UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

Form 10-Q

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-19253

Panera Bread Company

Delaware		04-2723701
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

6710 Clayton Road, Richmond Heights, MO		63117
(Address of Principal Executive Offices)		(Zip Code)

(314) 633-7100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 3, 2009, 30,125,867 shares and 1,392,107 shares of the registrant’s Class A Common Stock and Class B Common Stock, respectively, par value $.0001 per share, were outstanding.

 

 

PANERA BREAD COMPANY
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Cash Flows			5
Notes to Consolidated Financial Statements			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
ITEM 4. CONTROLS AND PROCEDURES			27
PART II OTHER INFORMATION			27
ITEM 1. LEGAL PROCEEDINGS			27
ITEM 1A. RISK FACTORS			28
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			28
ITEM 6. EXHIBITS			28
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

PANERA BREAD COMPANY

		September 29, 2009				December 30, 2008
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	172,413			$	74,710
Short-term investments			876				2,400
Trade accounts receivable, net			17,504				15,198
Other accounts receivable			6,814				9,944
Inventories			11,206				11,959
Prepaid expenses			26,429				14,265
Deferred income taxes			12,460				9,937
Total current assets			247,702				138,413
Property and equipment, net			407,168				417,006
Other assets:
Goodwill			87,334				87,334
Other intangible assets, net			19,512				20,475
Long-term investments			—				1,726
Deposits and other			5,905				8,963
Total other assets			112,751				118,498
Total assets		$	767,621			$	673,917
LIABILITIES
Current liabilities:
Accounts payable		$	6,178			$	4,036
Accrued expenses			124,653				109,978
Total current liabilities			130,831				114,014
Deferred rent			41,877				39,780
Other long-term liabilities			39,117				21,437
Total liabilities			211,825				175,231
Commitments and contingencies (Note 7)
EQUITY
Panera Bread Company stockholders’ equity:
Common stock, $.0001 par value per share:
Class A, 75,000,000 shares authorized; 30,165,466 issued and 29,998,067 outstanding in 2009; and 29,557,849 issued and 29,421,877 outstanding in 2008			3				3
Class 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; 167,399 shares in 2009 and 135,972 shares in 2008			(3,885	)			(2,204	)
Additional paid-in capital			156,854				151,358
Accumulated other comprehensive gain (loss)			69				(394	)
Retained earnings			402,755				346,399
Total Panera Bread Company stockholders’ equity			555,796				495,162
Noncontrolling interest			—				3,524
Total equity			555,796				498,686
Total liabilities and equity		$	767,621			$	673,917

The accompanying notes are an integral part of the consolidated financial statements.

PANERA BREAD COMPANY

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Revenues:
Bakery-cafe sales		$	285,871			$	268,486			$	840,397			$	803,328
Franchise royalties and fees			19,369				18,144				57,153				53,682
Fresh dough sales to franchisees			29,778				28,565				88,971				84,031
Total revenues			335,018				315,195				986,521				941,041
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products			83,715				81,556				248,765				243,895
Labor			92,682				86,639				272,892				256,843
Occupancy			24,200				22,750				71,558				66,334
Other operating expenses			39,880				36,934				114,736				107,098
Total bakery-cafe expenses			240,477				227,879				707,951				674,170
Fresh dough cost of sales to franchisees			24,812				26,982				74,582				80,382
Depreciation and amortization			16,988				16,794				49,986				49,168
General and administrative expenses			20,195				19,951				59,041				63,409
Pre-opening expenses			624				868				1,370				2,874
Total costs and expenses			303,096				292,474				892,930				870,003
Operating profit			31,922				22,721				93,591				71,038
Interest expense			163				225				537				1,398
Other (income) expense, net			1,248				461				1,090				806
Income before income taxes			30,511				22,035				91,964				68,834
Income taxes			11,617				8,156				34,807				25,931
Net income			18,894				13,879				57,157				42,903
Less: net income attributable to noncontrolling interest			—				139				801				1,016
Net income attributable to Panera Bread Company		$	18,894			$	13,740			$	56,356			$	41,887
Earnings per common share attributable to Panera Bread Company:
Basic		$	0.61			$	0.46			$	1.84			$	1.40
Diluted		$	0.61			$	0.45			$	1.82			$	1.38
Weighted average shares of common and common equivalent shares outstanding:
Basic			30,748				30,124				30,577				29,991
Diluted			31,065				30,557				30,925				30,383

The accompanying notes are an integral part of the consolidated financial statements.

PANERA BREAD COMPANY

		For the 39 Weeks Ended
		September 29, 2009				September 23, 2008
Cash flows from operating activities:
Net income		$	57,157			$	42,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			49,986				49,168
Stock-based compensation expense			6,464				5,685
Tax benefit from exercise of stock options			(3,102	)			(2,957	)
Deferred income taxes			17,811				(3,802	)
Other			900				1,838
Changes in operating assets and liabilities, excluding the effect of acquisitions:
Trade and other accounts receivable			621				11,577
Inventories			753				295
Prepaid expenses			(12,442	)			(6,626	)
Accounts payable			2,142				1,453
Accrued expenses			13,001				(7,998	)
Deferred rent			2,097				4,133
Other long-term liabilities			(27	)			4,563
Net cash provided by operating activities			135,361				100,232
Cash flows from investing activities:
Additions to property and equipment			(37,678	)			(50,097	)
Acquisitions, net of cash acquired			—				(2,694	)
Investment maturities proceeds			4,316				13,755
Decrease (increase) in deposits and other			(1,107	)			176
Net cash used in investing activities			(34,469	)			(38,860	)
Cash flows from financing activities:
Repurchase of common stock			(1,681	)			(48,878	)
Net payments under credit facility			—				(75,000	)
Exercise of employee stock options			14,224				15,485
Tax benefit from exercise of stock options			3,102				2,957
Proceeds from issuance of common stock under employee benefit plans			1,247				1,472
Purchase of noncontrolling interest			(20,081	)			—
Capitalized debt issuance costs			—				(1,153	)
Net cash used in financing activities			(3,189	)			(105,117	)
Net increase (decrease) in cash and cash equivalents			97,703				(43,745	)
Cash and cash equivalents at beginning of period			74,710				68,242
Cash and cash equivalents at end of period		$	172,413			$	24,497

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited consolidated financial statements of Panera Bread Company and its subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”), under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 30, 2008. These consolidated financial statements should be read in conjunction with such audited consolidated financial statements, which were included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2008 and filed with the SEC on February 27, 2009.

The consolidated financial statements consist of the accounts of Panera Bread Company and its wholly owned direct and indirect consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair statement of its financial position and results of operations for the interim periods. Interim results are not necessarily indicative of the results for any other interim period or for the entire year.

Adoption of the FASB Accounting Standards Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (“ASC”). Effective this quarter, the ASC became the single source for all authoritative GAAP recognized by the FASB and is required to be applied to financial statements issued for interim and annual periods ending after September 15, 2009. The ASC does not change GAAP and did not impact the Company’s consolidated financial statements.

Subsequent Events

The Company has evaluated the period from September 30, 2009 through November 6, 2009, the date the financial statements herein were issued, for subsequent events requiring recognition or disclosure in the financial statements. No material subsequent events were identified.

Accounting Standards Issued Not Yet Adopted

In June 2009, the FASB issued authoritative guidance on accounting for transfers of financial assets, which is effective for reporting periods beginning after November 15, 2009. This new guidance limits the circumstances in which a financial asset may be de-recognized when the transferor has not transferred the entire financial asset or has continuing involvement with the transferred asset. The concept of a qualifying special-purpose entity, which had previously facilitated sale accounting for certain asset transfers, is removed by this new guidance. The Company expects that the adoption of this new guidance will not have a material effect on its financial position or results of operations.

In June 2009, the FASB issued authoritative guidance on accounting for variable interest entities (“VIE”), which is effective for reporting periods beginning after November 15, 2009 and changes the process for how an enterprise determines which party consolidates a VIE, to a primarily qualitative analysis. The party that consolidates the VIE (the primary beneficiary) is defined as the party with (1) the power to direct activities of the VIE that most significantly affect the VIE’s economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Upon adoption, reporting enterprises must reconsider their conclusions on whether an entity should be consolidated and should a change result, the effect on net assets will be recorded as a cumulative effect adjustment to retained earnings. The Company expects that the adoption of this new guidance will not have a material effect on its financial position or results of operations.

Note 2. Noncontrolling Interest

Effective December 31, 2008, the Company implemented the accounting standard for the reporting of noncontrolling interests in the Company’s consolidated financial statements and accompanying notes. This standard changed the accounting and reporting for minority interests, which are to be recorded initially at fair market value and reported as noncontrolling interests as a component of equity, separate from the parent company’s equity. Purchases or sales of noncontrolling interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest is to be included in consolidated net income in the Consolidated Statements of Operations and upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. The Company has applied these presentation and disclosure requirements retrospectively.

The following tables illustrate the changes in equity for the thirteen weeks ended September 23, 2008 and September 29, 2009, respectively (in thousands):

																														Accumulated
																														Other
						Compre-																Additional								Compre-				Noncon-
						hensive				Common Stock								Treasury				Paid-in				Retained				hensive				trolling
		Total				Income				Class A				Class B				Stock				Capital				Earnings				Income (Loss)				Interest
Balance, June 24, 2008		$	442,056			$	—			$	3			$	—			$	(1,364	)		$	133,415			$	307,110			$	—			$	2,892
Comprehensive income:
Net income			13,879				13,879				—				—				—				—				13,740				—				139
Comprehensive income			13,879			$	13,879
Issuance of common stock			352								—				—				—				352				—				—				—
Exercise of employee stock options			5,687								—				—				—				5,687				—				—				—
Stock-based compensation expense			2,039								—				—				—				2,039				—				—				—
Repurchase of common stock			(825	)							—				—				(825	)			—				—				—				—
Tax benefit from exercise of stock options			1,301								—				—				—				1,301				—				—				—
Windfall pool adjustment on stock-based compensation			3,297								—				—				—				3,297				—				—				—
Balance, September 23, 2008		$	467,786							$	3			$	—			$	(2,189	)		$	146,091			$	320,850			$	—			$	3,031
Balance, June 30, 2009		$	532,605			$	—			$	3			$	—			$	(2,537	)		$	151,324			$	383,861			$	(46	)		$	—
Comprehensive income:
Net income			18,894				18,894				—				—				—				—				18,894				—				—
Other comprehensive income:
Foreign currency translation adjustment			115				115				—				—				—				—				—				115				—
Total other comprehensive income			115				115
Comprehensive income			19,009			$	19,009
Purchase of noncontrolling interest			(8	)							—				—				—				(8	)			—				—				—
Adjustment to noncontrolling interest			(742	)							—				—				—				(742	)			—				—				—
Issuance of common stock			445								—				—				—				445				—				—				—
Exercise of employee stock options			3,076								—				—				—				3,076				—				—				—
Stock-based compensation expense			2,177								—				—				—				2,177				—				—				—
Repurchase of common stock			(1,348	)							—				—				(1,348	)			—				—				—				—
Tax benefit from exercise of stock options			582								—				—				—				582				—				—				—
Balance, September 29, 2009		$	555,796							$	3			$	—			$	(3,885	)		$	156,854			$	402,755			$	69			$	—

The following tables illustrate the changes in equity for the thirty-nine weeks ended September 23, 2008 and September 29, 2009, respectively (in thousands):

																														Accumulated
																														Other
						Compre-																Additional								Compre-				Noncon-
						hensive				Common Stock								Treasury				Paid-in				Retained				hensive				trolling
		Total				Income				Class A				Class B				Stock				Capital				Earnings				Income (Loss)				Interest
Balance, December 25, 2007		$	448,179			$	—			$	3			$	—			$	(1,188	)		$	168,386			$	278,963			$	—			$	2,015
Comprehensive income:
Net income			42,903				42,903				—				—				—				—				41,887				—				1,016
Other comprehensive income:
Foreign currency translation adjustment			—				—				—				—				—				—				—				—				—
Total other comprehensive income			—				—
Comprehensive income			42,903			$	42,903
Issuance of common stock			1,472								—				—				—				1,472				—				—				—
Exercise of employee stock options			15,468								—				—				—				15,468				—				—				—
Stock-based compensation expense			5,685								—				—				—				5,685				—				—				—
Repurchase of common stock			(48,878	)							—				—				(1,001	)			(47,877	)			—				—				—
Tax benefit from exercise of stock options			2,957								—				—				—				2,957				—				—				—
Balance, September 23, 2008		$	467,786							$	3			$	—			$	(2,189	)		$	146,091			$	320,850			$	—			$	3,031
Balance, December 30, 2008		$	498,686			$	—			$	3			$	—			$	(2,204	)		$	151,358			$	346,399			$	(394	)		$	3,524
Comprehensive income:
Net income			57,157				57,157				—				—				—				—				56,356				—				801
Other comprehensive income:
Foreign currency translation adjustment			463				463				—				—				—				—				—				463				—
Total other comprehensive income			463				463
Comprehensive income			57,620			$	57,620
Purchase of noncontrolling interest			(23,124	)							—				—				—				(18,799	)			—				—				(4,325	)
Adjustment to noncontrolling interest			(742	)							—				—				—				(742	)			—				—				—
Issuance of common stock			1,247								—				—				—				1,247				—				—				—
Exercise of employee stock options			14,224								—				—				—				14,224				—				—				—
Stock-based compensation expense			6,464								—				—				—				6,464				—				—				—
Repurchase of common stock			(1,681	)							—				—				(1,681	)			—				—				—				—
Tax benefit from exercise of stock options			3,102								—				—				—				3,102				—				—				—
Balance, September 29, 2009		$	555,796							$	3			$	—			$	(3,885	)		$	156,854			$	402,755			$	69			$	—

During the thirteen weeks ended September 29, 2009, the Company recorded an adjustment of $0.7 million to noncontrolling interest to properly reflect deferred taxes prior to the purchase of the remaining 49 percent of Paradise Bakery & Café, Inc. (“Paradise”). This adjustment was recorded to additional paid-in capital as a result of the June 2, 2009 purchase of the remainder of Paradise.

Purchase of Noncontrolling Interest

On February 1, 2007, the Company purchased 51 percent of the outstanding stock of Paradise, then owner and operator of 22 bakery-cafes and one commissary and franchisor of 22 bakery-cafes and one commissary, for a purchase price of $21.1 million plus $0.5 million in acquisition costs. As a result, Paradise became a majority-owned consolidated subsidiary of the Company, with its operating results included in the Company’s Consolidated Statements of Operations and the 49 percent portion of equity attributable to Paradise presented as minority interest, and subsequently as noncontrolling interest, in the Company’s Consolidated Balance Sheets. In connection with this transaction, the Company received the right to purchase the remaining 49 percent of the outstanding stock of Paradise after January 1, 2009 at a contractually determined value, which approximated fair value. In addition, the related agreement provided that if the Company did not exercise its right to purchase the remaining 49 percent of the outstanding stock of Paradise by June 30, 2009, the remaining Paradise owners had the right to purchase the Company’s 51 percent interest in Paradise thereafter for $21.1 million.

On June 2, 2009, the Company exercised its right to purchase the remaining 49 percent of the outstanding stock of Paradise, excluding certain agreed upon assets totaling $0.7 million, for a purchase price of $22.3 million, $0.1 million in transaction costs, and settlement of $3.4 million of debt owed to the Company by the shareholders of the remaining 49 percent of Paradise. Approximately $20.0 million of the purchase price, as well as the transaction costs, were paid on June 2, 2009, with $2.3 million retained by the Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on the second anniversary of the transaction closing date, June 2, 2011, with any remaining holdback amounts reverting to the prior shareholders of the remaining 49 percent of Paradise. The transaction was accounted for as an equity transaction, by adjusting the carrying amount of the noncontrolling interest balance to reflect the change in the Company’s ownership interest in Paradise, with the difference between fair value of the consideration paid and the amount by which the noncontrolling interest was adjusted recognized in equity attributable to the Company. During the thirteen weeks ended September 29, 2009, certain holdback amounts and additional transaction costs totaling $0.01 million were paid.

The following table illustrates the effect on the Company’s equity of its purchase of the remaining 49 percent of outstanding stock of Paradise on June 2, 2009 (in thousands):

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Net income attributable to the Company		$	18,894			$	13,740			$	56,356			$	41,887
Decrease in equity for purchase of noncontrolling interest			(8	)			—				(18,799	)			—
Change from net income attributable to the Company and the purchase of noncontrolling interest		$	18,886			$	13,740			$	37,557			$	41,887

Note 3. Fair Value Measurements

Effective December 26, 2007, the Company implemented the accounting standard regarding disclosures for financial assets, financial liabilities, non-financial assets and non-financial liabilities recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Effective December 30, 2008, the Company also implemented the accounting standard for non-financial assets and non-financial liabilities reported or disclosed at fair value on a non-recurring basis, the adoption of which had no impact on the Company in the thirty-nine weeks ended September 29, 2009. This standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This standard also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following describes the three levels of inputs used to measure fair value:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3 — Unobservable inputs that are not corroborated by market data.

The Company’s $71.1 million and $76.6 million in cash equivalents at September 29, 2009 and December 30, 2008, respectively, were recorded at fair value in the Consolidated Balance Sheets based on quoted market prices for identical securities (Level 1 inputs).

At September 29, 2009 and December 30, 2008, the Company’s investments were recorded at fair value in the Consolidated Balance Sheets and consisted of units of beneficial interest in the Columbia Strategic Cash Portfolio (the “Columbia Portfolio”), an enhanced cash fund previously sold as an alternative to traditional money-market funds. The Columbia Portfolio includes investments in certain asset-backed securities and structured investment vehicles that are collateralized by sub-prime mortgage securities or related to mortgage securities, among other assets. As a result of adverse market conditions that have unfavorably affected the fair value and liquidity availability of collateral underlying the Columbia Portfolio, it was overwhelmed with withdrawal requests from investors and the Columbia Portfolio was closed, with a restriction placed upon the cash redemption ability of its holders in the fourth quarter of fiscal 2007.

As the Columbia Portfolio units are no longer trading and, therefore, have little or no price transparency, the Company assessed the fair value of the underlying collateral for the Columbia Portfolio through the review of current investment ratings, as available, coupled with the evaluation of the liquidation value of assets held by each investment and their subsequent distribution of cash. The Company then utilized this assessment of the underlying collateral from multiple indicators of fair value, which were then adjusted to reflect the expected timing of disposition and market risks to arrive at an estimated fair value of the Columbia Portfolio units of $0.661 per unit, or $0.9 million, as of September 29, 2009, and $0.650 per unit, or $4.1 million, as of December 30, 2008. Based on the valuation methodology used to determine the fair value, the Columbia Portfolio is classified within Level 3 of the fair value hierarchy. Realized and unrealized gains/(losses) relating to the Columbia Portfolio are classified in other (income) expense, net in the Consolidated Statements of Operations.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial asset for the periods indicated (in thousands):

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Beginning balance		$	2,282			$	13,544			$	4,126			$	23,198
Net realized and unrealized gains/(losses)(1)			899				(513	)			1,066				(1,360	)
Redemptions			(2,305	)			(4,948	)			(4,316	)			(13,755	)
Ending balance		$	876			$	8,083			$	876			$	8,083

Information and the markets relating to these investments remain dynamic, and there may be further declines in the value of these investments, the value of the collateral held by these entities, and the liquidity of the Company’s investments. To the extent the Company determines there is a further decline in fair value, it may recognize additional realized and unrealized losses in future periods up to the aggregate amount of these investments. The Company included $0.9 million of the remaining fair value of its Columbia Portfolio units in short-term investments in the Consolidated Balance Sheets at September 29, 2009, as the Company reasonably believes this amount of cash redemptions will be received within the next twelve months based on the redemptions received to-date and recent representations from the Columbia Portfolio management. However, the Columbia Portfolio has not made any formal commitments on the availability or timing of future redemptions.

Note 4. Inventories

Inventories consisted of the following (in thousands):

		September 29, 2009				December 30, 2008
Food:
Fresh dough facilities:
Raw materials		$	2,636			$	3,040
Finished goods			513				319
Bakery-cafes:
Raw materials			6,195				6,533
Paper goods			1,862				2,021
Retail merchandise			—				46
		$	11,206			$	11,959

Note 5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

		September 29, 2009				December 30, 2008
Compensation and related employment taxes		$	35,453			$	22,508
Unredeemed gift cards			24,142				33,042
Insurance			16,481				12,482
Capital expenditures			8,973				6,448
Taxes, other than income tax			8,953				4,898
Rent			5,394				4,567
Fresh dough operations			4,586				5,191
Utilities			3,770				3,258
Deferred revenue			2,621				2,024
Advertising			2,286				3,698
Deferred purchase price			2,258				—
Income taxes payable			—				1,259
Other			9,736				10,603
		$	124,653			$	109,978

Note 6. Credit Facility

The Company and certain of its direct and indirect subsidiaries, as guarantors, are parties to an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with Bank of America, N.A. and other lenders party thereto, which provides for a secured revolving credit facility of $250.0 million to be used for general corporate purposes, including working capital, capital expenditures, and permitted acquisitions and share repurchases. The credit facility, which is collateralized by the capital stock of the Company’s present and future material subsidiaries, will become due on March 7, 2013, subject to acceleration upon certain specified events of default.

As of September 29, 2009, the Company had no balance outstanding under the Amended and Restated Credit Agreement. The Company incurred $0.1 million and $0.3 million of commitment fees for the thirteen and thirty-nine weeks ended September 29, 2009, respectively, and accrued interest at September 29, 2009 related to the commitment fees was inconsequential. As of September 29, 2009, the Company was in compliance with all covenants in the Amended and Restated Credit Agreement.

Note 7. Commitments and Contingencies

Lease Obligations

As of September 29, 2009, the Company guaranteed operating leases of 29 franchisee locations and seven locations of its former Au Bon Pain division, or its franchisees, which the Company accounts for in accordance with the accounting standard for guarantees. These leases have terms expiring on various dates from October 31, 2009 to December 31, 2023 and have a potential amount of future rental payments of approximately $33.0 million as of September 29, 2009. The obligation from these leases will generally continue to decrease over time as these operating leases expire. The Company has not recorded a liability for certain of these guarantees as they arose prior to the implementation of this accounting standard for guarantees and, unless modified, are exempt from its requirements. The Company did not record a liability for those guarantees issued after the effective date of this accounting standard because the fair value of each such lease guarantee was determined by the Company to be insignificant based on analysis of the facts and circumstances of each such lease and each such franchisee’s performance, and the Company did not believe it was probable it would be required to perform under any guarantees at the time the guarantees were issued. The Company has not had to make any payments related to any of these guaranteed leases. Au Bon Pain or the applicable franchisees continue to have primary liability for these operating leases.

During the first quarter of fiscal 2008, the Company recorded a reserve of $1.2 million relating to the termination of operating leases for specific sites, which the Company had determined not to develop. During the thirteen weeks ended September 29, 2009, there were no significant changes made to the accrual. During the thirty-nine weeks ended September 29, 2009, the Company decreased the reserve by $0.3 million primarily due to its subsequent determination to move forward with the development of one of the sites and due to the settlement of one lease. No other significant changes were made to the accrual during the thirty-nine weeks ended September 29, 2009. As of September 29, 2009 and December 30, 2008, the Company had $0.6 million and $0.9 million accrued in its Consolidated Balance Sheets relating to the reserve for termination of these specific leases.

Related Party Credit Agreement

In order to facilitate the Company’s opening of the first Panera Bread bakery-cafes in Canada, on September 10, 2008, the Company’s Canadian subsidiary, Panera Bread ULC, as lender, entered into a Cdn. $3.5 million secured revolving credit facility agreement (the “Credit Agreement”) with Millennium Bread Inc., as borrower (“Millennium”), and certain of Millennium’s present and future subsidiaries (the “Franchisee Guarantors”), which have entered into franchise agreements with Panera Bread ULC, to operate three Panera Bread bakery-cafes in Canada. Covenants under the Credit Agreement require Millennium to maintain a certain level of cash equity contributions or subordinated loans from its shareholders in relation to principal outstanding under the Credit Agreement. The borrowings under the Credit Agreement bear interest at the per annum rate of 7.58 percent, calculated daily and payable monthly in arrears on the last business day of each fiscal month. The credit facility, which is collateralized by present and future property and assets of Millennium and the Franchisee Guarantors, as well as the personal guarantees of certain individuals, became due on September 9, 2009. On September 9, 2009 the maturity date was extended to December 9, 2009. The credit facility is subject to acceleration upon certain specified events of default, including breaches of representations or covenants, failure to pay other material indebtedness or a change of control of Millennium, as defined in the Credit Agreement. The proceeds from the credit facility may be used by Millennium to pay costs and expenses to develop and construct the Franchisee Guarantors’ bakery-cafes and for their day-to-day operating requirements.

As part of the franchise agreement between Millennium and Panera Bread ULC, Panera Bread ULC developed and equipped three bakery-cafes as typical Panera Bread bakery-cafes in accordance with the Company’s current design and construction standards and specifications as applied by Panera Bread ULC, in its sole discretion. Millennium was required to pay Panera Bread ULC an amount equal to the total cost of development of the bakery-cafes, which included all costs and expenses incurred by Panera Bread ULC in connection with selection and development of the bakery-cafes; however, no overhead expenses of Panera Bread ULC were included in the total cost. On September 15, 2008, October 27, 2008, and December 16, 2008, Panera Bread ULC delivered possession of the bakery-cafes in Canada to Millennium, which bakery-cafes subsequently opened on October 6, 2008, November 10, 2008, and January 26, 2009, respectively. The total development cost billed to Millennium for these three bakery-cafes was approximately Cdn. $3.7 million. On April 7, 2009, Millennium requested a Cdn. $3.5 million advance under the Credit Agreement, which was applied against the outstanding receivable as previously described. The remaining Cdn. $0.2 million receivable was resolved during the thirteen weeks ended September 29, 2009. The Cdn. $3.5 million note receivable from Millennium is included in other accounts receivable in the Consolidated Balance Sheets as of September 29, 2009.

Legal Proceedings

On January 25, 2008 and February 26, 2008, purported class action lawsuits were filed against the Company and three of the Company’s current or former executive officers by the Western Washington Laborers-Employers Pension Trust and by Sue Trachet, respectively, on behalf of investors who purchased the Company’s common stock during the period between November 1, 2005 and July 26, 2006. Both lawsuits were filed in the United States District Court for the Eastern District of Missouri, St. Louis Division. Each complaint alleges that the Company and the other defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 under the Exchange Act in connection with the Company’s disclosure of system-wide sales and earnings guidance during the period from November 1, 2005 through July 26, 2006. Each complaint seeks, among other relief, class certification of the lawsuit, unspecified damages, costs and expenses, including attorneys’ and experts’ fees, and such other relief as the court might find just and proper. On June 23, 2008, the lawsuits were consolidated and the Western Washington Laborers-Employers Pension Trust was appointed lead plaintiff in the lawsuit. On August 7, 2008, the plaintiff filed an amended complaint, which extended the class period to November 1, 2005 through July 26, 2007. The Company believes it and the other defendants have meritorious defenses to each of the claims in the lawsuit and the Company is prepared to vigorously defend the lawsuit. On October 6, 2008, the Company filed a motion to dismiss all of the claims in the lawsuit. On November 20, 2008, the plaintiff filed an opposition to the Company’s motion to dismiss, and on December 3, 2008, the Company filed a reply memorandum in support of its motion to dismiss. On June 25, 2009, the Court converted the Company’s motion to one for summary judgment and denied it without prejudice. The Court simultaneously gave the Company until July 20, 2009 to file a new motion for summary judgment, which deadline the Court subsequently extended until August 10, 2009. On August 10, 2009, the Company filed a motion for summary judgment. On September 9, 2009, the plaintiff filed a request to deny or continue the Company’s motion for summary judgment to allow the plaintiff to conduct discovery. On October 2, 2009, the Court held a hearing on the plaintiff’s request, at which it ordered plaintiff to provide notice of the discovery it seeks within 10 days. On October 12, 2009, the plaintiff provided such notice, and on October 23, 2009, the Company filed its response thereto. There can be no assurance that the Company will be successful, and an adverse resolution of the lawsuit could have a material adverse effect on the Company’s consolidated financial position and results of operations in the period in which the lawsuit is resolved. The Company is not presently able to reasonably estimate potential losses, if any, related to the lawsuit and as such, has not recorded a liability in its Consolidated Balance Sheets.

On February 22, 2008, a shareholder derivative lawsuit was filed against the Company as nominal defendant and against certain of its current or former officers and certain current directors. The lawsuit was filed by Paul Pashcetto in the Circuit Court of St. Louis, Missouri. The complaint alleges, among other things, breach of fiduciary duty, abuse of control, waste of corporate assets and unjust enrichment between November 5, 2006 and February 22, 2008. The complaint seeks, among other relief, unspecified damages, costs and expenses, including attorneys’ fees, an order requiring the Company to implement certain corporate governance reforms, restitution from the defendants and such other relief as the court might find just and proper. The Company believes it and the other defendants have meritorious defenses to each of the claims in this lawsuit and the Company is prepared to vigorously defend the lawsuit. On July 18, 2008, the Company filed a motion to dismiss all of the claims in this lawsuit. On August 29, 2008, the plaintiff filed an opposition to the Company’s motion to dismiss, and on September 10, 2008, the Company filed a reply memorandum in support of its motion to dismiss. There can be no assurance that the Company will be successful, and an adverse resolution of the lawsuit could have a material adverse effect on the Company’s consolidated financial position and results of operations in the period in which the lawsuit is resolved. The Company is not presently able to reasonably estimate potential losses, if any, related to the lawsuit and as such, has not recorded a liability in its Consolidated Balance Sheets.

On February 22, 2008, a purported class action lawsuit was filed against the Company and one of its subsidiaries by Pati Johns, a former employee of the Company, in the United States District Court for the District of Northern California. The complaint alleged, among other things, violations of the Fair Labor Standards Act and the California Labor Code for failure to pay overtime and termination compensation. Although the Company believes that its policies and practices were lawful and that it had meritorious defenses to each of the claims in this case, following mediation with the plaintiff, the Company entered into a settlement agreement in late fiscal 2008, which has been approved by the court. As a result, the Company accrued approximately $0.5 million in legal settlement costs for the fiscal year ended December 30, 2008, which it paid during the thirteen weeks ended June 30, 2009.

In addition, the Company is subject to other routine legal proceedings, claims and litigation in the ordinary course of its business. Defending lawsuits requires significant management attention and financial resources and the outcome of any litigation, including the matters described above, is inherently uncertain. The Company does not, however, currently expect that the costs to resolve these routine matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Other

The Company is subject to on-going federal and state income and sales tax audits, and any unfavorable rulings could materially and adversely affect its financial condition or results of operations. The Company believes reserves for these matters are adequately provided for in its consolidated financial statements.

Note 8. Business Segment Information

The Company operates three business segments. Its Bakery-Cafe Operations segment is comprised of the operating activities of the bakery-cafes owned directly and indirectly by the Company. The Company-owned bakery-cafes conduct business under the Panera Bread^®, Saint Louis Bread Co.^® or Paradise Bakery & Café^® names. These bakery-cafes offer some or all of the following: fresh baked goods, made-to-order sandwiches on freshly baked breads, soups, salads, custom roasted coffees, and other complementary products through on-premise sales, as well as catering.

The Franchise Operations segment is comprised of the operating activities of the franchise business unit which licenses qualified operators to conduct business under the Panera Bread or Paradise Bakery & Café names and also monitors the operations of these bakery-cafes. Under the terms of most of the agreements, the licensed operators pay royalties and fees to the Company in return for the use of the Panera Bread or Paradise Bakery & Café names.

The Fresh Dough Operations segment supplies fresh dough items and indirectly supplies proprietary sweet goods items through a contract manufacturing arrangement as well as other items to both Company-owned and franchise-operated bakery-cafes. The fresh dough is sold to a number of both Company-owned and franchise-operated bakery-cafes at a delivered cost generally not to exceed 27 percent of the retail value of the end product. The sales and related costs to the franchise-operated bakery-cafes are separately stated line items in the Consolidated Statements of Operations. The operating profit related to the sales to Company-owned bakery-cafes is classified as a reduction of the costs in the cost of food and paper products in the Consolidated Statements of Operations.

Information related to the Company’s three business segments follows (in thousands):

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Revenues:
Company bakery-cafe operations		$	285,871			$	268,486			$	840,397			$	803,328
Franchise operations			19,369				18,144				57,153				53,682
Fresh dough operations			52,204				51,940				158,506				152,763
Intercompany sales eliminations			(22,426	)			(23,375	)			(69,535	)			(68,732	)
Total revenues		$	335,018			$	315,195			$	986,521			$	941,041
Segment profit:
Company bakery-cafe operations		$	45,394			$	40,607			$	132,446			$	129,158
Franchise operations			18,140				15,121				53,077				46,410
Fresh dough operations			4,966				1,583				14,389				3,649
Total segment profit		$	68,500			$	57,311			$	199,912			$	179,217
Depreciation and amortization		$	16,988			$	16,794			$	49,986			$	49,168
Unallocated general and administrative expenses			18,966				16,928				54,965				56,137
Pre-opening expenses			624				868				1,370				2,874
Interest expense			163				225				537				1,398
Other (income) expense, net			1,248				461				1,090				806
Income before income taxes		$	30,511			$	22,035			$	91,964			$	68,834
Depreciation and amortization:
Company bakery-cafe operations		$	14,092			$	13,730			$	41,411			$	39,979
Fresh dough operations			1,899				2,006				5,754				5,972
Corporate administration			997				1,058				2,821				3,217
Total depreciation and amortization		$	16,988			$	16,794			$	49,986			$	49,168
Capital expenditures:
Company bakery-cafe operations		$	12,954			$	12,671			$	32,422			$	46,005
Fresh dough operations			1,015				892				2,650				1,730
Corporate administration			1,064				1,162				2,606				2,362
Total capital expenditures		$	15,033			$	14,725			$	37,678			$	50,097

		September 29, 2009				December 30, 2008
Segment assets:
Company bakery-cafe operations		$	506,349			$	503,928
Franchise operations			4,603				5,951
Fresh dough operations			48,481				50,699
Total segment assets		$	559,433			$	560,578
Unallocated trade and other accounts receivable			2,435				2,435
Unallocated property and equipment			14,650				13,673
Unallocated deposits and other			5,354				5,109
Other unallocated assets			185,749				92,122
Total assets		$	767,621			$	673,917

“Unallocated trade and other accounts receivable” relates primarily to rebates; “unallocated property and equipment” relates primarily to corporate property and equipment; “unallocated deposits and other” relates primarily to collateral deposits with insurance carriers, Company-owned life insurance program, and capitalized debt issuance costs; and “other unallocated assets” relates primarily to cash and cash equivalents, investments, and deferred income taxes.

Note 9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except for per share data):

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Amounts used for basic and diluted per share calculations:
Net income attributable to Panera Bread Company		$	18,894			$	13,740			$	56,356			$	41,887
Weighted average number of shares outstanding — basic			30,748				30,124				30,577				29,991
Effect of dilutive stock-based employee compensation			317				433				348				392
Weighted average number of shares outstanding — diluted			31,065				30,557				30,925				30,383
Earnings per common share attributable to Panera Bread Company:
Basic		$	0.61			$	0.46			$	1.84			$	1.40
Diluted		$	0.61			$	0.45			$	1.82			$	1.38

Approximately 0.4 million and 0.5 million weighted-average stock options, restricted stock and stock-settled appreciation rights for the thirteen weeks ended and 0.3 million and 0.6 million for the thirty-nine weeks ended September 29, 2009 and September 23, 2008, respectively, were excluded in calculating diluted earnings per share as the exercise price exceeded fair market value and inclusion would have been antidilutive.

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Matters discussed in this report and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, express or implied, of our anticipated growth, operating results, future earnings per share, plans and objectives, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are often identified by the words “believe,” “positioned,” “estimate,” “project,” “target,” “continue,” “intend,” “expect,” “future,” “anticipates,” and similar expressions that are not statements of historical fact. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this report and in our other public filings with the U.S. Securities and Exchange Commission, or the SEC. It is routine for internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that all forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this report or other periodic reports are made only as of the date made and may change. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

General

Panera Bread Company and its subsidiaries may be referred to as the “Company,” “Panera Bread,” or in the first person notation of “we,” “us,” and “our” in the following discussion.

Our revenues are derived from Company-owned bakery-cafe sales, fresh dough sales to franchisees, and franchise royalties and fees. Fresh dough sales to franchisees are primarily the sales of fresh dough products and sales of tuna and cream cheese to certain of our franchisees. Franchise royalties and fees include royalty income and franchise fees. The cost of food and paper products, labor, occupancy, and other operating expenses relate primarily to Company-owned bakery-cafe sales. The cost of fresh dough sales to franchisees relates primarily to the sale of fresh dough products and tuna and cream cheese to franchisees. General and administrative, depreciation and amortization, and pre-opening expenses relate to all areas of revenue generation.

Use of Non-GAAP Measurements

We include in this report information on Company-owned, franchise-operated and system-wide comparable bakery-cafe sales percentages. Company-owned comparable bakery-cafe sales percentages are based on sales from bakery-cafes that have been in operation and Company-owned for at least 18 months. Franchise-operated comparable bakery-cafe sales percentages are based on sales from franchised bakery-cafes, as reported by franchisees, that have been in operation and franchise-operated for at least 18 months. System-wide comparable bakery-cafe sales percentages are based on sales at both Company-owned and franchise-operated bakery-cafes that have been in operation and Company-owned or franchise-operated for at least 18 months. Acquired Company-owned and franchise-operated bakery-cafe locations and other restaurant or bakery-cafe concepts are excluded from comparable bakery-cafe sales until we have held a 100 percent ownership interest therein for at least 18 months. Comparable bakery-cafe sales exclude closed locations and currently, Paradise Bakery & Café, Inc., or Paradise, locations.

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.

We also include in this report information on Company-owned, franchise-operated and system-wide average weekly sales. Average weekly sales are calculated by dividing total net sales by operating weeks. Accordingly, year-over-year results reflect sales for all locations, whereas comparable bakery-cafe sales exclude closed locations and Paradise and are based on sales for bakery-cafes that have been in operation and owned for at least 18 months. New stores typically experience an opening “honeymoon” period during which they generate higher average weekly sales in the first 12 to 16 weeks they are open as customers “settle-in” to normal usage patterns from initial trial of the location. On average, the “settle-in” experienced is 5 percent to 10 percent less than the average weekly sales during the “honeymoon” period. As a result, year-over-year results of average weekly sales are generally lower than the results in comparable bakery-cafe sales. This results from the relationship of the number of bakery-cafes in the “honeymoon” phase, the number of bakery-cafes in the “settle-in” phase, and the number of bakery-cafes in the comparable bakery-cafe base.

Executive Summary of Results

For the thirteen weeks ended September 29, 2009, we earned $0.61 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 2.8 percent (3.3 percent for Company-owned bakery-cafes and 2.5 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.9 percent to $39,383 ($38,655 for Company-owned bakery-cafes and $39,913 for franchise-operated bakery-cafes); 19 new bakery-cafes opened system-wide (nine Company-owned bakery-cafes and ten franchise-operated bakery-cafes); and two franchise-operated bakery-cafes closed. Our results for the thirteen weeks ended September 29, 2009 of $0.61 per diluted share included $0.04 per diluted share of net charges primarily to increase reserves for certain state sales tax audit exposures, which were partially offset by a gain recorded on both, the redemptions we received during the quarter on our investment in the Columbia Strategic Cash Portfolio, referred to as the Columbia Portfolio, and the change in the recorded fair value of the units held as of September 29, 2009.

For the thirteen weeks ended September 23, 2008, we earned $0.45 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 3.3 percent (3.0 percent for Company-owned bakery-cafes and 3.5 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.5 percent to $38,633 ($37,424 for Company-owned bakery-cafes and $39,550 for franchise-operated bakery-cafes); and 24 new bakery-cafes opened system-wide (seven Company-owned bakery-cafes and 17 franchise-operated bakery-cafes). Our results for the thirteen weeks ended September 23, 2008 of $0.45 per diluted share included a $0.01 per diluted share net charge from the write-down of our investment in the Columbia Portfolio, partially offset by the gain recorded on the redemptions received during the quarter. Our results for the thirteen weeks ended September 23, 2008 also reflected the significant increase in commodity prices year-over-year that is further discussed below under “Results of Operations — Costs and Expenses.”

For the thirty-nine weeks ended September 29, 2009, we earned $1.82 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 1.0 percent (1.0 percent for Company-owned bakery-cafes and 1.1 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 0.2 percent to $39,033 ($38,178 for Company-owned bakery-cafes and $39,657 for franchise-operated bakery-cafes); 47 new bakery-cafes opened system-wide (17 Company-owned bakery-cafes and 30 franchise-operated bakery-cafes); and ten bakery-cafes closed system-wide (four Company-owned bakery-cafes and six franchise-operated bakery-cafes). Our results for the thirty-nine weeks ended September 29, 2009 of $1.82 per diluted share included $0.08 per diluted share net charges primarily to increase reserves for certain state sales tax audit exposures and to write-off smallwares related to the rollout of new china, partially offset by a gain recorded on both, the redemptions received during the period on our investment in the Columbia Portfolio and the change in the recorded fair value of the units held during the period.

For the thirty-nine weeks ended September 23, 2008, we earned $1.38 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 3.7 percent (4.3 percent for Company-owned bakery-cafes and 3.4 percent for franchise-operated bakery-cafes); system-wide average weekly sales increased 1.9 percent to $38,939 ($37,830 for Company-owned bakery-cafes and $39,783 for franchise-operated bakery-cafes); 70 new bakery-cafes opened system-wide (27 Company-owned bakery-cafes and 43 franchise-operated bakery-cafes); and six bakery-cafes closed system-wide (four Company-owned bakery-cafes and two franchise-operated bakery-cafes). In addition, beginning in the first quarter of fiscal 2008, we adjusted our 2008 development plans and made a determination to raise our sales hurdles for new bakery-cafe development and to no longer develop specific sites. As a result of this determination, we recorded a charge of $2.8 million, or $0.07 per diluted share, for the thirty-nine weeks ended September 23, 2008, to general and administrative expenses related to severance, the write-off of capitalized assets and overhead costs and the termination of leases for specific sites that we decided to no longer develop. Our results for the thirty-nine weeks ended September 23, 2008 of $1.38 per diluted share also included an aggregate $0.04 per diluted share negative impact from unfavorable tax adjustments and the net loss recorded on both the redemptions received during the period on our investment in the Columbia Portfolio and the change in the recorded fair value of the units held during the period. Our results for the thirty-nine weeks ended September 23, 2008 also reflected the significant increase in commodity prices year-over-year that is further discussed below under “Results of Operations — Costs and Expenses.”

The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Consolidated Statements of Operations for the periods indicated. Percentages may not add due to rounding:

		For the 13 Weeks Ended								For the 39 Weeks Ended
		September 29, 2009				September 23, 2008				September 29, 2009				September 23, 2008
Revenues:
Bakery-cafe sales			85.3	%			85.2	%			85.2	%			85.4	%
Franchise royalties and fees			5.8				5.8				5.8				5.7
Fresh dough sales to franchisees			8.9				9.1				9.0				8.9
Total revenues			100.0	%			100.0	%			100.0	%			100.0	%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products			29.3	%			30.4	%			29.6	%			30.4	%
Labor			32.4				32.3				32.5				32.0
Occupancy			8.5				8.5				8.5				8.3
Other operating expenses			14.0				13.8				13.7				13.3
Total bakery-cafe expenses			84.1				84.9				84.2				83.9
Fresh dough cost of sales to franchisees (2)			83.3				94.5				83.8				95.7
Depreciation and amortization			5.1				5.3				5.1				5.2
General and administrative expenses			6.0				6.3				6.0				6.7
Pre-opening expenses			0.2				0.3				0.1				0.3
Total costs and expenses			90.5				92.8				90.5				92.5
Operating profit			9.5				7.2				9.5				7.5
Interest expense			—				0.1				0.1				0.1
Other (income) expense, net			0.4				0.1				0.1				0.1
Income before income taxes			9.1				6.9				9.3				7.3
Income taxes			3.5				2.6				3.5				2.8
Net income			5.6				4.4				5.8				4.5
Less: net income attributable to noncontrolling interest			—				—				0.1				0.1
Net income attributable to Panera Bread Company			5.6	%			4.4	%			5.7	%			4.5	%