liable to the landlord for the remaining lease term in the event of a
default by the assignee. These leases have terms expiring on various dates from December 31, 2014 to September 30, 2027 and
have a potential amount of future rental payments of approximately $16.6 million as of December 30, 2014. The obligation from
these leases will 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 modified, are
exempt from its requirements. The Company has not recorded a liability for those guarantees issued after the effective date of the
accounting requirements because the fair value of these lease guarantees was determined by the Company to be insignificant
individually, and in the aggregate, based on analysis of the facts and circumstances of each such lease and each such assignee’s
performance, and the Company did not believe it was probable that it would be required to perform under any guarantees at the
time the guarantees were issued. The Company has not had to make any payments related to any of these guaranteed leases.
Applicable assignees continue to have primary liability for these operating leases. As of December 30, 2014, future commitments
under these leases were as follows (in thousands):
Fiscal Years
2015 2016 2017 2018 2019 Thereafter Total
$ 2,574 2,140 2,066 1,984 1,873 5,983 $ 16,620
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, 2014, the total amount potentially owed employees under these non-compete agreements was $24.3 million.
Legal Proceedings
On July 2, 2014, a purported class action lawsuit was filed against one of the Company's subsidiaries by Jason Lofstedt, a former
employee of one of the Company's subsidiaries. The lawsuit was filed in the California Superior Court, County of Riverside. The
complaint alleges, among other things, violations of the California Labor Code, failure to pay overtime, failure to provide meal
and rest periods, and violations of California's Unfair Competition Law. The complaint seeks, among other relief, collective and