Panera Bread 2015 Annual Report Download - page 47

37
• the useful life of the improvement is longer than the lease term.
We report the period to period change in the landlord receivable within the operating activities section of the Consolidated Statements
of Cash Flows.
Management makes judgments regarding the probable term for each lease, which can impact the classification and accounting for
a lease as capital or operating, the rent holiday, and/or escalations in payments that are taken into consideration when calculating
straight-line rent and the term over which leasehold improvements for each bakery-cafe, fresh dough facility, and support center
is amortized. These judgments may produce materially different amounts of depreciation, amortization, and rent expense than
would be reported if different assumed lease terms were used.
Impairment of Long-Lived Assets
We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets
may warrant revision or that the remaining balance of an asset may not be recoverable. When appropriate, we compare anticipated
undiscounted cash flows from the related long-lived assets of a bakery-cafe or fresh dough facility with their respective carrying
values to determine if the long-lived assets are recoverable. If the sum of the anticipated undiscounted cash flows for the long-
lived assets is less than their carrying value, an impairment loss would be recognized for the difference between the anticipated
discounted cash flows, which approximates fair value, and the carrying value of the long-lived assets. Our estimates of cash flow
were based upon, among other things, certain assumptions about expected future operating performance, such as revenue growth
rates, operating margins, risk-adjusted discount rates, and future economic and market conditions. Our estimates of cash flow
may differ from actual cash flow due to, among other things, economic conditions, changes to our business model or changes in
operating performance. The long-term financial forecasts that we utilize represent the best estimate that we have at this time and
we believe that its underlying assumptions are reasonable.
We recognized impairment losses of $3.8 million, $0.9 million, and $0.8 million during fiscal 2015, fiscal 2014, and fiscal 2013,
respectively, related to distinct under-performing Company-owned bakery-cafes. For fiscal 2015, the impairment loss was recorded
in refranchising loss in the Consolidated Statements of Income. For fiscal 2014 and fiscal 2013, these impairment losses were
recorded in other operating expenses in the Consolidated Statements of Income.
Contractual Obligations and Other Commitments
In addition to our planned capital expenditure requirements, we have certain other contractual and committed cash obligations.
Our contractual cash obligations consist of non-cancelable operating leases for our bakery-cafes, fresh dough facilities and trucks,
and support centers; principal and interest payments related to the term loan borrowings; capital leases; purchase obligations
primarily for certain commodities; and uncertain tax positions. Lease terms for our trucks are generally for five to seven years.
The reasonably assured lease terms for most bakery-cafe and support center leases is the initial non-cancelable lease term plus
one renewal option period, which generally equates to an aggregate of 15 years. The reasonably assured lease term for most fresh
dough facilities is the initial non-cancelable lease term plus one to two renewal periods, which generally equates to an aggregate
of 20 years. Lease terms generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance,
and other operating costs. Certain bakery-cafe leases provide for contingent rental (i.e., percentage rent) payments based on sales
in excess of specified amounts, scheduled rent increases during the lease terms, and/or rental payments commencing at a date
other than the date of initial occupancy. As of December 29, 2015, we expect cash expenditures under these lease obligations,
purchase obligations, term loan borrowings, and uncertain tax positions to be as follows for the periods indicated (in thousands):
Less than
1 year
1-3
years
3-5
years
More than
5 years Total
Operating leases (1) . . . . . . . . . . . . . . . . . . . $ 149,882 $ 293,471 $ 269,024 $ 659,087 $ 1,371,464
Capital lease obligations (1). . . . . . . . . . . . . 509 1,033 1,053 2,549 5,144
Purchase obligations (2) . . . . . . . . . . . . . . . . 294,344 632 — — 294,976
Long-term debt (3) . . . . . . . . . . . . . . . . . . . . 15,000 30,000 352,397 — 397,397
Installment payment agreement (3) . . . . . . . 2,536 5,072 2,536 — 10,144
Interest payments (4) . . . . . . . . . . . . . . . . . . 5,545 10,474 6,004 — 22,023
Uncertain tax positions (5) . . . . . . . . . . . . . . 1,933 2,406 1,568 165 6,072
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 469,749 $ 343,088 $ 632,582 $ 661,801 $ 2,107,220
(1) See Note 14, Commitments and Contingencies, to the consolidated financial statements included in Part II, Item 8 of this
Annual Report on Form 10-K for further information with respect to our operating and capital leases. Future minimum lease