Panera Bread 2015 Annual Report Download - page 48

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payments have not been reduced by minimum sublease rentals to be received in the future under non-cancelable subleases.
Sublease rentals are approximately $20.4 million for operating subleases.
(2) Relates to certain commodity and service agreements pursuant to which we are committed as of December 29, 2015 to purchase
a fixed quantity over a contracted time period.
(3) See Note 11, Debt, 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 term loan borrowings and installment payment agreement.
(4) Represents estimated interest payments on the term loan borrowings. Interest payments are calculated based on Eurodollar
plus the applicable margin in effect at December 29, 2015. The actual interest rates on our term loan borrowings could vary
from that used to compute the above interest payments. See Note 11, Debt, 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 term loan borrowings.
(5) See Note 15, Income Taxes, 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 uncertain tax positions.
Off-Balance Sheet Arrangements
As of December 29, 2015, we have guaranteed the operating leases of 75 franchisee locations, which we account for in accordance
with the accounting requirements for guarantees. These guarantees are primarily a result of the sales of Company-owned bakery-
cafes to franchisees, pursuant to which we exercised our right to assign the lease for the bakery-cafe but remain liable to the
landlord in the event of a default by the assignee. These guarantees expire on various dates from July 15, 2020 to February 28,
2049, with a maximum potential amount of future rental payments of approximately $244.4 million as of December 29, 2015.
Our obligation from these leases will decrease over time as these operating leases expire. We have not recorded a liability for
these guarantees because the fair value of these lease guarantees was determined by us to be insignificant individually, and in the
aggregate, based on an analysis of the facts and circumstances of each such lease and each such assignee's performance, and we
did not believe it was probable we would be required to perform under any guarantees at the time the guarantees were issued. We
have not had to make any payments related to any of these guaranteed leases. Applicable assignees continue to have primary
obligation for these operating leases. As of December 29, 2015, future commitments under these leases were as follows (in
thousands):
Less than
1 year
1-3
years
3-5
years
More than
5 years Total
Lease Guarantees (1) . . . . . . . . . . . . . . . . . . $ 11,832 $ 24,501 $ 25,172 $ 182,907 $ 244,412
(1) Represents aggregate maximum requirement — 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 lease
guarantees.
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 29, 2015, the total amount
potentially owed employees under these non-compete agreements was $24.8 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