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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON D.C. 20549
 
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 29, 2009
 or
 o
    
    TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OT 1934
 For the transition period from
 to
 Commission file number 0-19253
 
 Panera Bread Company
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware(State or Other Jurisdiction of 
Incorporation or Organization)
    
    04-2723701(I.R.S. Employer
Identification No.)6710 Clayton Rd., 
Richmond Heights, MO(Address of Principal Executive Offices)
    
    63117(Zip Code)
 (314) 633-7100
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Exchange on Which RegisteredClass A Common Stock, $.0001 par value per share
    
    The NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Act:
None.
 Yes þ     No o
 Yes o     No þ
 þ o
 Yes o     No o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PART I
    
    
    3ITEM 1. BUSINESS
    
    
    3ITEM 1A. RISK FACTORS
    
    
    9ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    16ITEM 2. PROPERTIES
    
    
    16ITEM 3. LEGAL PROCEEDINGS
    
    
    18ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    19PART II
    
    
    19ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
    
    
    19ITEM 6. SELECTED FINANCIAL DATA
    
    
    20ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    40ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    41ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    74ITEM 9A. CONTROLS AND PROCEDURES
    
    
    74ITEM 9B. OTHER INFORMATION
    
    
    75PART III
    
    
    75ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    75ITEM 11. EXECUTIVE COMPENSATION
    
    
    75ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
    
    
    75ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    75ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    75PART IV
    
    
    76ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    76SIGNATURES
    
    
    77EXHIBIT INDEX
    
    
    78REGISTRANT'S SUBSIDIARIESCONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCERTIFICATIONCERTIFICATIONCERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
   2




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Forward-Looking Statements
  
 PART I
 
 ITEM 1.
    
    BUSINESS
 General
 ® ® ®
     3




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Concept and Strategy
   ®
  Menu
     Health
  4




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Operational Excellence
   Marketing
     Capital Resources and Deployment of Capital
     5




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Franchise Operations
     6




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Bakery-Cafe Supply Chain
        Management Information Systems
     7




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Competition
  Employees
  Proprietary Rights
  ® ® ® ® ® ® ®
 Corporate History and Additional Information
   www.sec.gov
 www.panerabread.com
  8




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Government Regulation
     
 ITEM 1A.
    
    RISK FACTORS
  Disruptions in our bakery-cafe supply chain could adversely affect our profitability and operating results.
    Changes in food and supply costs could adversely affect our results of operations.
   9




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Disruptions or supply issues in our fresh dough facilities could adversely affect our business and results of operations.
    The continuing adverse economic conditions could adversely affect our business and financial
results and have a material adverse effect on our liquidity and capital resources.
  We may not be able to continue to convince our customers of the benefits of paying our prices for
higher-quality food.
  Customer preferences and traffic could be negatively impacted by health concerns about the
consumption of certain products.
   10




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Our failure or inability to protect our brand, trademarks or other proprietary rights could
adversely affect our business and competitive position.
 ® ® ® ® ®
   Competition may adversely affect our operations and results of operations.
   Loss of senior management or the inability to recruit and retain associates could adversely affect our future success.
   Our ability to increase our revenue and operating profits could be adversely affected if we are
unable to execute our growth strategy or achieve sufficient returns on invested capital for
bakery-cafe locations.
  
    
    identification and availability of suitable locations for new bakery-cafes on acceptable terms,
including costs and appropriate delivery distances from our fresh dough facilities;
    
    competition for restaurant sites;
  11




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
    
    variations in the number and timing of bakery-cafe openings as compared to our construction schedule;
    
    management of the costs of construction of bakery-cafes, particularly factors outside our control,
such as the timing of delivery of a leased location by the landlord;
    
    our ability to take advantage of perceived opportunities in a softening commercial real estate market;
    
    securing required governmental approvals and permits and complying with applicable zoning, land use
and environmental regulations; and
    
    general economic conditions.
 Our growth strategy in part depends on continued development by our franchisees. If our franchisees
do not continue to successfully finance and open new bakery-cafes, our business could be adversely
affected.
   Although we have been able to successfully manage our growth to date, we may experience
difficulties doing so in the future.
   We operate in Canada and may expand into other foreign markets and therefore, we may be exposed to
uncertainties and risks that could negatively impact our results of operations.
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If we fail to comply with governmental laws or regulations or if these laws or regulations change,
our business could suffer.
  
    
    franchise relationships;
    
    building construction and zoning requirements;
    
    nutritional content labeling and disclosure requirements;
    
    management and protection of the personal data of our employees and customers;
    
    environmental matters.
     Rising insurance costs could negatively impact our profitability.
    13




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We are subject to complaints and litigation that could have an adverse effect on our business.
  If we are unable to protect our customers credit card data, we could be exposed to data loss,
litigation and liability, and our reputation could be significantly harmed.
  We periodically acquire existing bakery-cafes from our franchisees or ownership interests in other
restaurant or bakery-cafe concepts, which could adversely affect our results of operations.
  
    
    our ability to successfully achieve anticipated synergies, accurately assess contingent and other
liabilities as well as potential profitability;
    
    failure to successfully integrate the acquired entitys operational and support activities;
    
    unanticipated changes in business and economic conditions;
    
    limited or no operational experience in the acquired bakery-cafe market;
    
    future impairment charges related to goodwill and other acquired intangible assets; and
    
    risks of dispute and litigation with the seller, the sellers landlords, and vendors and other parties.
   14




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Our operating results fluctuate due to a number of factors, some of which may be beyond our
control, and any of which may adversely affect our financial condition.
  
    
    changes in average weekly sales and comparable bakery-cafe sales due to:
 
    
    lower customer traffic or average check per transaction, including as a result of the
introduction of new
menu items;
    
    changes in demographics, consumer preferences and discretionary spending;
    
    negative publicity about the ingredients we use or the occurrence of food-borne illnesses or
other problems at our bakery-cafes; or
    
    unfavorable general economic conditions in the markets in which we operate, including, but not
limited to, downturns in the housing market, higher interest rates, higher unemployment,
lower disposable income due to higher energy or other consumer costs, lower consumer confidence
and other events or factors that adversely affect consumer spending.
    
    seasonality, including as a result of inclement weather.
 
    
    cost increases due to:
 
    
    changes in our operating costs;
    
    labor availability and increased labor costs, including wages of
management and associates, compensation, insurance and health care; and
    
    changes in business strategy including concept evolution and new designs.
 
    
    profitability of new bakery-cafes, especially in new markets;
    
    delays in new bakery-cafe openings;
    
    fluctuations in supply costs, shortages or interruptions; and
    
    natural disasters and other calamities.
 Increased advertising and marketing costs could adversely affect our results of operations.
  Our federal, state and local tax returns have been and may in the future be selected for audit by
the taxing authorities, which may result in tax assessments or penalties that could have a material
adverse impact on our results of operations and financial position.
  A regional or global health pandemic could severely affect our business.
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Regional factors could negatively impact our results of operations.
  Failure to meet market expectations for our financial performance will likely adversely affect the
market price of our stock.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
   Facility
    
    Square FootageAtlanta, GA
    
    
    18,000Beltsville, MD
    
    
    26,800Chicago, IL
    
    
    30,900Cincinnati, OH
    
    
    22,300Dallas, TX
    
    
    12,900Denver, CO
    
    
    10,000Detroit, MI
    
    
    19,600Fairfield, NJ
    
    
    39,900Franklin, MA (1)
    
    
    40,300Greensboro, NC
    
    
    19,200Kansas City, KS
    
    
    17,000Minneapolis, MN
    
    
    10,300Miramar, FL
    
    
    15,100Ontario, CA
    
    
    27,800Orlando, FL
    
    
    16,500Phoenix, AZ
    
    
    9,100Seattle, WA
    
    
    16,600St. Louis, MO
    
    
    30,000Stockton, CA
    
    
    14,300Warren, OH
    
    
    16,300Ontario, CAN (2)
    
    
    300
  16




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(1)
    
    Total square footage includes approximately 20,000 square feet utilized in tuna and cream
cheese production.(2)
    
    Company-owned limited production facility co-located with one of our franchised bakery-cafes
in Ontario, Canada to support the franchise-operated bakery-cafes located in this market.  Company-
    
    
    Franchise-Owned
    
    
    Operated
    
    
    TotalState
    
    Bakery-Cafes
    
    
    Bakery-Cafes
    
    
    Bakery-CafesAlabama
    
    
    14
    
    
    
    
    
    
    
    14Arizona
    
    
    30
    
    
    
    5
    
    
    
    35Arkansas
    
    
    
    
    
    
    5
    
    
    
    5California
    
    
    39
    
    
    
    52
    
    
    
    91Colorado
    
    
    
    
    
    
    35
    
    
    
    35Connecticut
    
    
    11
    
    
    
    10
    
    
    
    21Delaware
    
    
    
    
    
    
    3
    
    
    
    3Florida
    
    
    39
    
    
    
    77
    
    
    
    116Georgia
    
    
    14
    
    
    
    18
    
    
    
    32Illinois
    
    
    69
    
    
    
    34
    
    
    
    103Indiana
    
    
    32
    
    
    
    6
    
    
    
    38Iowa
    
    
    2
    
    
    
    15
    
    
    
    17Kansas
    
    
    
    
    
    
    18
    
    
    
    18Kentucky
    
    
    15
    
    
    
    2
    
    
    
    17Maine
    
    
    
    
    
    
    4
    
    
    
    4Maryland
    
    
    
    
    
    
    42
    
    
    
    42Massachusetts
    
    
    8
    
    
    
    36
    
    
    
    44Michigan
    
    
    47
    
    
    
    15
    
    
    
    62Minnesota
    
    
    23
    
    
    
    3
    
    
    
    26Missouri
    
    
    45
    
    
    
    21
    
    
    
    66Nebraska
    
    
    11
    
    
    
    2
    
    
    
    13Nevada
    
    
    
    
    
    
    5
    
    
    
    5New Hampshire
    
    
    
    
    
    
    9
    
    
    
    9New Jersey
    
    
    
    
    
    
    48
    
    
    
    48New York
    
    
    34
    
    
    
    36
    
    
    
    70North Carolina
    
    
    12
    
    
    
    30
    
    
    
    42Ohio
    
    
    9
    
    
    
    89
    
    
    
    98Oklahoma
    
    
    
    
    
    
    17
    
    
    
    17Oregon
    
    
    5
    
    
    
    4
    
    
    
    9Pennsylvania
    
    
    23
    
    
    
    46
    
    
    
    69Rhode Island
    
    
    
    
    
    
    6
    
    
    
    6South Carolina
    
    
    8
    
    
    
    6
    
    
    
    14South Dakota
    
    
    1
    
    
    
    
    
    
    
    1Tennessee
    
    
    12
    
    
    
    16
    
    
    
    28Texas
    
    
    18
    
    
    
    29
    
    
    
    47Utah
    
    
    
    
    
    
    6
    
    
    
    6Virginia
    
    
    53
    
    
    
    10
    
    
    
    63Washington
    
    
    11
    
    
    
    1
    
    
    
    12West Virginia
    
    
    
    
    
    
    7
    
    
    
    7Wisconsin
    
    
    
    
    
    
    24
    
    
    
    24Canada
    
    
    
    
    
    
    3
    
    
    
    3Totals
    
    
    585
    
    
    
    795
    
    
    
    1,380
  17




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ITEM 3.
    
    LEGAL PROCEEDINGS
      18




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ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
  December 29, 2009
    
    
    December 30, 2008High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    58.03
    
    
    $
    43.33
    
    
    $
    44.20
    
    
    $
    31.52Second Quarter
    
    $
    63.75
    
    
    $
    49.62
    
    
    $
    52.30
    
    
    $
    41.02Third Quarter
    
    $
    58.05
    
    
    $
    48.59
    
    
    $
    58.88
    
    
    $
    43.64Fourth Quarter
    
    $
    68.63
    
    
    $
    53.24
    
    
    $
    55.91
    
    
    $
    36.36
  Dividend Policy
  Share Repurchase Program
   19




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Total Number of
    
    
    Approximate Dollar Value ofShares Purchased as
    
    
    Shares That May Yet BeTotal Number of
    
    
    Average Price
    
    
    Part of Publicly
    
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Announced Program
    
    
    Announced ProgramSeptember 30, 2009
- October 27, 2009
    
    
    22
    (1)
    
    $
    50.92
    
    
    
    
    
    
    $
    October 28, 2009 -
December 1, 2009
    
    
    28,069
    (1)(2)
    
    $
    63.01
    
    
    
    27,429
    
    
    $
    598,272,419December 2, 2009 -
December 29, 2009
    
    
    46
    (1)
    
    $
    51.85
    
    
    
    
    
    
    $
    598,272,419Total
    
    
    28,137
    
    
    $
    62.98
    
    
    
    27,429
    
    
    $
    598,272,419
 (1)
    
    Represents Class A common stock surrendered by participants under the Panera Bread 1992
Stock Incentive Plan and the Panera Bread 2006 Stock Incentive Plan as payment of applicable
tax withholding on the vesting of restricted stock. Shares so surrendered by the participants
are repurchased by us pursuant to the terms of those plans and the applicable award agreements
and not pursuant to publicly announced share repurchase programs.(2)
    
    Includes 27,429 shares of Class A common stock that were repurchased under a Rule 10b5-1
plan, as described above. See Note 12 to our consolidated financial statements for further
information regarding the share repurchase program. 
 ITEM 6.
    
    SELECTED FINANCIAL DATA
   20




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For the fiscal year ended (1)December 29,
    
    
    December 30,
    
    
    December 25,
    
    
    December 26,
    
    
    December 27,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Revenues:Bakery-cafe sales
    
    $
    1,153,255
    
    
    $
    1,106,295
    
    
    $
    894,902
    
    
    $
    666,141
    
    
    $
    499,422Franchise royalties and fees
    
    
    78,367
    
    
    
    74,800
    
    
    
    67,188
    
    
    
    61,531
    
    
    
    54,309Fresh dough sales to franchisees
    
    
    121,872
    
    
    
    117,758
    
    
    
    104,601
    
    
    
    101,299
    
    
    
    86,544Total revenue
    
    
    1,353,494
    
    
    
    1,298,853
    
    
    
    1,066,691
    
    
    
    828,971
    
    
    
    640,275Costs and expenses:Bakery-cafe expenses:Cost of food and paper products
    
    $
    337,599
    
    
    $
    332,697
    
    
    $
    271,442
    
    
    $
    196,849
    
    
    $
    143,057Labor
    
    
    370,595
    
    
    
    352,462
    
    
    
    286,238
    
    
    
    204,956
    
    
    
    151,524Occupancy
    
    
    95,996
    
    
    
    90,390
    
    
    
    70,398
    
    
    
    48,602
    
    
    
    35,558Other operating expenses
    
    
    155,396
    
    
    
    147,033
    
    
    
    121,325
    
    
    
    92,176
    
    
    
    70,003Total bakery-cafe expenses
    
    
    959,586
    
    
    
    922,582
    
    
    
    749,403
    
    
    
    542,583
    
    
    
    400,142Fresh dough cost of sales to franchisees
    
    
    100,229
    
    
    
    108,573
    
    
    
    92,852
    
    
    
    85,951
    
    
    
    74,654Depreciation and amortization
    
    
    67,162
    
    
    
    67,225
    
    
    
    57,903
    
    
    
    44,166
    
    
    
    33,011General and administrative expenses
    
    
    83,169
    
    
    
    84,393
    
    
    
    68,966
    
    
    
    59,306
    
    
    
    46,301Pre-opening expenses
    
    
    2,451
    
    
    
    3,374
    
    
    
    8,289
    
    
    
    6,173
    
    
    
    5,072Total costs and expenses
    
    
    1,212,597
    
    
    
    1,186,147
    
    
    
    977,413
    
    
    
    738,179
    
    
    
    559,180Operating profit
    
    
    140,897
    
    
    
    112,706
    
    
    
    89,278
    
    
    
    90,792
    
    
    
    81,095Interest expense
    
    
    700
    
    
    
    1,606
    
    
    
    483
    
    
    
    92
    
    
    
    50Other (income) expense, net
    
    
    273
    
    
    
    883
    
    
    
    333
    
    
    
    (1,976
    )
    
    
    (1,133
    )Income before income taxes
    
    
    139,924
    
    
    
    110,217
    
    
    
    88,462
    
    
    
    92,676
    
    
    
    82,178Income taxes
    
    
    53,073
    
    
    
    41,272
    
    
    
    31,434
    
    
    
    33,827
    
    
    
    29,995Net income
    
    
    86,851
    
    
    
    68,945
    
    
    
    57,028
    
    
    
    58,849
    
    
    
    52,183Less: income (loss) attributable to noncontrolling interest
    
    
    801
    
    
    
    1,509
    
    
    
    (428
    )
    
    
    
    
    
    
    Net income attributable to Panera Bread Company
    
    $
    86,050
    
    
    $
    67,436
    
    
    $
    57,456
    
    
    $
    58,849
    
    
    $
    52,183Earnings per common share attributable
to Panera Bread Company:Basic
    
    $
    2.81
    
    
    $
    2.24
    
    
    $
    1.81
    
    
    $
    1.88
    
    
    $
    1.69Diluted
    
    $
    2.78
    
    
    $
    2.22
    
    
    $
    1.79
    
    
    $
    1.84
    
    
    $
    1.65Weighted average shares of common and common
equivalent shares outstanding:Basic
    
    
    30,667
    
    
    
    30,059
    
    
    
    31,708
    
    
    
    31,313
    
    
    
    30,871Diluted
    
    
    30,979
    
    
    
    30,422
    
    
    
    32,178
    
    
    
    32,044
    
    
    
    31,651Consolidated balance sheet data:Cash and cash equivalents
    
    $
    246,400
    
    
    $
    74,710
    
    
    $
    68,242
    
    
    $
    52,097
    
    
    $
    24,451Short-term investments
    
    $
    
    
    
    $
    2,400
    
    
    $
    23,198
    
    
    $
    20,025
    
    
    $
    46,308Total assets
    
    $
    837,165
    
    
    $
    673,917
    
    
    $
    698,752
    
    
    $
    542,609
    
    
    $
    437,667Long-term liabilities
    
    $
    97,870
    
    
    $
    61,217
    
    
    $
    122,807
    
    
    $
    35,333
    
    
    $
    33,824Stockholders equity
    
    $
    597,036
    
    
    $
    495,162
    
    
    $
    446,164
    
    
    $
    397,666
    
    
    $
    316,978Franchisee revenues (2)
    
    $
    1,640,309
    
    
    $
    1,542,791
    
    
    $
    1,376,430
    
    
    $
    1,245,472
    
    
    $
    1,097,191Comparable bakery-cafe sales percentage for (2)(3):Company-owned bakery-cafes
    
    
    0.7
    %
    
    
    5.8
    %
    
    
    1.9
    %
    
    
    3.9
    %
    
    
    7.4
    %Franchise-operated bakery-cafes
    
    
    0.5
    %
    
    
    5.3
    %
    
    
    1.5
    %
    
    
    4.1
    %
    
    
    8.0
    %Bakery-cafe data:Company-owned bakery-cafes open
    
    
    585
    
    
    
    562
    
    
    
    532
    
    
    
    391
    
    
    
    311Franchise-operated bakery-cafes open
    
    
    795
    
    
    
    763
    
    
    
    698
    
    
    
    636
    
    
    
    566Total bakery-cafes open
    
    
    1,380
    
    
    
    1,325
    
    
    
    1,230
    
    
    
    1,027
    
    
    
    877
  21




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##### Table of Contents



(1)
    
    Fiscal 2008 was a 53 week year consisting of 371 days. All other fiscal years presented
contained 52 weeks consisting of 364 days, with the exception of fiscal 2005. In fiscal 2005,
we changed our fiscal week to end on Tuesday rather than Saturday. As a result, our 2005
fiscal year ended on December 27, 2005 instead of December 31, 2005 and, therefore, consisted
of 52 and a half weeks rather than the 53 week year that would have resulted without the
calendar change.(2)
    
    Comparable bakery-cafe sales percentages are non-GAAP financial measures, which should not be
considered in isolation or as a substitute for other measures of performance prepared in
accordance with generally accepted accounting principles in the U.S., or GAAP, and may not be
equivalent to comparable bakery-cafe sales as defined or used by other companies. We do not
record franchise-operated bakery-cafe sales as revenues. However, royalty revenues are
calculated based on a percentage of franchise-operated bakery-cafe sales, as reported by
franchisees. We use franchise-operated and system-wide sales information internally in
connection with store development decisions, planning, and budgeting analyses. We believe
franchise-operated and system-wide sales information is useful in assessing consumer
acceptance of our brand, facilitates an understanding of financial performance and the overall
direction and trends of sales and operating income, helps us appreciate the effectiveness of
our advertising and marketing initiatives to which our franchisees also contribute based on a
percentage of their sales, and provides information that is relevant for comparison within the
industry.(3)
    
    Comparable bakery-cafe sales for fiscal 2009 and fiscal 2007 contained 52 weeks of sales
while fiscal 2008 contained 53 weeks of sales, with an impact of approximately $14.4 million
and $21.4 million of sales in the additional week for Company-owned and franchise-operated
bakery-cafes, respectively. Adjusted to reflect a comparative 52 week period in fiscal 2008
(the first 52 weeks in fiscal 2008), Company-owned and franchise-operated comparable
bakery-cafe sales for fiscal 2009 would have been
approximately 2.3 percent and 2.2 percent, respectively. Adjusted to reflect a comparative 53
week period in fiscal 2007 (52 weeks in fiscal 2007 plus week one of fiscal 2008), Company-owned
and franchise-operated comparable bakery-cafe sales for fiscal 2008 would have been
approximately 3.6 percent and 3.4 percent, respectively. Adjusted on a calendar basis to match
the specific weeks in fiscal 2009 to the same specific weeks in fiscal 2008, Company-owned and
franchise-operated comparable bakery-cafe sales for fiscal 2009 would have been 2.6 percent and
2.3 percent, respectively. For further information regarding comparable bakery-cafe sales, see
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   Use of Non-GAAP Measurements
    22




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##### Table of Contents



Executive Summary of Results
   ®
  23




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##### Table of Contents



Consolidated Statements of Operations Margin Analysis
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Revenues:Bakery-cafe sales
    
    
    85.2
    %
    
    
    85.2
    %
    
    
    83.9
    %Franchise royalties and fees
    
    
    5.8
    
    
    
    5.8
    
    
    
    6.3Fresh dough sales to franchisees
    
    
    9.0
    
    
    
    9.1
    
    
    
    9.8Total revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs and expenses:Bakery-cafe expenses (1):Cost of food and paper products
    
    
    29.3
    %
    
    
    30.1
    %
    
    
    30.3
    %Labor
    
    
    32.1
    
    
    
    31.9
    
    
    
    32.0Occupancy
    
    
    8.3
    
    
    
    8.2
    
    
    
    7.9Other operating expenses
    
    
    13.5
    
    
    
    13.3
    
    
    
    13.6Total bakery-cafe expenses
    
    
    83.2
    
    
    
    83.4
    
    
    
    83.7Fresh dough cost of sales to franchisees (2)
    
    
    82.2
    
    
    
    92.2
    
    
    
    88.8Depreciation and amortization
    
    
    5.0
    
    
    
    5.2
    
    
    
    5.4General and administrative expenses
    
    
    6.1
    
    
    
    6.5
    
    
    
    6.5Pre-opening expenses
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.8Total costs and expenses
    
    
    89.6
    
    
    
    91.3
    
    
    
    91.6Operating profit
    
    
    10.4
    
    
    
    8.7
    
    
    
    8.4Interest expense
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Other (income) expense, net
    
    
    
    
    
    
    0.1
    
    
    
    Income before income taxes
    
    
    10.3
    
    
    
    8.5
    
    
    
    8.3Income taxes
    
    
    3.9
    
    
    
    3.2
    
    
    
    2.9Net income
    
    
    6.4
    
    
    
    5.3
    
    
    
    5.4Less: net income attributable to noncontrolling interest
    
    
    0.1
    
    
    
    0.1
    
    
    
    Net income attributable to Panera Bread Company
    
    
    6.4
    %
    
    
    5.2
    %
    
    
    5.4
    %
 (1)
    
    As a percentage of bakery-cafe sales.(2)
    
    As a percentage of fresh dough facility sales to franchisees.  24




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##### Table of Contents



Bakery-cafe Composition
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Number of bakery-cafes:Company-owned:Beginning of period
    
    
    562
    
    
    
    532
    
    
    
    391Bakery-cafes opened
    
    
    30
    
    
    
    35
    
    
    
    89Bakery-cafes closed
    
    
    (7
    )
    
    
    (5
    )
    
    
    (5
    )Bakery-cafes acquired from franchisees (1)
    
    
    
    
    
    
    
    
    
    
    36Bakery-cafes acquired (2)
    
    
    
    
    
    
    
    
    
    
    22Bakery-cafe sold to a franchisee (3)
    
    
    
    
    
    
    
    
    
    
    (1
    )End of period
    
    
    585
    
    
    
    562
    
    
    
    532Franchise-operated:Beginning of period
    
    
    763
    
    
    
    698
    
    
    
    636Bakery-cafes opened
    
    
    39
    
    
    
    67
    
    
    
    80Bakery-cafes closed
    
    
    (7
    )
    
    
    (2
    )
    
    
    (5
    )Bakery-cafes sold to Company (1)
    
    
    
    
    
    
    
    
    
    
    (36
    )Bakery-cafes acquired (2)
    
    
    
    
    
    
    
    
    
    
    22Bakery-cafe purchased from Company (3)
    
    
    
    
    
    
    
    
    
    
    1End of period
    
    
    795
    
    
    
    763
    
    
    
    698System-wide:Beginning of period
    
    
    1,325
    
    
    
    1,230
    
    
    
    1,027Bakery-cafes opened
    
    
    69
    
    
    
    102
    
    
    
    169Bakery-cafes closed
    
    
    (14
    )
    
    
    (7
    )
    
    
    (10
    )Bakery-cafes acquired (2)
    
    
    
    
    
    
    
    
    
    
    44End of period
    
    
    1,380
    
    
    
    1,325
    
    
    
    1,230
 (1)
    
    In June 2007, we acquired 32 bakery-cafes and the area development rights from franchisees
in certain markets in Illinois and Minnesota. In February 2007, we acquired four
bakery-cafes, as well as two bakery-cafes still under construction, and the area development
rights from a franchisee in certain markets in California.(2)
    
    In February 2007, we acquired 51 percent of the outstanding capital stock of Paradise Bakery
& Café, Inc., which then owned and operated 22 bakery-cafes and franchised 22 bakery-cafes,
principally in certain markets in Arizona and Colorado.(3)
    
    In June 2007, we sold one bakery-cafe and the area development rights for certain markets in
Southern California to a new area developer. Comparable Bakery-Cafe Sales
  Calendar Basis
   25




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##### Table of Contents



Adjusted Fiscal Basis
  Fiscal Basis
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007(52 weeks)
    
    
    (53 weeks)
    
    
    (52 weeks)Company-owned
    
    
    0.7
    %
    
    
    5.8
    %
    
    
    1.9
    %Franchise-operated
    
    
    0.5
    %
    
    
    5.3
    %
    
    
    1.5
    %System-wide
    
    
    0.5
    %
    
    
    5.5
    %
    
    
    1.6
    %
  Results of Operations
 Fiscal 2009 Compared to Fiscal 2008
 Revenues
   For the fiscal year ended
    
    
    PercentageDecember 29, 2009
    
    
    December 30, 2008
    
    
    ChangeSystem-wide average weekly sales
    
    $
    39,926
    
    
    $
    39,239
    
    
    
    1.8
    %
   26




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##### Table of Contents



For the fiscal year ended
    
    
    PercentageDecember 29, 2009
    
    
    December 30, 2008
    
    
    ChangeCompany-owned average weekly sales
    
    $
    39,050
    
    
    $
    38,066
    
    
    
    2.6
    %Company-owned number of operating weeks
    
    
    29,533
    
    
    
    29,062
    
    
    
    1.6
    %
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008Franchise royalties
    
    $
    77,119
    
    
    $
    72,565Franchise fees
    
    
    1,248
    
    
    
    2,235Total
    
    $
    78,367
    
    
    $
    74,800
  For the fiscal year ended
    
    
    PercentageDecember 29, 2009
    
    
    December 30, 2008
    
    
    ChangeFranchise average weekly sales
    
    $
    40,566
    
    
    $
    40,126
    
    
    
    1.1
    %Franchise number of operating weeks
    
    
    40,436
    
    
    
    38,449
    
    
    
    5.2
    %
   Costs and Expenses
    27




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##### Table of Contents



Interest Expense
  Other Income and Expense
  Income Taxes
   28




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##### Table of Contents



Fiscal 2008 Compared to Fiscal 2007
 Revenues
   For the fiscal year ended
    
    
    PercentageDecember 30, 2008
    
    
    December 25, 2007
    
    
    ChangeSystem-wide average weekly sales
    
    $
    39,239
    
    
    $
    38,668
    
    
    
    1.5
    %
  For the fiscal year ended
    
    
    PercentageDecember 30, 2008
    
    
    December 25, 2007
    
    
    ChangeCompany-owned average weekly sales
    
    $
    38,066
    
    
    $
    37,548
    
    
    
    1.4
    %Company-owned number of operating weeks
    
    
    29,062
    
    
    
    23,834
    
    
    
    21.9
    %
  For the fiscal year endedDecember 30, 2008
    
    
    December 25, 2007Franchise royalties
    
    $
    72,565
    
    
    $
    64,581Franchise fees
    
    
    2,235
    
    
    
    2,607Total
    
    $
    74,800
    
    
    $
    67,188
  29




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##### Table of Contents



For the fiscal year ended
    
    
    PercentageDecember 30, 2008
    
    
    December 25, 2007
    
    
    ChangeFranchise average weekly sales
    
    $
    40,126
    
    
    $
    39,433
    
    
    
    1.8
    %Franchise number of operating weeks
    
    
    38,449
    
    
    
    34,905
    
    
    
    10.2
    %
   Costs and Expenses
   ®
  30




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##### Table of Contents



Other Income and Expense
  Income Taxes
  Liquidity and Capital Resources
   31




---



##### Table of Contents



For the fiscal year endedCash provided by (used in):
    
    December 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Operating activities
    
    $
    214,904
    
    
    $
    157,324
    
    
    $
    154,245Investing activities
    
    $
    (49,219
    )
    
    $
    (48,705
    )
    
    $
    (197,493
    )Financing activities
    
    $
    6,005
    
    
    $
    (102,151
    )
    
    $
    59,393Net increase in cash and cash equivalents
    
    $
    171,690
    
    
    $
    6,468
    
    
    $
    16,145
 Operating Activities
  Investing Activities
 Capital Expenditures
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007New bakery-cafe and fresh dough facilities
    
    $
    28,036
    
    
    $
    39,122
    
    
    $
    92,864Bakery-cafe and fresh dough facility improvements
    
    
    21,695
    
    
    
    20,665
    
    
    
    27,617Other capital needs
    
    
    4,953
    
    
    
    3,376
    
    
    
    3,652Total
    
    $
    54,684
    
    
    $
    63,163
    
    
    $
    124,133
   32




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Business Combinations
  Investments
    Financing Activities
   33




---



##### Table of Contents



Purchase of Noncontrolling Interest
  Share Repurchases
    Credit Facility
   34




---



##### Table of Contents



Critical Accounting Policies & Estimates
   Revenue Recognition
  Valuation of Goodwill
   35




---



##### Table of Contents



Self-Insurance
  Income Taxes
      36




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##### Table of Contents



Lease Obligations
     Stock-Based Compensation
   
    
    Expected term The expected term of the option awards represents the period of time
between the grant date of the option awards and the date the option awards are either
exercised or canceled, including an estimate for those option awards still outstanding, and is
derived from historical terms and other factors.
 
    
    Expected volatility The expected volatility is based on an average of the historical
volatility of our stock price, for a period approximating the expected term, and the implied
volatility of externally traded options of our stock that were entered into during the period.
 
    
    Risk-free interest rate The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant and with a maturity that approximates the option awards
expected term.
 
    
    Dividend yield The dividend yield is based on our anticipated dividend payout over the
expected term of the option awards.
  37




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##### Table of Contents



Contractual Obligations and Other Commitments
   Total
    
    
    In 2010
    
    
    2011-2012
    
    
    2013-2014
    
    
    After 2014Operating Leases (1)
    
    $
    888,821
    
    
    $
    82,017
    
    
    $
    164,163
    
    
    $
    160,832
    
    
    $
    481,809Purchase Obligations (2)
    
    $
    52,940
    
    
    
    43,350
    
    
    
    8,590
    
    
    
    1,000
    
    
    
    Uncertain Tax Positions (3)
    
    $
    4,355
    
    
    
    2,947
    
    
    
    1,065
    
    
    
    343
    
    
    
    Total
    
    $
    946,116
    
    
    $
    128,314
    
    
    $
    173,818
    
    
    $
    162,175
    
    
    $
    481,809
 (1)
    
    See Note 13 to the consolidated financial statements for further information with respect
to our operating leases.(2)
    
    Relates to certain commodity and service agreements where we are committed as of December 29,
2009 to purchase a fixed quantity over a contracted time period.(3)
    
    See Note 14 to the consolidated financial statements for further information with respect to
our uncertain tax positions. Off-Balance Sheet Arrangements
  Total
    
    
    In 2010
    
    
    2011-2012
    
    
    2013-2014
    
    
    After 2014Subleases and Lease Guarantees (1)
    
    $
    30,040
    
    
    $
    3,975
    
    
    $
    6,246
    
    
    $
    5,910
    
    
    $
    13,909
 (1)
    
    Represents aggregate minimum requirement  see Note 13 to the consolidated financial
statements for further information with respect to our operating leases.  38




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##### Table of Contents



Employee Commitments
  Related Party Credit Agreement
   Impact of Inflation
    39




---



##### Table of Contents



Accounting Standards Issued Not Yet Adopted
   
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Risk
  Interest Rate Sensitivity
  Foreign Currency Exchange Risk
   40




---



##### 



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   
 Report of Independent Registered Public Accounting Firm

42Consolidated Balance Sheets

43Consolidated Statements of Operations

44Consolidated Statements of Cash Flows

45Consolidated Statements of Stockholders Equity

46Notes to the Consolidated Financial Statements

47Schedule II  Valuation and Qualifying Accounts  is included in Item 15(a)(2). All other
schedules are omitted because they are not applicable or the required information is shown in the
financial statements or notes thereto.
   41




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
     /s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLPSt. Louis, MOFebruary 26, 2010
  42




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##### Table of Contents



PANERA BREAD COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share information)
 December 29, 2009
    
    
    December 30, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    246,400
    
    
    $
    74,710Short-term investments
    
    
    
    
    
    
    2,400Trade accounts receivable, net
    
    
    17,317
    
    
    
    15,198Other accounts receivable
    
    
    11,176
    
    
    
    9,944Inventories
    
    
    12,295
    
    
    
    11,959Prepaid expenses
    
    
    16,211
    
    
    
    14,265Deferred income taxes
    
    
    18,685
    
    
    
    9,937Total current assets
    
    
    322,084
    
    
    
    138,413Property and equipment, net
    
    
    403,784
    
    
    
    417,006Other assets:Goodwill
    
    
    87,481
    
    
    
    87,334Other intangible assets, net
    
    
    19,195
    
    
    
    20,475Long-term investments
    
    
    
    
    
    
    1,726Deposits and other
    
    
    4,621
    
    
    
    8,963Total other assets
    
    
    111,297
    
    
    
    118,498Total assets
    
    $
    837,165
    
    
    $
    673,917LIABILITIESCurrent liabilities:Accounts payable
    
    $
    6,417
    
    
    $
    4,036Accrued expenses
    
    
    135,842
    
    
    
    109,978Total current liabilities
    
    
    142,259
    
    
    
    114,014Deferred rent
    
    
    43,371
    
    
    
    39,780Deferred income taxes
    
    
    28,813
    
    
    
    Other long-term liabilities
    
    
    25,686
    
    
    
    21,437Total liabilities
    
    
    240,129
    
    
    
    175,231Commitments and contingencies (Note 13)EQUITYPanera Bread Company stockholders equity:Common stock, $.0001 par value:Class A, 75,000,000 shares authorized; 30,364,915 issued and 30,196,808
outstanding in 2009 and 29,557,849 issued and 29,421,877 outstanding in 2008
    
    
    3
    
    
    
    3Class B, 10,000,000 shares authorized; 1,392,107 issued and outstanding in 2009 and
1,398,242 in 2008
    
    
    
    
    
    
    Treasury stock, carried at cost; 168,107 shares in 2009 and 135,972 shares in 2008
    
    
    (3,928
    )
    
    
    (2,204
    )Additional paid-in capital
    
    
    168,288
    
    
    
    151,358Accumulated other comprehensive income (loss)
    
    
    224
    
    
    
    (394
    )Retained earnings
    
    
    432,449
    
    
    
    346,399Total Panera Bread Company stockholders equity
    
    
    597,036
    
    
    
    495,162Noncontrolling interest
    
    
    
    
    
    
    3,524Total Equity
    
    $
    597,036
    
    
    $
    498,686Total Equity and Liabilities
    
    $
    837,165
    
    
    $
    673,917
   43




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##### Table of Contents



PANERA BREAD COMPANY



CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
 For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Revenues:Bakery-cafe sales
    
    $
    1,153,255
    
    
    $
    1,106,295
    
    
    $
    894,902Franchise royalties and fees
    
    
    78,367
    
    
    
    74,800
    
    
    
    67,188Fresh dough sales to franchisees
    
    
    121,872
    
    
    
    117,758
    
    
    
    104,601Total revenue
    
    
    1,353,494
    
    
    
    1,298,853
    
    
    
    1,066,691Costs and expenses:Bakery-cafe expenses:Cost of food and paper products
    
    $
    337,599
    
    
    $
    332,697
    
    
    $
    271,442Labor
    
    
    370,595
    
    
    
    352,462
    
    
    
    286,238Occupancy
    
    
    95,996
    
    
    
    90,390
    
    
    
    70,398Other operating expenses
    
    
    155,396
    
    
    
    147,033
    
    
    
    121,325Total bakery-cafe expenses
    
    
    959,586
    
    
    
    922,582
    
    
    
    749,403Fresh dough cost of sales to franchisees
    
    
    100,229
    
    
    
    108,573
    
    
    
    92,852Depreciation and amortization
    
    
    67,162
    
    
    
    67,225
    
    
    
    57,903General and administrative expenses
    
    
    83,169
    
    
    
    84,393
    
    
    
    68,966Pre-opening expenses
    
    
    2,451
    
    
    
    3,374
    
    
    
    8,289Total costs and expenses
    
    
    1,212,597
    
    
    
    1,186,147
    
    
    
    977,413Operating profit
    
    
    140,897
    
    
    
    112,706
    
    
    
    89,278Interest expense
    
    
    700
    
    
    
    1,606
    
    
    
    483Other (income) expense, net
    
    
    273
    
    
    
    883
    
    
    
    333Income before income taxes
    
    
    139,924
    
    
    
    110,217
    
    
    
    88,462Income taxes
    
    
    53,073
    
    
    
    41,272
    
    
    
    31,434Net income
    
    
    86,851
    
    
    
    68,945
    
    
    
    57,028Less: net income (loss) attributable to noncontrolling interest
    
    
    801
    
    
    
    1,509
    
    
    
    (428
    )Net income attributable to Panera Bread Company
    
    $
    86,050
    
    
    $
    67,436
    
    
    $
    57,456Earnings per common share attributable to Panera Bread
Company:Basic
    
    $
    2.81
    
    
    $
    2.24
    
    
    $
    1.81Diluted
    
    $
    2.78
    
    
    $
    2.22
    
    
    $
    1.79Weighted average shares of common and common equivalent shares
outstanding:Basic
    
    
    30,667
    
    
    
    30,059
    
    
    
    31,708Diluted
    
    
    30,979
    
    
    
    30,422
    
    
    
    32,178
   44




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##### Table of Contents



PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Cash flows from operations:Net income
    
    $
    86,851
    
    
    $
    68,945
    
    
    $
    57,028Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    67,162
    
    
    
    67,225
    
    
    
    57,903(Gain) Loss from short-term investments
    
    
    (1,339
    )
    
    
    1,910
    
    
    
    967Stock-based compensation expense
    
    
    8,661
    
    
    
    7,954
    
    
    
    7,255Tax benefit from exercise of stock options
    
    
    (5,095
    )
    
    
    (3,376
    )
    
    
    (3,731
    )Deferred income taxes
    
    
    22,950
    
    
    
    (4,107
    )
    
    
    (7,276
    )Other
    
    
    2,799
    
    
    
    228
    
    
    
    725Changes in operating assets and liabilities, excluding
the effect of acquisitions:Trade and other accounts receivable
    
    
    (3,554
    )
    
    
    11,650
    
    
    
    (5,549
    )Inventories
    
    
    (336
    )
    
    
    (565
    )
    
    
    (1,798
    )Prepaid expenses
    
    
    (2,224
    )
    
    
    (8,966
    )
    
    
    6,884Deposits and other
    
    
    100
    
    
    
    1,042
    
    
    
    231Accounts payable
    
    
    2,381
    
    
    
    (2,290
    )
    
    
    (815
    )Accrued expenses
    
    
    28,901
    
    
    
    5,450
    
    
    
    32,398Deferred rent
    
    
    3,591
    
    
    
    6,211
    
    
    
    5,885Other long-term liabilities
    
    
    4,056
    
    
    
    6,013
    
    
    
    4,138Net cash provided by operating activities
    
    
    214,904
    
    
    
    157,324
    
    
    
    154,245Cash flows from investing activities:Additions to property and equipment
    
    
    (54,684
    )
    
    
    (63,163
    )
    
    
    (124,133
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    1,844Acquisitions, net of cash acquired
    
    
    
    
    
    
    (2,704
    )
    
    
    (71,039
    )Short-term investments transferred from cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (26,526
    )Investment maturities proceeds
    
    
    5,465
    
    
    
    17,162
    
    
    
    22,361Net cash used in investing activities
    
    
    (49,219
    )
    
    
    (48,705
    )
    
    
    (197,493
    )Cash flows from financing activities:Net (payments) borrowing under credit facility
    
    
    
    
    
    
    (75,000
    )
    
    
    75,000Repurchase of common stock
    
    
    (3,453
    )
    
    
    (48,893
    )
    
    
    (27,487
    )Exercise of employee stock options
    
    
    22,818
    
    
    
    17,621
    
    
    
    6,576Tax benefit from exercise of stock options
    
    
    5,095
    
    
    
    3,376
    
    
    
    3,731Proceeds from issuance of common stock
    
    
    1,626
    
    
    
    1,898
    
    
    
    1,782Purchase of noncontrolling interest
    
    
    (20,081
    )
    
    
    
    
    
    
    Capitalized debt issuance costs
    
    
    
    
    
    
    (1,153
    )
    
    
    (209
    )Net cash provided by (used in) financing activities
    
    
    6,005
    
    
    
    (102,151
    )
    
    
    59,393Net increase in cash and cash equivalents
    
    
    171,690
    
    
    
    6,468
    
    
    
    16,145Cash and cash equivalents at beginning of period
    
    
    74,710
    
    
    
    68,242
    
    
    
    52,097Cash and cash equivalents at end of period
    
    $
    246,400
    
    
    $
    74,710
    
    
    $
    68,242
   45




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##### Table of Contents



PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
  AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherComprehensive
    
    
    Class A
    
    
    Class B
    
    
    Treasury Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    NonControllnigTotal
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    InterestBalance, December 26, 2006
    
    $
    397,666
    
    
    
    
    
    
    
    30,344
    
    
    $
    3
    
    
    
    1,400
    
    
    $
    
    
    
    
    109
    
    
    $
    (900
    )
    
    $
    176,241
    
    
    $
    222,322
    
    
    $
    
    
    
    $
    Net income
    
    
    57,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,456
    
    
    
    
    
    
    
    (428
    )Acquisition of Paradise Bakery & Café (Note 3)
    
    
    2,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,443Issuance of common stock
    
    
    1,782
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,782
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock (net of forfeitures)
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    6,576
    
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,576
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    7,255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,255
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Class B to Class A
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (27,487
    )
    
    
    
    
    
    
    (760
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (288
    )
    
    
    (27,199
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit related to stock option plan
    
    
    3,731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,731
    
    
    
    
    
    
    
    
    
    
    
    Cumulative
effect of adopting the pronouncement related to uncertain tax
positions
    
    
    (815
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (815
    )
    
    
    
    
    
    
    Balance, December 25, 2007
    
    $
    448,179
    
    
    
    
    
    
    
    30,098
    
    
    $
    3
    
    
    
    1,398
    
    
    $
    
    
    
    
    116
    
    
    $
    (1,188
    )
    
    $
    168,386
    
    
    $
    278,963
    
    
    $
    
    
    
    $
    2,015Comprehensive income:Net income
    
    
    68,945
    
    
    $
    68,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,436
    
    
    
    
    
    
    
    1,509Other comprehensive income (loss):Foreign currency
translation
adjustment
    
    
    (394
    )
    
    
    (394
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (394
    )
    
    
    Total other comprehensive income
    
    
    (394
    )
    
    
    (394
    )Comprehensive income
    
    
    68,551
    
    
    $
    68,551Issuance of common stock
    
    
    1,898
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,898
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock (net of forfeitures)
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    17,621
    
    
    
    
    
    
    
    532
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,621
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    7,954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,954
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (48,893
    )
    
    
    
    
    
    
    (1,433
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    (1,016
    )
    
    
    (47,877
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit related to stock option plan
    
    
    3,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,376
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 30, 2008
    
    $
    498,686
    
    
    
    
    
    
    
    29,422
    
    
    $
    3
    
    
    
    1,398
    
    
    $
    
    
    
    
    136
    
    
    $
    (2,204
    )
    
    $
    151,358
    
    
    $
    346,399
    
    
    $
    (394
    )
    
    $
    3,524Comprehensive income:Net income
    
    
    86,851
    
    
    $
    86,851
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,050
    
    
    
    
    
    
    
    801Other comprehensive income (loss):Foreign currency
translation
adjustment
    
    
    618
    
    
    
    618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    618
    
    
    
    Total other comprehensive income
    
    
    618
    
    
    
    618Comprehensive income
    
    
    87,469
    
    
    $
    87,469Purchase of noncontrolling interest
    
    
    (23,124
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,799
    )
    
    
    
    
    
    
    
    
    
    
    (4,325
    )Adjustment to noncontrolling interest
    
    
    (742
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (742
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
    
    
    1,626
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,626
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock (net of forfeitures)
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of employee stock options
    
    
    22,818
    
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,818
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    8,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,661
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Class B to Class A
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (3,453
    )
    
    
    
    
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    (1,724
    )
    
    
    (1,729
    )
    
    
    
    
    
    
    
    
    
    
    Income tax benefit related to stock option plan
    
    
    5,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,095
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 29, 2009
    
    $
    597,036
    
    
    
    
    
    
    
    30,197
    
    
    $
    3
    
    
    
    1,392
    
    
    $
    
    
    
    
    168
    
    
    $
    (3,928
    )
    
    $
    168,288
    
    
    $
    432,449
    
    
    $
    224
    
    
    $
    
   46




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##### Table of Contents



PANERA BREAD COMPANY
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of Business
 ® ® ®
 2. Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
  Fiscal Year
  Adoption of the FASB Accounting Standards Codification
  Subsequent Events
  Use of Estimates
  Reclassifications
  Cash and Cash Equivalents
   47




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##### Table of Contents



Short-term Investments
  Trade and Other Accounts Receivable
   Inventories
  Property and Equipment
  Leasehold improvements
    
    15-20 yearsMachinery and equipment
    
    3-10 yearsFurniture and fixtures
    
    2-7 yearsExternal signage
    
    3-7 yearsCapitalized software
    
    3-5 years
   Goodwill
   48




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##### Table of Contents



Other Intangible Assets
   Impairment of Long-Lived Assets
   49




---



##### Table of Contents



Self-Insurance Reserves
  Income Taxes
   Capitalization of Certain Development Costs
   Deferred Financing Costs
   50




---



##### Table of Contents



Revenue Recognition
    Advertising Costs
  Pre-Opening Expenses
  Rent Expense
   Earnings Per Share Data
   51




---



##### Table of Contents



Foreign Currency Translation
  Fair Value of Financial Instruments
  Stock-Based Compensation
   Asset Retirement Obligations
  Variable Interest Entities
   52




---



##### Table of Contents



Accounting Standards Issued Not Yet Adopted
   3. Business Combinations
    53




---



##### Table of Contents



54




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##### Table of Contents



4. Noncontrolling Interest
   Purchase of Noncontrolling Interest
    For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008Net income attributable to the Company
    
    $
    86,050
    
    
    $
    67,436Decrease in equity for purchase of noncontrolling interest
    
    $
    (18,799
    )
    
    $
    Change from net income attributable to the Company and the purchase of
noncontrolling interest
    
    $
    67,251
    
    
    $
    67,436
  55




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##### Table of Contents



5. Fair Value Measurements
        For the Fiscal Year EndedDecember 29, 2009
    
    
    December 30, 2008Beginning balance
    
    $
    4,126
    
    
    $
    23,198Net realized and unrealized gains (losses) (1)
    
    
    1,339
    
    
    
    (1,910
    )Redemptions
    
    
    (5,465
    )
    
    
    (17,162
    )Ending balance
    
    $
    
    
    
    $
    4,126
 (1)
    
    Includes $2.0 million of losses attributable to the change in unrealized losses relating to
the units of the Columbia Portfolio still held as of December 30, 2008.  56




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##### Table of Contents



6. Inventories
  December 29, 2009
    
    
    December 30, 2008Food:Fresh dough facilities:Raw materials
    
    $
    2,573
    
    
    $
    3,040Finished goods
    
    
    275
    
    
    
    319Bakery-cafes:Raw materials
    
    
    7,304
    
    
    
    6,533Paper goods
    
    
    2,143
    
    
    
    2,021Retail merchandise
    
    
    
    
    
    
    46$
    12,295
    
    
    $
    11,959
 7. Property and Equipment
  December 29, 2009
    
    
    December 30, 2008Leasehold improvements
    
    $
    375,689
    
    
    $
    355,744Machinery and equipment
    
    
    236,196
    
    
    
    221,963Furniture and fixtures
    
    
    68,172
    
    
    
    62,057Signage
    
    
    17,848
    
    
    
    17,129Smallwares
    
    
    16,144
    
    
    
    14,557Construction in progress
    
    
    17,880
    
    
    
    12,452731,929
    
    
    
    683,902Less: accumulated depreciation
    
    
    (328,145
    )
    
    
    (266,896
    )Property and equipment, net
    
    $
    403,784
    
    
    $
    417,006
  8. Goodwill
  Company Bakery-
    
    
    Franchise
    
    
    Fresh DoughCafe Operations
    
    
    Operations
    
    
    Operations
    
    
    TotalBalance December 25, 2007
    
    
    83,463
    
    
    
    1,934
    
    
    
    1,695
    
    
    
    87,092Goodwill arising from acquisitions
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    242Balance December 30, 2008
    
    $
    83,705
    
    
    $
    1,934
    
    
    $
    1,695
    
    
    $
    87,334Goodwill arising from acquisitions
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    147Balance December 29, 2009
    
    $
    83,852
    
    
    $
    1,934
    
    
    $
    1,695
    
    
    $
    87,481
   57




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##### Table of Contents



9. Other Intangible Assets
  December 29, 2009
    
    
    December 30, 2008Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingValue
    
    
    Amortization
    
    
    Carrying Value
    
    
    Value
    
    
    Amortization
    
    
    ValueTrademark
    
    $
    5,610
    
    
    $
    (742
    )
    
    $
    4,868
    
    
    $
    5,610
    
    
    $
    (488
    )
    
    $
    5,122Re-acquired territory rights
    
    
    14,629
    
    
    
    (2,357
    )
    
    
    12,272
    
    
    
    14,629
    
    
    
    (1,571
    )
    
    
    13,058Favorable leases
    
    
    2,776
    
    
    
    (721
    )
    
    
    2,055
    
    
    
    2,776
    
    
    
    (481
    )
    
    
    2,295Total other intangible assets
    
    $
    23,015
    
    
    $
    (3,820
    )
    
    $
    19,195
    
    
    $
    23,015
    
    
    $
    (2,540
    )
    
    $
    20,475
  10. Accrued Expenses
  December 29, 2009
    
    
    December 30, 2008Unredeemed gift cards
    
    $
    37,454
    
    
    $
    33,042Compensation and related employment taxes
    
    
    33,416
    
    
    
    22,508Insurance
    
    
    16,265
    
    
    
    12,482Taxes, other than income tax
    
    
    11,072
    
    
    
    4,898Capital expenditures
    
    
    6,108
    
    
    
    6,448Fresh dough operations
    
    
    5,263
    
    
    
    5,191Rent
    
    
    5,019
    
    
    
    4,567Utilities
    
    
    3,163
    
    
    
    3,258Advertising
    
    
    2,465
    
    
    
    3,698Deferred purchase price of noncontrolling interest (Note 4)
    
    
    2,264
    
    
    
    Deferred revenue
    
    
    1,334
    
    
    
    2,024Income taxes payable
    
    
    
    
    
    
    1,259Other
    
    
    12,019
    
    
    
    10,603$
    135,842
    
    
    $
    109,978
 11. Credit Facility
   58




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12. Share Repurchase Program
     59




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##### Table of Contents



13. Commitments and Contingent Liabilities
 Operating Lease Commitments
   2010
    
    
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total$
    82,017
    
    
    
    
    
    82,418
    
    
    
    81,745
    
    
    
    81,577
    
    
    
    79,255
    
    
    
    481,809
    
    
    $
    888,821
    Lease Guarantees
  2010
    
    
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total$
    3,975
    
    
    
    
    
    3,226
    
    
    
    3,020
    
    
    
    3,013
    
    
    
    2,897
    
    
    
    13,909
    
    
    $
    30,040
 Employee Commitments
   60




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Related Party Credit Agreement
   Legal Proceedings
   61




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##### Table of Contents



Other
  14. Income Taxes
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007United States
    
    $
    139,005
    
    
    $
    110,220
    
    
    $
    88,399Canada
    
    
    919
    
    
    
    (3
    )
    
    
    63Income before income taxes
    
    $
    139,924
    
    
    $
    110,217
    
    
    $
    88,462
  62




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For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008 (1)
    
    
    December 25, 2007Current:Federal
    
    $
    24,428
    
    
    $
    37,188
    
    
    $
    30,438State
    
    
    5,390
    
    
    
    8,192
    
    
    
    6,453Foreign
    
    
    304
    
    
    
    
    
    
    
    30,122
    
    
    
    45,380
    
    
    
    36,891Deferred:Federal
    
    
    20,006
    
    
    
    (3,589
    )
    
    
    (4,624
    )State
    
    
    2,945
    
    
    
    (519
    )
    
    
    (833
    )Foreign
    
    
    
    
    
    
    
    
    
    
    22,951
    
    
    
    (4,108
    )
    
    
    (5,457
    )Tax Provision
    
    $
    53,073
    
    
    $
    41,272
    
    
    $
    31,434
 (1)
    
    The Company developed its first bakery-cafes in Canada in fiscal 2008. Fiscal 2008 current and
deferred income taxes consisted primarily of United States taxes. Canadian taxes were nominal, and
thus were not shown separately.  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Statutory rate provision
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes, net of federal tax benefit and other
    
    
    3.1
    
    
    
    3.0
    
    
    
    0.438.1
    %
    
    
    38.0
    %
    
    
    35.4
    %
  December 29, 2009
    
    
    December 30, 2008Deferred tax assets:Accrued expenses
    
    $
    42,029
    
    
    $
    28,794Stock-based compensation
    
    
    2,531
    
    
    
    3,875Other
    
    
    15
    
    
    
    1,463Total deferred tax assets
    
    $
    44,575
    
    
    $
    34,132Deferred tax liabilities:Property and equipment
    
    $
    (39,433
    )
    
    $
    (7,021
    )Goodwill and other intangibles
    
    
    (15,270
    )
    
    
    (13,825
    )Total deferred tax liabilities
    
    $
    (54,703
    )
    
    $
    (20,846
    )Net deferred tax asset (liability)
    
    $
    (10,128
    )
    
    $
    13,286Net current deferred tax asset
    
    $
    18,685
    
    
    $
    9,937Net non-current deferred tax asset (liability)
    
    $
    (28,813
    )
    
    $
    3,349
  63




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Balance at December 27, 2006
    
    $
    2,700Tax positions related to the current year:Additions
    
    
    579Tax positions related to prior years:Additions
    
    
    1122Expiration of statutes of limitations
    
    
    (1,720
    )Balance at December 25, 2007
    
    $
    2,681Tax positions related to the current year:Additions
    
    
    281Tax positions related to prior years:Additions
    
    
    5,919Reductions
    
    
    (3,992
    )Settlements
    
    
    (486
    )Expiration of statutes of limitations
    
    
    (80
    )Balance at December 30, 2008
    
    $
    4,323Tax positions related to the current year:Additions
    
    
    617Tax positions related to prior years:Additions
    
    
    381Settlements
    
    
    (836
    )Expiration of statutes of limitations
    
    
    (130
    )Balance at December 29, 2009
    
    $
    4,355
  15. Deposits and Other
  December 29, 2009
    
    
    December 30, 2008Deposits
    
    $
    3,800
    
    
    $
    2,869Deferred financing costs
    
    
    821
    
    
    
    1,125Deferred income taxes
    
    
    
    
    
    
    3,349Company-owned life insurance program
    
    
    
    
    
    
    1,031Note receivable
    
    
    
    
    
    
    589Total deposits and other
    
    $
    4,621
    
    
    $
    8,963
   64




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December 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Cash value loss
    
    $
    1,018
    
    
    $
    639
    
    
    $
    1,485Mortlity income
    
    
    (1,894
    )
    
    
    (644
    )
    
    
    (1,283
    )Interest (income) expense
    
    
    (111
    )
    
    
    71
    
    
    
    292Total (income) expense, net
    
    $
    (987
    )
    
    $
    66
    
    
    $
    494
  16. Stockholders Equity
 Common Stock
  Registration Rights
  Preferred Stock
  Treasury Stock
  Share Repurchase Program
   65




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17. Stock-Based Compensation
   2006 Stock Incentive Plan
  Long-Term Incentive Program
     66




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##### Table of Contents



WeightedRestricted
    
    
    AverageStock
    
    
    Grant-Date(in thousands)
    
    
    Fair ValueNon-vested at December 25, 2007
    
    
    387
    
    
    $
    48.04Granted
    
    
    228
    
    
    
    48.76Vested
    
    
    (55
    )
    
    
    51.36Forfeited
    
    
    (55
    )
    
    
    47.52Non-vested at December 30, 2008
    
    
    505
    
    
    $
    48.06Granted
    
    
    202
    
    
    
    55.09Vested
    
    
    (102
    )
    
    
    47.92Forfeited
    
    
    (36
    )
    
    
    48.96Non-vested at December 29, 2009
    
    
    569
    
    
    $
    50.52
   For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Charged to general and administrative expenses (1)
    
    $
    2,154
    
    
    $
    3,212
    
    
    $
    3,874Income tax benefit
    
    
    (821
    )
    
    
    (1,205
    )
    
    
    (1,426
    )Total stock-based compensation expense, net of tax
    
    $
    1,333
    
    
    $
    2,007
    
    
    $
    2,448Effect on basic earnings per share
    
    
    0.04
    
    
    
    0.07
    
    
    
    0.08Effect on diluted earnings per share
    
    
    0.04
    
    
    
    0.07
    
    
    
    0.08
 (1)
    
    Net of $0.1 million, $0.2 million, and $0.6 million of capitalized compensation cost
related to the acquisition, development, design, and construction of new bakery-cafe locations
and fresh dough facilities for fiscal 2009, fiscal 2008 and fiscal 2007, respectively.  67




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Weighted Average
    
    
    AggregateWeighted
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Average
    
    
    Remaining
    
    
    Value (1)(in thousands)
    
    
    Exercise Price
    
    
    (Years)
    
    
    (in thousands)Outstanding at December 26, 2006
    
    
    2,311
    
    
    $
    36.36Granted
    
    
    140
    
    
    
    44.58Exercised
    
    
    (310
    )
    
    
    21.40
    
    
    
    
    
    
    $
    10,101Cancelled
    
    
    (55
    )
    
    
    40.88Outstanding at December 25, 2007
    
    
    2,086
    
    
    $
    39.05Granted
    
    
    127
    
    
    
    45.06Exercised
    
    
    (532
    )
    
    
    33.03
    
    
    
    
    
    
    $
    8,293Cancelled
    
    
    (229
    )
    
    
    45.68Outstanding at December 30, 2008
    
    
    1,452
    
    
    $
    40.73Granted
    
    
    7
    
    
    
    52.23Exercised
    
    
    (627
    )
    
    
    36.39
    
    
    
    
    
    
    $
    13,115Cancelled
    
    
    (18
    )
    
    
    46.91Outstanding at December 29, 2009
    
    
    814
    
    
    $
    44.04
    
    
    
    1.8
    
    
    $
    20,114Exercisable at December 29, 2009
    
    
    575
    
    
    $
    42.66
    
    
    
    1.1
    
    
    $
    14,998
 (1)
    
    Intrinsic value for activities other than exercises is defined as the difference between
the grant price and the market value on the last day of fiscal 2009 (or $68.63) for those
stock options where the market value is greater than the exercise price. For exercises,
intrinsic value is defined as the difference between the grant price and the market value on
the date of exercise.   Stock Options Outstanding
    
    
   Stock Options ExercisableWeighted AverageNumber
    
    
    Contractual Term
    
    
    Weighted
    
    
    Number
    
    
    WeightedOutstanding
    
    
    Remaining
    
    
    Average
    
    
    Exercisable
    
    
    AverageRange of Exercise Price
    
    (in thousands)
    
    
    (Years)
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Exercise Price$27.51  $35.29
    
    
    162
    
    
    
    0.3
    
    
    
    29.73
    
    
    
    162
    
    
    
    29.73$35.30  $40.35
    
    
    162
    
    
    
    0.8
    
    
    
    37.07
    
    
    
    157
    
    
    
    36.96$40.36  $44.41
    
    
    143
    
    
    
    3.8
    
    
    
    43.08
    
    
    
    25
    
    
    
    43.09$44.42  $54.30
    
    
    144
    
    
    
    3.2
    
    
    
    49.41
    
    
    
    52
    
    
    
    49.17$54.31  $62.47
    
    
    154
    
    
    
    1.3
    
    
    
    54.61
    
    
    
    141
    
    
    
    54.53$62.48  $72.58
    
    
    49
    
    
    
    1.8
    
    
    
    68.46
    
    
    
    38
    
    
    
    68.50814
    
    
    
    1.8
    
    
    $
    44.04
    
    
    
    575
    
    
    $
    42.66
   68




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##### Table of Contents



Weighted Average
    
    
    AggregateWeighted
    
    
    Contractual Term
    
    
    IntrinsicShares
    
    
    Average
    
    
    Remaining
    
    
    Value (2)(in thousands)
    
    
    Conversion Price (1)
    
    
    (Years)
    
    
    (in thousands)Outstanding at December 30, 2008
    
    
    
    
    
    $
    Granted
    
    
    23
    
    
    
    55.20Converted
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Cancelled
    
    
    (1
    )
    
    
    55.20Outstanding at December 29, 2009
    
    
    22
    
    
    $
    55.20
    
    
    
    5.6
    
    
    $
    293Convertible at December 29, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
 (1)
    
    Conversion price is defined as the price from which SSARs are measured and is equal to the
market value on the date of issuance.(2)
    
    Intrinsic value for activities other than conversions is defined as the difference between
the grant price and the market value on the last day of fiscal 2009 (or $68.63) for those
SSARs where the market value is greater than the conversion price. For conversions, intrinsic
value is defined as the difference between the grant price and the market value on the date of
conversion.   
    
    Expected term- The expected term of the option awards represents the period of time
between the grant date of the option awards and the date the option awards are either
exercised or canceled, including an estimate for those option awards still outstanding, and is
derived from historical terms and other factors.
 
    
    Expected volatility- The expected volatility is based on an average of the historical
volatility of the Companys stock price, for a period approximating the expected term, and the
implied volatility of externally traded options of the Companys stock that were entered into
during the period.
 
    
    Risk-free interest rate- The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant and with a maturity that approximates the option awards
expected term.
 
    
    Dividend yield- The dividend yield is based on the Companys anticipated dividend payout
over the expected term of the option awards.
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Fair value per option awards
    
    $
    21.70
    
    
    $
    15.54
    
    
    $
    15.69Assumptions:Expected term (years)
    
    
    5.0
    
    
    
    4.5
    
    
    
    5.0Expected volatility
    
    
    41.8
    %
    
    
    36.5
    %
    
    
    30.0
    %Risk-free interest rate
    
    
    2.4
    %
    
    
    2.5
    %
    
    
    4.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 1992 Equity Incentive Plan
   69




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##### Table of Contents



2001 Employee, Director, and Consultant Stock Option Plan
  Employee Stock Purchase Plan
  18. Defined Contribution Benefit Plan
  19. Business Segment Information
 ® ® ®
 ® ® ® ®
   70




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##### Table of Contents



For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Revenues:Company bakery-cafe operations
    
    $
    1,153,255
    
    
    $
    1,106,295
    
    
    $
    894,902Franchise operations
    
    
    78,367
    
    
    
    74,800
    
    
    
    67,188Fresh dough operations
    
    
    216,116
    
    
    
    213,620
    
    
    
    176,710Intercompany sales eliminations
    
    
    (94,244
    )
    
    
    (95,862
    )
    
    
    (72,109
    )Total Revenues
    
    $
    1,353,494
    
    
    $
    1,298,853
    
    
    $
    1,066,691Segment profit:Company bakery-cafe operations
    
    $
    193,669
    
    
    $
    183,713
    
    
    $
    145,499Franchise operations
    
    
    72,381
    
    
    
    65,005
    
    
    
    59,011Fresh dough operations
    
    
    21,643
    
    
    
    9,185
    
    
    
    11,749Total segment profit
    
    $
    287,693
    
    
    $
    257,903
    
    
    $
    216,259Depreciation and amortization
    
    
    67,162
    
    
    
    67,225
    
    
    
    57,903Unallocated general and administrative expenses
    
    
    77,183
    
    
    
    74,598
    
    
    
    60,789Pre-opening expenses
    
    
    2,451
    
    
    
    3,374
    
    
    
    8,289Interest expense
    
    
    700
    
    
    
    1,606
    
    
    
    483Other (income) expense, net
    
    
    273
    
    
    
    883
    
    
    
    333Income before income taxes
    
    $
    139,924
    
    
    $
    110,217
    
    
    $
    88,462Depreciation and amortization:Company bakery-cafe operations
    
    $
    55,726
    
    
    $
    54,814
    
    
    $
    45,021Fresh dough operations
    
    
    7,620
    
    
    
    8,072
    
    
    
    8,367Corporate administration
    
    
    3,816
    
    
    
    4,339
    
    
    
    4,515Total depreciation and amortization
    
    $
    67,162
    
    
    $
    67,225
    
    
    $
    57,903Capital expenditures:Company bakery-cafe operations
    
    $
    46,408
    
    
    $
    56,477
    
    
    $
    111,500Fresh dough operations
    
    
    3,681
    
    
    
    3,872
    
    
    
    9,556Corporate administration
    
    
    4,595
    
    
    
    2,814
    
    
    
    3,077Total capital expenditures
    
    $
    54,684
    
    
    $
    63,163
    
    
    $
    124,133
 December 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Segment assets:Company bakery-cafe operations
    
    $
    498,806
    
    
    $
    503,928
    
    
    $
    514,528Franchise operations
    
    
    3,850
    
    
    
    5,951
    
    
    
    6,179Fresh dough operations
    
    
    48,616
    
    
    
    50,699
    
    
    
    55,350Total segment assets
    
    $
    551,272
    
    
    $
    560,578
    
    
    $
    576,057Unallocated trade and other accounts receivable
    
    
    2,267
    
    
    
    2,435
    
    
    
    2,468Unallocated property and equipment
    
    
    14,437
    
    
    
    13,673
    
    
    
    15,016Unallocated deposits and other
    
    
    4,104
    
    
    
    5,109
    
    
    
    4,592Other unallocated assets
    
    
    265,085
    
    
    
    92,122
    
    
    
    100,619Total assets
    
    $
    837,165
    
    
    $
    673,917
    
    
    $
    698,752
   71




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##### Table of Contents



20. Earnings Per Share
  For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Amounts used for basic and diluted per share calculations:Net income attributable to Panera Bread Company
    
    $
    86,050
    
    
    $
    67,436
    
    
    $
    57,456Weighted average number of shares outstanding  basic
    
    
    30,667
    
    
    
    30,059
    
    
    
    31,708Effect of dilutive stock-based employee compensation awards
    
    
    312
    
    
    
    363
    
    
    
    470Weighted average number of shares outstanding  diluted
    
    
    30,979
    
    
    
    30,422
    
    
    
    32,178Earnings per common share attributable to Panera Bread Company:Basic
    
    $
    2.81
    
    
    $
    2.24
    
    
    $
    1.81Diluted
    
    $
    2.78
    
    
    $
    2.22
    
    
    $
    1.79
  21. Supplemental Cash Flow Information
 For the fiscal year endedDecember 29, 2009
    
    
    December 30, 2008
    
    
    December 25, 2007Cash paid during the year for (in thousands):Interest
    
    $
    380
    
    
    $
    1,748
    
    
    $
    165Income taxes
    
    $
    26,947
    
    
    $
    37,328
    
    
    $
    28,493Non-cash investing and financing activities (in thousands):Accrued property and equipment purchases
    
    $
    6,108
    
    
    $
    6,448
    
    
    $
    17,473Accrued acquisition purchase price
    
    $
    
    
    
    $
    
    
    
    $
    2,501Accrued purchase price of noncontrolling interest
    
    $
    2,264
    
    
    $
    
    
    
    $
    
  72




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##### Table of Contents



22. Selected Quarterly Financial Data (unaudited)
  Fiscal 2009 - quarters ended (1)March 31
    
    
    June 30
    
    
    September 29
    
    
    December 29Revenues
    
    $
    320,709
    
    
    $
    330,794
    
    
    $
    335,018
    
    
    $
    366,972Operating profit
    
    
    28,786
    
    
    
    32,882
    
    
    
    31,922
    
    
    
    47,307Net income
    
    
    18,027
    
    
    
    20,235
    
    
    
    18,894
    
    
    
    29,696Net income attributable to Panera Bread Company
    
    
    17,432
    
    
    
    20,029
    
    
    
    18,894
    
    
    
    29,696Earnings per common share attributable to Panera Bread Company:Basic
    
    $
    0.57
    
    
    $
    0.65
    
    
    $
    0.61
    
    
    $
    0.96Diluted
    
    $
    0.57
    
    
    $
    0.65
    
    
    $
    0.61
    
    
    $
    0.95
 Fiscal 2008 - quarters ended (1)March 25
    
    
    June 24
    
    
    September 23
    
    
    December 30Revenues
    
    $
    304,978
    
    
    $
    320,868
    
    
    $
    315,195
    
    
    $
    357,812Operating profit
    
    
    21,149
    
    
    
    27,169
    
    
    
    22,721
    
    
    
    41,668Net income
    
    
    12,801
    
    
    
    16,222
    
    
    
    13,879
    
    
    
    26,043Net income attributable to Panera Bread Company
    
    
    12,440
    
    
    
    15,706
    
    
    
    13,740
    
    
    
    25,549Earnings per common share attributable to Panera Bread Company:Basic
    
    $
    0.42
    
    
    $
    0.52
    
    
    $
    0.46
    
    
    $
    0.84Diluted
    
    $
    0.41
    
    
    $
    0.52
    
    
    $
    0.45
    
    
    $
    0.84
 (1)
    
    Fiscal quarters may not sum to the fiscal year reported amounts due to rounding.         73




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures and Changes in Internal Control Over Financial Reporting
   Managements Report on Internal Control Over Financial Reporting
      Internal Control  Integrated Framework.
  74




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##### Table of Contents



ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  www.panerabread.com
 
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   75




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
          PANERA BREAD COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
 Balance - beginning
    
    
    Additions charged
    
    
    Deductions/
    
    
    Balance - endDescription
    
    of period
    
    
    to expense
    
    
    other additions
    
    
    of periodAllowance for doubtful accounts:Fiscal year ended December 25, 2007
    
    $
    26
    
    
    $
    
    
    
    $
    42
    
    
    $
    68Fiscal year ended December 30, 2008
    
    $
    68
    
    
    $
    153
    
    
    $
    (32
    )
    
    $
    189Fiscal year ended December 29, 2009
    
    $
    189
    
    
    $
    28
    
    
    $
    (92
    )
    
    $
    125Self-insurance reserves:Fiscal year ended December 25, 2007
    
    $
    7,412
    
    
    $
    22,708
    
    
    $
    (21,184
    )
    
    $
    8,936Fiscal year ended December 30, 2008
    
    $
    8,936
    
    
    $
    32,981
    
    
    $
    (29,768
    )
    
    $
    12,149Fiscal year ended December 29, 2009
    
    $
    12,149
    
    
    $
    37,077
    
    
    $
    (33,292
    )
    
    $
    15,934
   76




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##### Table of Contents



SIGNATURES
  PANERA BREAD COMPANYBy:
    /s/   RONALD M. SHAICHRonald M. ShaichChairman and Chief Executive Officer




Date: February 26, 2010  Signature
    
    Title
    
    Date/s/ RONALD M. SHAICH

Ronald M. Shaich
    
    Chairman and Chief Executive Officer
    
    February 26, 2010/s/ DOMENIC COLASACCO

Domenic Colasacco
    
    Director
    
    February 26, 2010/s/ FRED K. FOULKES

Fred K. Foulkes
    
    Director
    
    February 26, 2010/s/ LARRY J. FRANKLIN

Larry J. Franklin
    
    Director
    
    February 26, 2010/s/ CHARLES J. CHAPMAN III

Charles J. Chapman III
    
    Director
    
    February 26, 2010/s/ JEFFREY W. KIP

Jeffrey W. Kip
    
    Senior Vice President, Chief Financial Officer
    
    February 26, 2010/s/ AMY L. KUZDOWICZ

Amy L. Kuzdowicz
    
    Vice President, Controller
    
    February 26, 2010/s/ MARK D. WOOLDRIDGE

Mark D. Wooldridge
    
    Assistant Controller, Chief Accounting Officer
    
    February 26, 2010
  77




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    
    Certificate of Incorporation of the Registrant, as amended through June 7, 2002
(filed as Exhibit 3.1 to the Registrants Quarterly Report on Form 10-Q for
the period ended July 13, 2002 (File No. 0-19253), as filed with the Commission
on August 26, 2002 and incorporated herein by reference).3.2
    
    
    Amended and Restated Bylaws of the Registrant, as amended through March 9, 2006
(filed as Exhibit 3.2 to the Registrants Current Report on Form 8-K (File No.
0-19253), as filed with the Commission on March 15, 2006 and incorporated
herein by reference).10.1
    
    
    1992 Employee Stock Purchase Plan, as amended (filed as Exhibit A to the
Registrants Proxy Statement on Schedule 14A dated April 16, 2007 (File No.
0-19253), as filed with the Commission on April 13, 2008 and incorporated
herein by reference).10.2
    
    
    Formula Stock Option Plan for Independent Directors, as amended (filed as
Exhibit 10.2 to the Registrants Annual Report on Form 10-K for the year ended
December 29, 2001 (File No. 0-19253), as filed with the Commission on March 22,
2002 and incorporated herein by reference).10.3
    
    
    1992 Equity Incentive Plan, as amended (filed as Exhibit 10.3 to the
Registrants Registration Statement on Form S-8 (File No. 333-128049), as filed
with the Commission on September 1, 2005 and incorporated herein by
reference).10.4
    
    
    2001 Employee, Director and Consultant Stock Option Plan (filed as Appendix A
to the Registrants Proxy Statement on Schedule 14A dated April 21, 2005 (File
No. 0-19253), as filed with the Commission on April 21, 2005 and incorporated
herein by reference).10.5
    
    
    Amended and restated 2005 Long-Term Incentive Program (filed as Exhibit 10.1 to
the Registrants Current Report on Form 8-K (File No. 0-19253), as filed with
the Commission on July 29, 2009 and incorporated herein by reference).10.6
    
    
    2006 Stock Incentive Plan (filed as Exhibit A to the Registrants Proxy
Statement on Schedule 14A dated April 13, 2006 (File No. 0-19253), as filed
with the Commission on April 13, 2006 and incorporated herein by reference). 10.7
    
    
    Form of Non-qualified Stock Option Agreement under the 2006 Stock Incentive
Plan (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
(File No. 0-19253), as filed with the Commission on May 25, 2006 and
incorporated herein by reference). 10.8
    
    
    Form of Non-qualified Stock Option Agreement under the 2005 Long Term Incentive
Program (filed as Exhibit 10.3 to the Registrants Current Report on Form 8-K
(File No. 0-19253), as filed with the Commission on May 25, 2006 and
incorporated herein by reference). 10.9
    
    
    Form of Restricted Stock Agreement under the 2005 Long-Term Incentive Program
(filed as Exhibit 10.4 to the Registrants Current Report on Form 8-K (File No.
0-19253), as filed with the Commission on May 25, 2006 and incorporated herein
by reference). 10.10
    
    
    Form of amended Restricted Stock Agreement under the 2005 Long-Term Incentive
Program (filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
(File No. 0-19253), as filed with the Commission on May 28, 2009 and
incorporated herein by reference). 10.11
    
    
    Form of Stock Settled Appreciation Rights Agreement under the 2005 Long-Term
Incentive Program (filed as Exhibit 10.2 to the Registrants Current Report on
Form 8-K (File No. 0-19253), as filed with the Commission on July 29, 2009 and
incorporated herein by reference). 10.12
    
    
    Employment Letter between the Registrant and Michael Kupstas (filed as Exhibit
10.6.6 to the Registrants Annual Report on Form 10-K for the year ended
December 25, 1999 (File No. 0-19253), as filed with the Commission on April 10,
2000 and incorporated herein by reference).10.13
    
    
    Employment Letter between the Registrant and Mark Borland (filed as Exhibit
10.6.17 to the Registrants Quarterly Report of Form 10-Q for the period ended
October 5, 2002 (File No. 0-19253), as filed with the Commission on November
18, 2002 and incorporated herein by reference).10.14
    
    
    Form of Panera, LLC Confidential and Proprietary Information and
Non-Competition Agreement executed by Senior Vice Presidents (filed as Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended
October 4, 2003 (File No. 0-19253), as filed with the Commission on November
18, 2003 and incorporated herein by reference).10.15
    
    
    Description of Compensation Arrangements with Non-Employee Directors (filed as
Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the period
ended March 28, 2006 (File No. 0-19253), as filed with the Commission on May 4,
2006 and incorporated herein by reference).
  78




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##### Table of Contents



ExhibitNumber
    
    Description10.16
    
    
    Lease and Construction Exhibit between Bachelor Foods, Inc. and Panera, Inc.
dated September 7, 2000 (filed as Exhibit 10.12 to the Registrants Annual
Report on Form 10-K for the year ended December 30, 2000, (File No. 0-19253),
as filed with the Commission on March 28, 2001 and incorporated herein by
reference).10.17
    
    
    Credit Agreement, dated as of November 27, 2007, among Panera Bread Company,
Bank of America, N.A. and Banc of America Securities LLC (filed as Exhibit 10.2
to the Registrants Current Report on Form 8-K (File No. 0-19253), as filed
with the Commission on December 3, 2007 and incorporated herein by reference).10.18
    
    
    Amended and Restated Credit Agreement, dated as of March 7, 2008, among Panera
Bread Company, Bank of America, N.A., other Lenders party thereto, Banc of
America Securities LLC and Wells Fargo Bank, N.A. (filed as Exhibit 10.1 to the
Registrants Current Report on Form 8-K (File No. 0-19253), as filed with the
Commission on March 13, 2008 and incorporated herein by reference).21
    *
    
    Registrants Subsidiaries.23.1
    *
    
    Consent of Independent Registered Public Accounting Firm.31.1
    *
    
    Certification by Chief Executive Officer.31.2
    *
    
    Certification by Chief Financial Officer.32
    *
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer and
Chief Financial Officer.
 *
    
    Filed herewith.
    
    Management contract or compensatory plan required to be filed as an exhibit hereto pursuant to
Item 15(a) of Form 10-K.  79