Panera Bread 2015 Annual Report Download - page 73

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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
63
In addition, the Company has repurchased shares of its Class A common stock through a share repurchase authorization approved
by its Board of Directors from participants of the Panera Bread 2006 Stock Incentive Plan and the Panera Bread 2015 Stock
Incentive Plan, which are netted and surrendered as payment for applicable tax withholding on the vesting of their restricted stock.
Shares surrendered by the participants are repurchased by the Company pursuant to the terms of those plans and the applicable
award agreements and not pursuant to publicly announced share repurchase authorizations. See Note 16 for further information
with respect to the Company’s repurchase of the shares.
14. Commitments and Contingencies
Lease Commitments
The Company is obligated under operating leases for its bakery-cafes, fresh dough facilities and trucks, and support centers. Lease
terms for its trucks are generally for five to seven years. The reasonably assured lease term 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 facility leases 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 the Company to pay
a proportionate share of real estate taxes, insurance, common area, 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.
Aggregate minimum requirements under non-cancelable operating leases, excluding contingent payments, as of December 29,
2015, were as follows (in thousands):
Fiscal Years
2016 2017 2018 2019 2020 Thereafter Total
$ 149,882 148,430 145,041 138,941 130,083 659,087 $ 1,371,464
Rental expense under operating leases was approximately $146.6 million, $138.0 million, and $130.0 million in fiscal 2015, fiscal
2014, and fiscal 2013, respectively, which included contingent (i.e., percentage rent) expense of $2.0 million, $1.5 million, and
$2.2 million, respectively.
The Company complies with lease obligations at the end of a lease as it relates to tangible long-lived assets, in accordance with
the accounting guidance for asset retirement obligations. The liability as of December 29, 2015 and December 30, 2014 was $19.5
million and $19.8 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 29, 2015 and December 30, 2014, the Company held industrial revenue bonds and had
recorded a capital lease of $0.9 million and $1.1 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 29,
2015
December 30,
2014
December 31,
2013
Number of bakery-cafes sold and leased back . . . . . . . . . . . . . . . . . . . . . . . . 463
Proceeds from sale-leaseback transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,095 $ 12,900 $ 6,132
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 $0.4 million, $0.3
million, and $0.3 million during fiscal 2015, fiscal 2014, and fiscal 2013, 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 29, 2015, the Company has guaranteed the operating leases of 75 franchisee 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, pursuant to which the Company exercised its right to assign the