Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - PANERA BREAD CO | Financial_Report.xls |
EX-32 - EXHIBIT 32 - PANERA BREAD CO | c06219exv32.htm |
EX-31.2 - EXHIBIT 31.2 - PANERA BREAD CO | c06219exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - PANERA BREAD CO | c06219exv31w1.htm |
Table of Contents
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 |
For the quarterly period ended September 28, 2010
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 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 | 04-2723701 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
3630 South Geyer Road, Suite 100, Saint Louis, MO | 63127 | |
(Address of Principal Executive Offices) | (Zip Code) |
(314) 984-1000
(Registrants Telephone Number, Including Area Code)
(Registrants Telephone Number, Including Area Code)
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). þ 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, 2010, 28,953,403 shares and 1,391,907 shares of the registrants 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
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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27 | ||||||||
28 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
September 28, 2010 | December 29, 2009 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 231,740 | $ | 246,400 | ||||
Trade accounts receivable, net |
18,678 | 17,317 | ||||||
Other accounts receivable |
10,288 | 11,176 | ||||||
Inventories |
12,049 | 12,295 | ||||||
Prepaid expenses |
25,336 | 16,211 | ||||||
Deferred income taxes |
24,048 | 18,685 | ||||||
Total current assets |
322,139 | 322,084 | ||||||
Property and equipment, net |
412,684 | 403,784 | ||||||
Other assets: |
||||||||
Goodwill |
89,817 | 87,481 | ||||||
Other intangible assets, net |
18,456 | 19,195 | ||||||
Deposits and other |
5,019 | 4,621 | ||||||
Total other assets |
113,292 | 111,297 | ||||||
Total assets |
$ | 848,115 | $ | 837,165 | ||||
LIABILITIES |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 9,250 | $ | 6,417 | ||||
Accrued expenses |
169,290 | 135,842 | ||||||
Total current liabilities |
178,540 | 142,259 | ||||||
Deferred rent |
46,884 | 43,371 | ||||||
Deferred income taxes |
27,624 | 28,813 | ||||||
Other long-term liabilities |
36,766 | 25,686 | ||||||
Total liabilities |
289,814 | 240,129 | ||||||
Commitments and contingencies (Note 8)
|
||||||||
EQUITY |
||||||||
Panera Bread Company stockholders equity: |
||||||||
Common stock, $.0001 par value per share: |
||||||||
Class A, 75,000,000 shares authorized;
30,095,738 issued and 28,977,898
outstanding in 2010; and 30,364,915 issued and
30,196,808 outstanding in 2009 |
3 | 3 | ||||||
Class B, 10,000,000 shares authorized; 1,392,107
issued and outstanding in
2010 and in 2009 |
| | ||||||
Treasury stock, carried at cost; 1,117,840 shares
in 2010 and 168,107 shares in 2009 |
(78,874 | ) | (3,928 | ) | ||||
Additional paid-in capital |
128,611 | 168,288 | ||||||
Accumulated other comprehensive income |
271 | 224 | ||||||
Retained earnings |
507,791 | 432,449 | ||||||
Total Panera Bread Company stockholders equity |
557,802 | 597,036 | ||||||
Noncontrolling interest |
499 | | ||||||
Total equity |
$ | 558,301 | $ | 597,036 | ||||
Total liabilities and equity |
$ | 848,115 | $ | 837,165 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
3
Table of Contents
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share information)
For the 13 Weeks Ended | For the 39 Weeks Ended | |||||||||||||||
September 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Bakery-cafe sales |
$ | 315,231 | $ | 285,871 | $ | 950,155 | $ | 840,397 | ||||||||
Franchise royalties and fees |
21,521 | 19,369 | 64,025 | 57,153 | ||||||||||||
Fresh dough and other product sales to franchisees |
35,242 | 29,778 | 100,148 | 88,971 | ||||||||||||
Total revenues |
371,994 | 335,018 | 1,114,328 | 986,521 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Bakery-cafe expenses: |
||||||||||||||||
Cost of food and paper products |
89,869 | 83,715 | 270,894 | 248,765 | ||||||||||||
Labor |
103,192 | 92,682 | 306,905 | 272,892 | ||||||||||||
Occupancy |
25,071 | 24,200 | 74,112 | 71,558 | ||||||||||||
Other operating expenses |
45,786 | 39,880 | 129,244 | 114,736 | ||||||||||||
Total bakery-cafe expenses |
263,918 | 240,477 | 781,155 | 707,951 | ||||||||||||
Fresh dough and other product cost of sales to franchisees |
30,272 | 24,812 | 82,909 | 74,582 | ||||||||||||
Depreciation and amortization |
16,300 | 16,988 | 50,224 | 49,986 | ||||||||||||
General and administrative expenses |
24,297 | 20,195 | 73,414 | 59,041 | ||||||||||||
Pre-opening expenses |
1,211 | 624 | 2,367 | 1,370 | ||||||||||||
Total costs and expenses |
335,998 | 303,096 | 990,069 | 892,930 | ||||||||||||
Operating profit |
35,996 | 31,922 | 124,259 | 93,591 | ||||||||||||
Interest expense |
165 | 163 | 498 | 537 | ||||||||||||
Other (income) expense, net |
(540 | ) | 1,248 | 2,776 | 1,090 | |||||||||||
Income before income taxes |
36,371 | 30,511 | 120,985 | 91,964 | ||||||||||||
Income taxes |
13,656 | 11,617 | 45,774 | 34,807 | ||||||||||||
Net income |
22,715 | 18,894 | 75,211 | 57,157 | ||||||||||||
Less: net (loss) income attributable to noncontrolling interest |
(82 | ) | | (131 | ) | 801 | ||||||||||
Net income attributable to Panera Bread Company |
$ | 22,797 | $ | 18,894 | $ | 75,342 | $ | 56,356 | ||||||||
Earnings per common share attributable to Panera Bread Company: |
||||||||||||||||
Basic |
$ | 0.75 | $ | 0.61 | $ | 2.44 | $ | 1.84 | ||||||||
Diluted |
$ | 0.75 | $ | 0.61 | $ | 2.42 | $ | 1.82 | ||||||||
Weighted average shares of common and common
equivalent shares outstanding: |
||||||||||||||||
Basic |
30,273 | 30,748 | 30,879 | 30,577 | ||||||||||||
Diluted |
30,534 | 31,065 | 31,193 | 30,925 | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
4
Table of Contents
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
For the 39 Weeks Ended | ||||||||
September 28, 2010 | September 29, 2009 | |||||||
Cash flows from operations: |
||||||||
Net income |
$ | 75,211 | $ | 57,157 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
50,224 | 49,986 | ||||||
Stock-based compensation expense |
7,112 | 6,464 | ||||||
Tax benefit from exercise of stock options |
(5,950 | ) | (3,102 | ) | ||||
Deferred income taxes |
(6,552 | ) | 17,811 | |||||
Other |
497 | 900 | ||||||
Changes in operating assets and liabilities, excluding the effect of acquisitions: |
||||||||
Trade and other accounts receivable |
(3,806 | ) | 621 | |||||
Inventories |
246 | 753 | ||||||
Prepaid expenses |
(9,125 | ) | (12,442 | ) | ||||
Deposits and other |
(398 | ) | (1,107 | ) | ||||
Accounts payable |
2,833 | 2,142 | ||||||
Accrued expenses |
29,283 | 13,001 | ||||||
Deferred rent |
3,513 | 2,097 | ||||||
Other long-term liabilities |
11,080 | (27 | ) | |||||
Net cash provided by operating activities |
154,168 | 134,254 | ||||||
Cash flows from investing activities: |
||||||||
Additions to property and equipment |
(49,297 | ) | (37,678 | ) | ||||
Proceeds from sale of bakery-cafes |
2,204 | | ||||||
Investment maturities proceeds |
| 4,316 | ||||||
Net cash used in investing activities |
(47,093 | ) | (33,362 | ) | ||||
Cash flows from financing activities: |
||||||||
Repurchase of common stock |
(153,376 | ) | (1,681 | ) | ||||
Exercise of employee stock options |
24,327 | 14,224 | ||||||
Tax benefit from exercise of stock options |
5,950 | 3,102 | ||||||
Proceeds from issuance of common stock under employee benefit plans |
1,364 | 1,247 | ||||||
Purchase of noncontrolling interest |
| (20,081 | ) | |||||
Net cash used in financing activities |
(121,735 | ) | (3,189 | ) | ||||
Net (decrease) increase in cash and cash equivalents |
(14,660 | ) | 97,703 | |||||
Cash and cash equivalents at beginning of period |
246,400 | 74,710 | ||||||
Cash and cash equivalents at end of period |
$ | 231,740 | $ | 172,413 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
5
Table of Contents
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
United States (GAAP), under the rules and regulations of the United States 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 29,
2009. These unaudited consolidated financial statements should be read in conjunction with such
audited consolidated financial statements, which are included in the Companys Annual Report on
Form 10-K for the fiscal year ended December 29, 2009 as filed with the SEC on February 26, 2010.
The unaudited consolidated financial statements consist of the accounts of Panera Bread Company and
its wholly owned and majority owned direct and indirect 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 presented. Interim results are
not necessarily indicative of the results for any other interim period or for the entire year.
Subsequent Events
The Company has evaluated all events or transactions occurring between the balance sheet date and
the date of issuance of the consolidated financial statements. Refer to Note 11 for information
related to subsequent events.
Reclassifications
The Company reclassified deposits and other from cash flows from investing activities to cash flows
from operating activities in the Consolidated Statements of Cash Flows to more appropriately
reflect the nature of the activities in the account. The Company has also reclassified prior
periods in order to conform to the current presentation.
Recent Accounting Pronouncements
On December 30, 2009, the Company adopted the updated guidance issued by the Financial Accounting
Standards Board (FASB) related to fair value measurements and disclosures, which requires a
reporting entity to separately disclose the amounts of significant transfers in and out of Level 1
and Level 2 fair value measurements and to describe the reasons for the transfers. The updated
guidance also requires that an entity provide fair value measurement disclosures for each class of
assets and liabilities and disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and non-recurring Level 2 and Level 3 fair value measurements. This
guidance was effective for interim or annual financial reporting periods beginning after
December 15, 2009. The adoption of this updated guidance did not have an impact on the Companys
consolidated results of operations or financial condition. In addition, the updated guidance
requires that in the reconciliation for fair value measurements using significant unobservable
inputs, or Level 3 fair value measurements, a reporting entity separately disclose information
about purchases, sales, issuances and settlements on a gross basis rather than as one net number.
This guidance is effective for fiscal years beginning after December 15, 2010 and for interim
periods therein. Therefore, the Company has not yet adopted the guidance with respect to the roll
forward activity in Level 3 fair value measurements. The Company does not expect the adoption of
this new guidance to have a material effect on its financial position or results of operations.
On December 30, 2009, the Company adopted the updated guidance issued by the FASB on accounting for
variable interest entities (VIE), which changes the process for how an enterprise determines
which party consolidates a VIE to a primarily qualitative analysis. The enterprise that
consolidates the VIE (the primary beneficiary) is defined as the enterprise with (1) the power to
direct activities of the VIE that most significantly affect the VIEs economic performance and
(2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Upon
adoption, companies must reconsider their conclusions on whether an entity should be consolidated
and, should a change result, record the effect on net assets as a cumulative effect adjustment to
retained earnings. The adoption of this updated guidance did not have an impact on the Companys
consolidated results of operations or financial condition.
Note 2. Business Combination
On September 10, 2008, the Companys Canadian subsidiary, Panera Bread ULC, as lender, entered into
a Cdn. $3.5 million secured revolving credit facility agreement and franchise agreements with
Millennium Bread Inc. (Millennium) and certain of Millenniums present and future subsidiaries
(the Franchise Guarantors), pursuant to which Millennium would operate three Panera Bread
bakery-cafes in Ontario, Canada. See Note 8 for additional information pertaining to the revolving
credit facility with Millennium.
6
Table of Contents
On March 30, 2010, PB Biscuit, ULC (PB Biscuit) was formed by Panera Bread ULC through the
contribution of its Cdn. $3.5 million note receivable from Millennium and cash. On March 31, 2010,
PB Biscuit acquired certain assets and liabilities and the operations of Millenniums three Panera
Bread bakery-cafes. The transaction was accounted for as an acquisition under the business
combination authoritative guidance. In exchange for the bakery-cafe operations and certain assets
and liabilities, PB Biscuit assigned the Cdn. $3.5 million note receivable to and issued minority
ownership interest to Millennium at a fair value of $0.6 million (28.5 percent ownership of PB
Biscuits voting shares), for a total consideration of $4.1 million, subject to certain closing
adjustments.
The Consolidated Statements of Operations include the results of operations from the operating
bakery-cafes from the date of the acquisition. This non-cash transaction is excluded from the
Consolidated Statements of Cash Flows for the thirty-nine weeks ended September 28, 2010. The pro
forma impact of the acquisition on prior periods is not presented, as the impact was not material
to reported results. These acquired bakery-cafes are included in our Company bakery-cafe
operations segment. The Company allocated the purchase price to the tangible and intangible assets
acquired in the acquisition at their estimated fair values with the remainder allocated to tax
deductible goodwill as follows: $2.3 million to property and equipment, $0.5 million of net assumed
current liabilities, and $2.3 million to goodwill.
Note 3. Noncontrolling Interest
The following tables illustrate the changes in equity for the thirty-nine weeks ended September 28,
2010 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 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 | ||||||||||||||||||||||||||||||||||
Total comprehensive income |
57,620 | $ | 57,620 | |||||||||||||||||||||||||||||||||
Purchase of noncontrolling interest |
(23,124 | ) | | | | (18,799 | ) | | | (4,325 | ) | |||||||||||||||||||||||||
Adjustment to additional paid-in capital |
(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 | $ | | |||||||||||||||||||
Balance, December 29, 2009 |
$ | 597,036 | $ | 3 | $ | | $ | (3,928 | ) | $ | 168,288 | $ | 432,449 | $ | 224 | $ | | |||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||||||
Net income (loss) |
75,211 | $ | 75,211 | | | | | 75,342 | | (131 | ) | |||||||||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
47 | 47 | | | | | | 47 | | |||||||||||||||||||||||||||
Total other comprehensive income |
47 | 47 | ||||||||||||||||||||||||||||||||||
Total comprehensive income |
75,258 | $ | 75,258 | |||||||||||||||||||||||||||||||||
Noncontrolling interest in PB Biscuit |
630 | | | | | | | 630 | ||||||||||||||||||||||||||||
Issuance of common stock |
1,364 | | | | 1,364 | | | | ||||||||||||||||||||||||||||
Exercise of employee stock options |
24,327 | | | | 24,327 | | | | ||||||||||||||||||||||||||||
Stock-based compensation expense |
7,112 | | | | 7,112 | | | | ||||||||||||||||||||||||||||
Repurchase of common stock |
(153,376 | ) | | | (74,946 | ) | (78,430 | ) | | | | |||||||||||||||||||||||||
Tax benefit from exercise of stock options |
5,950 | | | | 5,950 | | | | ||||||||||||||||||||||||||||
Balance, September 28, 2010 |
$ | 558,301 | $ | 3 | $ | | $ | (78,874 | ) | $ | 128,611 | $ | 507,791 | $ | 271 | $ | 499 | |||||||||||||||||||
Refer to Note 2 for information pertaining to the noncontrolling interest in PB Biscuit.
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 Companys Consolidated Statements of Operations and the 49 percent of
equity attributable to Paradise presented as noncontrolling interest in the Companys Consolidated
Balance Sheets.
7
Table of Contents
On June 2, 2009, the Company purchased 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 former shareholders of the remaining 49 percent of Paradise (the Prior
Shareholders). Approximately $20.0 million of the purchase price, as well as the transaction
costs, were paid by the Company 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 June 2, 2011, with any remaining holdback amounts reverting to the
Prior Shareholders. 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 Companys
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.
Note 4. Fair Value Measurements
The Companys $10.1 million and $115.9 million in cash equivalents at September 28, 2010 and
December 29, 2009, respectively, were recorded at fair value in the Consolidated Balance Sheets
based on quoted market prices for identical securities (Level 1 inputs).
Note 5. Inventories
Inventories consisted of the following (in thousands):
September 28, 2010 | December 29, 2009 | |||||||
Food: |
||||||||
Fresh dough facilities: |
||||||||
Raw materials |
$ | 2,574 | $ | 2,573 | ||||
Finished goods |
342 | 275 | ||||||
Bakery-cafes: |
||||||||
Raw materials |
7,126 | 7,304 | ||||||
Paper goods |
2,007 | 2,143 | ||||||
$ | 12,049 | $ | 12,295 | |||||
Note 6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
September 28, 2010 | December 29, 2009 | |||||||
Compensation and related employment taxes |
$ | 44,069 | $ | 33,416 | ||||
Unredeemed gift cards |
28,996 | 37,454 | ||||||
Insurance |
20,347 | 16,265 | ||||||
Capital expenditures |
16,624 | 6,108 | ||||||
Taxes, other than income tax |
15,405 | 11,072 | ||||||
Advertising |
7,784 | 2,465 | ||||||
Rent |
5,915 | 5,019 | ||||||
Fresh dough and other product operations |
5,190 | 5,263 | ||||||
Utilities |
4,447 | 3,163 | ||||||
Deferred revenue |
2,380 | 1,334 | ||||||
Deferred purchase price of noncontrolling interest (Note 3) |
2,279 | 2,264 | ||||||
Other |
15,854 | 12,019 | ||||||
$ | 169,290 | $ | 135,842 | |||||
Note 7. 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 Amended and Restated
Credit Agreement, which is collateralized by the capital stock of the Companys present and future
material subsidiaries, will become due on March 7, 2013, subject to acceleration upon certain
specified events of default.
As of September 28, 2010 and December 29, 2009, the Company had no balance outstanding under the
Amended and Restated Credit Agreement. The Company incurred $0.1 million of commitment fees for
each of the thirteen weeks ended September 28, 2010 and September 29, 2009 and $0.3 million for
each of the thirty-nine weeks ended September 28, 2010 and September 29, 2009, respectively.
Accrued interest related to the commitment fees was $0.1 million at both September 28, 2010 and
December 29, 2009. As of September 28, 2010, the Company was in compliance with all covenants
included in the Amended and Restated Credit Agreement.
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Note 8. Commitments and Contingencies
Lease Obligations
As of September 28, 2010, the Company guaranteed operating leases of 28 franchisee locations and
two 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 November 23, 2010 to December 31, 2023 and a potential amount of future rental
payments of approximately $31.3 million as of September 28, 2010. The Companys obligations under
these leases will generally 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 issuance of the
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 an analysis of the facts and circumstances of each such lease
and each such franchisees 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 decided not to develop.
During the thirteen weeks ended September 28, 2010, the Company had no activity related to the
accrual. During the thirteen weeks ended September 29, 2009, there were no significant changes
made to the accrual. During the thirty-nine weeks ended September 28, 2010, the Company decreased
the reserve by $0.4 million due to the settlement of two leases and the Companys decision to
develop one bakery-cafe. During the thirty-nine weeks ended September 29, 2009, the Company
decreased the reserve by $0.4 million due to its subsequent determination to develop one of the
sites and the settlement of one lease. No other significant changes were made to the accrual
during the thirty-nine weeks ended September 28, 2010. As of September 28, 2010 and December 29,
2009, the Company had no accrual and approximately $0.4 million accrued in its Consolidated Balance
Sheets relating to the termination of these specific leases.
Related Party Credit Agreement
On September 10, 2008, the Companys Canadian subsidiary, Panera Bread ULC, as lender, entered into
a Cdn. $3.5 million secured revolving credit facility agreement with Millennium, as borrower, and
the Franchisee Guarantors, who entered into franchise agreements with Panera Bread ULC to operate
three Panera Bread bakery-cafes in Ontario, Canada. On April 7, 2009, Millennium requested a Cdn.
$3.5 million advance under the credit agreement for payment of the costs to develop the
bakery-cafes, which was included in other accounts receivable in the Consolidated Balance Sheet as
of December 29, 2009. The proceeds from the credit facility were used by Millennium to pay costs
to develop and construct the Franchisee Guarantors bakery-cafes and for their day-to-day operating
requirements. On March 31, 2010, the credit facility was terminated through the purchase
transaction with Millennium, as described in Note 2.
Legal Proceedings
On January 25, 2008 and February 26, 2008, purported class action lawsuits were filed against the
Company and three of the Companys current or former executive officers by the Western Washington
Laborers-Employers Pension Trust and Sue Trachet, respectively, on behalf of investors who
purchased the Companys 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 Companys 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. 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 that it and the other defendants have meritorious defenses to each of
the claims in this lawsuit and the Company is vigorously defending the lawsuit. On October 6,
2008, the Company filed a motion to dismiss all of the claims in this lawsuit. Following filings
by both parties on the Companys motion to dismiss, on June 25, 2009, the Court converted the
Companys 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 Companys motion for summary judgment to allow the plaintiff to conduct
discovery. Following a hearing and subsequent filings by both parties on the plaintiffs request
for discovery, on November 6, 2009, the Court denied the plaintiffs request. The plaintiff filed
an opposition to the Companys motion for summary judgment on December 12, 2009, and the Company
filed its reply in support of its motion on December 21, 2009. On March 16, 2010, the Court
granted in part and denied in part the Companys motion for summary judgment. On April 5, 2010,
the Court granted a joint motion by the parties to stay the case through July 6, 2010, which stay
was subsequently extended by the Court until July 30, 2010, pending an attempt by the parties to
resolve through mediation. Mediation was not successful and on August 30, 2010, the Company
answered the complaint. An adverse resolution of the lawsuit could have a material adverse effect
on the Companys 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.
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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
that it and the other defendants have meritorious defenses to each of the claims in this lawsuit
and the Company is vigorously defending the lawsuit. On July 18, 2008, the Company filed a motion
to dismiss all of the claims in this lawsuit. Following filings by both parties on the Companys
motion to dismiss, on December 14, 2009, the Court denied the Companys motion. The Company filed
an answer to the complaint on January 27, 2010. On July 28, 2010, the Company filed a motion for
summary judgment. The Court will hold a hearing on the motion for summary judgment on November 19,
2010. 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 Companys 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 December 9, 2009, a purported class action lawsuit was filed against the Company and one of its
subsidiaries by Nick Sotoudeh, a former employee of the Company. The lawsuit was filed in the
California Superior Court, County of Contra Costa. The complaint alleges, among other things,
violations of the California Labor Code, failure to pay overtime, failure to provide meal and rest
periods and termination compensation and violations of Californias Unfair Competition Law. The
complaint seeks, among other relief, collective and class certification of the lawsuit, unspecified
damages, costs and expenses, including attorneys fees, and such other relief as the Court might
find just and proper. The Company believes it and the other defendant have meritorious defenses to
each of the claims in this lawsuit and the Company is prepared to vigorously defend the lawsuit.
There can be no assurance, however, that the Company will be successful, and an adverse resolution
of the lawsuit could have a material adverse effect on the Companys 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.
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 9. Business Segment Information
The Company operates three business segments. The Company 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 and Other Product Operations segment supplies fresh dough, produce, tuna, cream
cheese and indirectly supplies proprietary sweet goods items through a contract manufacturing
arrangement, to Company-owned and franchise-operated bakery-cafes. The fresh dough is sold to a
number of 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.
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Information related to the Companys three business segments follows (in thousands):
For the 13 Weeks Ended | For the 39 Weeks Ended | |||||||||||||||
September 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Company bakery-cafe operations |
$ | 315,231 | $ | 285,871 | $ | 950,155 | $ | 840,397 | ||||||||
Franchise operations |
21,521 | 19,369 | 64,025 | 57,153 | ||||||||||||
Fresh dough and other product operations |
64,181 | 52,204 | 184,732 | 158,506 | ||||||||||||
Intercompany sales eliminations |
(28,939 | ) | (22,426 | ) | (84,584 | ) | (69,535 | ) | ||||||||
Total revenues |
$ | 371,994 | $ | 335,018 | $ | 1,114,328 | $ | 986,521 | ||||||||
Segment profit: |
||||||||||||||||
Company bakery-cafe operations |
$ | 51,313 | $ | 45,394 | $ | 169,000 | $ | 132,446 | ||||||||
Franchise operations |
19,966 | 18,140 | 59,742 | 53,077 | ||||||||||||
Fresh dough and other product operations |
4,970 | 4,966 | 17,239 | 14,389 | ||||||||||||
Total segment profit |
$ | 76,249 | $ | 68,500 | $ | 245,981 | $ | 199,912 | ||||||||
Depreciation and amortization |
$ | 16,300 | $ | 16,988 | $ | 50,224 | $ | 49,986 | ||||||||
Unallocated general and administrative expenses |
22,742 | 18,966 | 69,131 | 54,965 | ||||||||||||
Pre-opening expenses |
1,211 | 624 | 2,367 | 1,370 | ||||||||||||
Interest expense |
165 | 163 | 498 | 537 | ||||||||||||
Other (income) expense, net |
(540 | ) | 1,248 | 2,776 | 1,090 | |||||||||||
Income before income taxes |
$ | 36,371 | $ | 30,511 | $ | 120,985 | $ | 91,964 | ||||||||
Depreciation and amortization: |
||||||||||||||||
Company bakery-cafe operations |
$ | 13,420 | $ | 14,092 | $ | 41,525 | $ | 41,411 | ||||||||
Fresh dough and other product operations |
1,855 | 1,899 | 5,686 | 5,754 | ||||||||||||
Corporate administration |
1,025 | 997 | 3,013 | 2,821 | ||||||||||||
Total depreciation and amortization |
$ | 16,300 | $ | 16,988 | $ | 50,224 | $ | 49,986 | ||||||||
Capital expenditures: |
||||||||||||||||
Company bakery-cafe operations |
$ | 20,212 | $ | 12,954 | $ | 38,978 | $ | 32,422 | ||||||||
Fresh dough and other product operations |
2,800 | 1,015 | 4,299 | 2,650 | ||||||||||||
Corporate administration |
2,492 | 1,064 | 6,020 | 2,606 | ||||||||||||
Total capital expenditures |
$ | 25,504 | $ | 15,033 | $ | 49,297 | $ | 37,678 | ||||||||
September 28, 2010 | December 29, 2009 | |||||||
Segment assets: |
||||||||
Company bakery-cafe operations |
$ | 511,135 | $ | 498,806 | ||||
Franchise operations |
6,051 | 3,850 | ||||||
Fresh dough and other product operations |
47,309 | 48,616 | ||||||
Total segment assets |
$ | 564,495 | $ | 551,272 | ||||
Unallocated trade and other accounts receivable |
1,994 | 2,267 | ||||||
Unallocated property and equipment |
18,689 | 14,437 | ||||||
Unallocated deposits and other |
4,381 | 4,104 | ||||||
Other unallocated assets |
258,556 | 265,085 | ||||||
Total assets |
$ | 848,115 | $ | 837,165 | ||||
Unallocated trade and other accounts receivable relates primarily to rebates and interest
receivable, unallocated property and equipment relates primarily to corporate fixed assets,
unallocated deposits and other relates primarily to insurance deposits, and other unallocated
assets relates primarily to cash and cash equivalents and deferred income taxes.
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Note 10. 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 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Amounts used for basic and diluted per share calculations: |
||||||||||||||||
Net income attributable to Panera Bread Company |
$ | 22,797 | $ | 18,894 | $ | 75,342 | $ | 56,356 | ||||||||
Weighted average number of shares outstanding basic |
30,273 | 30,748 | 30,879 | 30,577 | ||||||||||||
Effect of dilutive stock-based employee compensation awards |
261 | 317 | 314 | 348 | ||||||||||||
Weighted average number of shares outstanding diluted |
30,534 | 31,065 | 31,193 | 30,925 | ||||||||||||
Earnings per common share attributable to Panera Bread Company: |
||||||||||||||||
Basic |
$ | 0.75 | $ | 0.61 | $ | 2.44 | $ | 1.84 | ||||||||
Diluted |
$ | 0.75 | $ | 0.61 | $ | 2.42 | $ | 1.82 | ||||||||
For the thirteen and thirty-nine weeks ended September 29, 2009, options and restricted stock of
0.4 million shares and 0.3 million shares, respectively, were excluded in calculating diluted
earnings per share as the exercise price exceeded fair market value and the inclusion of such
shares would have been antidilutive. There were no antidilutive shares for the thirteen and
thirty-nine weeks ended September 28, 2010.
Note 11. Subsequent Event
On September 29, 2010, the Company completed the purchase of substantially all the assets and
certain liabilities of 37 bakery-cafes from its New Jersey franchisee for a purchase price of
approximately $55.0 million, which the Company paid with cash on hand at the time of closing. The
Companys results for the reported periods were not impacted by this acquisition as it was
completed subsequent to September 28, 2010.
Item 2. | Managements 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 expressed or implied, of our
anticipated growth, operating results, plans, objectives and future earnings per share, 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, anticipate, 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 those discussed from time to time in our Securities and Exchange Commission reports,
including our Form 10-K for the year ended December 29, 2009 and our quarterly reports on Form
10-Q. 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 expressly disclaim 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 and other product sales
to franchisees, and franchise royalties and fees. Fresh dough and other product sales to
franchisees are primarily the sales of fresh dough, produce, 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 and other product sales to franchisees
relates primarily to the sale of fresh dough, produce, tuna, and cream cheese to certain of our
franchisees. General and administrative, depreciation and amortization, and pre-opening expenses
relate to all areas of revenue generation.
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Table of Contents
Use of Non-GAAP Measurements
We include in this report information on Company-owned, franchise-operated and system-wide
comparable bakery-cafe sales percentages. In fiscal 2010, we modified the method by which we
determine bakery-cafes included in our comparable bakery-cafe sales percentages to include those
bakery-cafes with an open date prior to the first day of our prior fiscal year, which we refer to
as our base store bakery-cafes. Previously, comparable bakery-cafe sales percentages were based on
bakery-cafes that had been in operation for 18 months. The modification of the method did not have
a material impact on previously reported amounts. Company-owned comparable bakery-cafe sales
percentages are based on sales from Company-owned bakery-cafes included in our base store
bakery-cafes. Franchise-operated comparable bakery-cafe sales percentages are based on sales from
franchised bakery-cafes, as reported by franchisees, that are included in our base store
bakery-cafes. System-wide comparable bakery-cafe sales percentages are based on sales at
Company-owned and franchise-operated bakery-cafes that are included in our base store bakery-cafes.
Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe
concepts are included in our comparable bakery-cafe sales percentages after we have acquired a 100
percent ownership interest and such acquisition occurred prior to the first day of our prior fiscal
year. Comparable bakery-cafe sales exclude closed 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 United States, (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 our 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 in the
period by operating weeks in the period. Accordingly, year-over-year results reflect sales for all
locations, whereas comparable bakery-cafe sales exclude closed locations and are based on sales
from bakery-cafes included in our base store bakery-cafes. 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 28, 2010, we earned $0.75 per diluted share with the
following performance on key metrics: system-wide comparable bakery-cafe sales grew 6.9 percent
compared to the thirteen weeks ended September 29, 2009 (growth of 5.5 percent for Company-owned
bakery-cafes and growth of 7.9 percent for franchise-operated bakery-cafes); system-wide average
weekly sales increased 6.2 percent to $41,813 ($40,487 for Company-owned bakery-cafes and $42,797
for franchise-operated bakery-cafes); and 22 new bakery-cafes opened system-wide (10 Company-owned
bakery-cafes and 12 franchise-operated bakery-cafes). Our results for the thirteen weeks ended
September 28, 2010 of $0.75 per diluted share included a favorable impact of $0.01 per diluted
share from the repurchase of 1,007,984 shares under our $600.0 million share repurchase
authorization.
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 2.7 percent
compared to the thirteen weeks ended September 23, 2008 (growth of 3.2 percent for Company-owned
bakery-cafes and growth of 2.4 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 10 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, partially offset by a gain recorded on both, the redemptions 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 during the period.
For the thirty-nine weeks ended September 28, 2010, we earned $2.42 per diluted share with the
following performance on key metrics: system-wide comparable bakery-cafe sales grew 8.8 percent
compared to the thirty-nine weeks ended September 29, 2009 (growth of 8.3 percent for Company-owned
bakery-cafes and growth of 9.1 percent for franchise-operated bakery-cafes); system-wide average
weekly sales increased 8.1 percent to $42,210 ($41,121 for Company-owned bakery-cafes and $43,016
for franchise-operated bakery-cafes); 43 new bakery-cafes opened system-wide (21 Company-owned
bakery-cafes and 22 franchise-operated bakery-cafes); and two bakery-cafes closed system-wide (one
Company-owned bakery-cafe and one franchise-operated bakery-cafe). Our results for thirty-nine
weeks ended September 28, 2010 of $2.42 per diluted share included a favorable impact of $0.04 per
diluted share from the repurchase of 1,905,540
shares under our $600.0 million share repurchase authorization. This favorable impact was offset
by the negative impact of $0.05 per diluted share related to an on-going unclaimed property audit.
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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 0.9 percent
compared to the thirty-nine weeks ended September 23, 2008 (growth of 0.7 percent for Company-owned
bakery-cafes and growth of 1.0 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 10 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.
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 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Bakery-cafe sales |
84.7 | % | 85.3 | % | 85.3 | % | 85.2 | % | ||||||||
Franchise royalties and fees |
5.8 | 5.8 | 5.7 | 5.8 | ||||||||||||
Fresh dough and other product sales to franchisees |
9.5 | 8.9 | 9.0 | 9.0 | ||||||||||||
Total revenues |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Costs and expenses: |
||||||||||||||||
Bakery-cafe expenses (1): |
||||||||||||||||
Cost of food and paper products |
28.5 | % | 29.3 | % | 28.5 | % | 29.6 | % | ||||||||
Labor |
32.7 | 32.4 | 32.3 | 32.5 | ||||||||||||
Occupancy |
8.0 | 8.5 | 7.8 | 8.5 | ||||||||||||
Other operating expenses |
14.5 | 14.0 | 13.6 | 13.7 | ||||||||||||
Total bakery-cafe expenses |
83.7 | 84.1 | 82.2 | 84.2 | ||||||||||||
Fresh dough and other product cost of sales to franchisees (2) |
85.9 | 83.3 | 82.8 | 83.8 | ||||||||||||
Depreciation and amortization |
4.4 | 5.1 | 4.5 | 5.1 | ||||||||||||
General and administrative expenses |
6.5 | 6.0 | 6.6 | 6.0 | ||||||||||||
Pre-opening expenses |
0.3 | 0.2 | 0.2 | 0.1 | ||||||||||||
Total costs and expenses |
90.3 | 90.5 | 88.8 | 90.5 | ||||||||||||
Operating profit |
9.7 | 9.5 | 11.2 | 9.5 | ||||||||||||
Interest expense |
| | | 0.1 | ||||||||||||
Other (income) expense, net |
(0.1 | ) | 0.4 | 0.2 | 0.1 | |||||||||||
Income before income taxes |
9.8 | 9.1 | 10.9 | 9.3 | ||||||||||||
Income taxes |
3.7 | 3.5 | 4.1 | 3.5 | ||||||||||||
Net income |
6.1 | 5.6 | 6.7 | 5.8 | ||||||||||||
Less: net (loss) income attributable to noncontrolling interest |
| | | 0.1 | ||||||||||||
Net income attributable to Panera Bread Company |
6.1 | % | 5.6 | % | 6.8 | % | 5.7 | % | ||||||||
(1) | As a percentage of bakery-cafe sales. |
|
(2) | As a percentage of fresh dough and other product sales to franchisees. |
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The following table sets forth certain information and other data relating to Company-owned
and franchise-operated bakery-cafes for the periods indicated:
For the 13 Weeks Ended | For the 39 Weeks Ended | |||||||||||||||
September 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Number of bakery-cafes: |
||||||||||||||||
Company-owned: |
||||||||||||||||
Beginning of period |
595 | 566 | 585 | 562 | ||||||||||||
Bakery-cafes opened |
10 | 9 | 21 | 17 | ||||||||||||
Bakery-cafes closed |
| | (1 | ) | (4 | ) | ||||||||||
End of period |
605 | 575 | 605 | 575 | ||||||||||||
Franchise-operated: |
||||||||||||||||
Beginning of period |
804 | 779 | 795 | 763 | ||||||||||||
Bakery-cafes opened |
12 | 10 | 22 | 30 | ||||||||||||
Bakery-cafes closed |
| (2 | ) | (1 | ) | (6 | ) | |||||||||
End of period |
816 | 787 | 816 | 787 | ||||||||||||
System-wide: |
||||||||||||||||
Beginning of period |
1,399 | 1,345 | 1,380 | 1,325 | ||||||||||||
Bakery-cafes opened |
22 | 19 | 43 | 47 | ||||||||||||
Bakery-cafes closed |
| (2 | ) | (2 | ) | (10 | ) | |||||||||
End of period |
1,421 | 1,362 | 1,421 | 1,362 | ||||||||||||
Comparable Bakery-Cafe Sales
Fiscal comparable bakery-cafe sales growth for the periods indicated were as follows:
For the 13 Weeks Ended | For the 39 Weeks Ended | |||||||||||||||
September 28, 2010 | September 29, 2009 | September 28, 2010 | September 29, 2009 | |||||||||||||
Company-owned |
5.5 | % | 3.2 | % | 8.3 | % | 0.7 | % | ||||||||
Franchise-operated |
7.9 | % | 2.4 | % | 9.1 | % | 1.0 | % | ||||||||
System-wide |
6.9 | % | 2.7 | % | 8.8 | % | 0.9 | % |
In fiscal 2010, we modified the method by which we determine bakery-cafes included in our
comparable bakery-cafe sales percentages to include those bakery-cafes with an open date prior to
the first day of our prior fiscal year. Previously, comparable bakery-cafe sales percentages were
based on bakery-cafes that had been 100 percent owned and in operation for 18 months. The
modification of the method did not have a material impact on previously reported amounts.
Results of Operations
Revenues
Total revenues for the thirteen weeks ended September 28, 2010 increased 11.0 percent to $372.0
million compared to $335.0 million for the thirteen weeks ended September 29, 2009. The growth in
total revenues for the thirteen weeks ended September 28, 2010 compared to the same period in 2009
was primarily due to the opening of 65 new bakery-cafes system-wide since September 29, 2009 and to
the 6.9 percent increase in system-wide comparable bakery-cafe sales for the thirteen weeks ended
September 28, 2010. The system-wide average weekly sales per bakery-cafe for the periods indicated
were as follows:
For the 13 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
System-wide average
weekly sales |
$ | 41,813 | $ | 39,383 | 6.2 | % |
Total revenues for the thirty-nine weeks ended September 28, 2010 increased 13.0 percent to
$1,114.3 million compared to $986.5 million for the thirty-nine weeks ended September 29, 2009. The
growth in total revenues for the thirty-nine weeks ended September 28, 2010 compared to the same
period in 2009 was primarily due to the opening of 65 new bakery-cafes system-wide since September
29, 2009, and to the 8.8 percent increase in system-wide comparable bakery-cafe sales for the
thirty-nine weeks ended September 28, 2010. The system-wide average weekly sales per bakery-cafe
for the periods indicated were as follows:
For the 39 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
System-wide average
weekly sales |
$ | 42,210 | $ | 39,033 | 8.1 | % |
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Table of Contents
Bakery-cafe sales for the thirteen weeks ended September 28, 2010 increased 10.3 percent to
$315.2 million compared to $285.9 million for the thirteen weeks ended September 29, 2009. The
increase in bakery-cafe sales for the thirteen weeks ended September 28, 2010 compared to the same
period in 2009 was primarily due to the opening of 34 new Company-owned bakery-cafes since
September 29, 2009 and to the 5.5 percent increase in Company-owned comparable bakery-cafe sales
for the thirteen weeks ended September 28, 2010. This 5.5 percent growth in comparable bakery-cafe
sales was driven by approximately 0.2 percent of transaction growth and approximately 5.3 percent
average check growth. Average check growth, in turn, was comprised of retail price increases of
approximately 2.0 percent and positive mix impact of approximately 3.3 percent in comparison to the
same period in the prior year. In total, Company-owned bakery-cafe sales as a percentage of total
revenues decreased to 84.7 percent for the thirteen weeks ended September 28, 2010 as compared to
85.3 percent for the same period in 2009. The increase in average weekly sales for Company-owned
bakery-cafes for the thirteen weeks ended September 28, 2010 compared to the same period in 2009
was primarily due to an increase in transactions and average check growth. The average weekly
sales per Company-owned bakery-cafe and the number of operating weeks for the periods indicated
were as follows:
For the 13 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
Company-owned average weekly sales |
$ | 40,487 | $ | 38,655 | 4.7 | % | ||||||
Company-owned number of operating
weeks |
7,786 | 7,396 | 5.3 | % |
Bakery-cafe sales for the thirty-nine weeks ended September 28, 2010 increased 13.1 percent to
$950.2 million compared to $840.4 million for the thirty-nine weeks ended September 29, 2009. The
increase in bakery-cafe sales for the thirty-nine weeks ended September 28, 2010 compared to the
same period in 2009 was primarily due to the opening of 34 new Company-owned bakery-cafes since
September 29, 2009, and the 8.3 percent increase in comparable Company-owned bakery-cafe sales for
the thirty-nine weeks ended September 28, 2010. This 8.3 percent increase in comparable
bakery-cafe sales was driven by approximately 1.9 percent of transaction growth and approximately
6.4 percent average check growth. Average check growth, in turn, was comprised of retail price
increases of approximately 2.2 percent and positive mix impact of approximately 4.2 percent in
comparison to the same period in the prior year. In total, Company-owned bakery-cafe sales as a
percentage of total revenues increased to 85.3 percent for the thirty-nine weeks ended September
28, 2010 as compared to 85.2 percent for the same period in 2009. In addition, the increase in
average weekly sales for Company-owned bakery-cafes for the thirty-nine weeks ended September 28,
2010 compared to the same period in 2009 was due to an increase in transactions and average check
growth. The average weekly sales per Company-owned bakery-cafe and the number of operating weeks
for the periods indicated were as follows:
For the 39 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
Company-owned average weekly sales |
$ | 41,121 | $ | 38,178 | 7.7 | % | ||||||
Company-owned number of operating
weeks |
23,106 | 22,013 | 5.0 | % |
Franchise royalties and fees for the thirteen weeks ended September 28, 2010 increased 11.1
percent to $21.5 million compared to $19.4 million for the thirteen weeks ended September 29, 2009.
The components of franchise royalties and fees for the periods indicated were as follows (in
thousands):
For the 13 Weeks Ended | ||||||||
September 28, 2010 | September 29, 2009 | |||||||
Franchise royalties |
$ | 21,131 | $ | 19,080 | ||||
Franchise fees |
390 | 289 | ||||||
Total |
$ | 21,521 | $ | 19,369 | ||||
The increase in franchise royalty and fee revenues for the thirteen weeks ended September 28,
2010 compared to the same period in 2009 was primarily due to the opening of 31 franchise-operated
bakery-cafes since September 29, 2009 and the 7.9 percent increase in comparable franchise-operated
bakery-cafe sales for the thirteen weeks ended September 28, 2010. The average weekly sales per
franchise-operated bakery-cafe and the related number of operating weeks for the periods indicated
were as follows:
For the 13 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
Franchise-operated average weekly sales |
$ | 42,797 | $ | 39,913 | 7.2 | % | ||||||
Franchise-operated number of operating
weeks |
10,490 | 10,162 | 3.2 | % |
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Franchise royalties and fees for the thirty-nine weeks ended September 28, 2010 increased 12.0
percent to $64.0 million compared to $57.2 million for the thirty-nine weeks ended September 29,
2009. The components of franchise royalties and fees for the periods indicated were as follows (in
thousands):
For the 39 Weeks Ended | ||||||||
September 28, 2010 | September 29, 2009 | |||||||
Franchise royalties |
$ | 63,179 | $ | 56,256 | ||||
Franchise fees |
846 | 897 | ||||||
Total |
$ | 64,025 | $ | 57,153 | ||||
The increase in franchise royalty and fee revenues for the thirty-nine weeks ended September
28, 2010 compared to the same period in 2009 was due to the opening of 31 franchise-operated
bakery-cafes since September 29, 2009 and the 9.1 percent increase in comparable franchise-operated
bakery-cafe sales for the thirty-nine weeks ended September 28, 2010. The average weekly sales per
franchise-operated bakery-cafe and the related number of operating weeks for the periods indicated
were as follows:
For the 39 Weeks Ended | Percentage | |||||||||||
September 28, 2010 | September 29, 2009 | Change | ||||||||||
Franchise-operated average weekly sales |
$ | 43,016 | $ | 39,657 | 8.5 | % | ||||||
Franchise-operated number of operating
weeks |
31,190 | 30,163 | 3.4 | % |
As of September 28, 2010, we had 816 franchise-operated bakery-cafes open throughout the
United States and we have received commitments to open 216 additional franchise-operated
bakery-cafes. The timetables for opening these bakery-cafes are established in the respective Area
Development Agreements, referred to as ADAs, with franchisees, which provide for the majority to
open in the next four to five years. An ADA requires a franchisee to develop a specified number of
bakery-cafes on or before specific dates. If a franchisee fails to develop bakery-cafes on the
schedule set forth in the ADA, we have the right to terminate the ADA and develop Company-owned
locations or develop locations through new franchisees in that market. We may exercise one or more
alternative remedies to address defaults by franchisees, including not only development defaults,
but also defaults in complying with our operating and brand standards and other covenants included
in the ADAs and franchise agreements. We may waive compliance with certain requirements included
in our ADAs and franchise agreements if we determine such action is warranted under the particular
circumstances.
Fresh dough and other product sales to franchisees for the thirteen weeks ended September 28, 2010
increased 18.4 percent to $35.2 million compared to $29.8 million for the thirteen weeks ended
September 29, 2009. Fresh dough and other product sales to franchisees for the thirty-nine weeks
ended September 28, 2010 increased 12.6 percent to $100.1 million compared to $89.0 million for the
thirty-nine weeks ended September 29, 2009. The increase in fresh dough and other product sales to
franchisees for the thirteen and thirty-nine weeks ended September 28, 2010 was primarily driven by
the previously described increased number of franchise-operated bakery-cafes opened since September
29, 2009, the 7.9 percent and 9.1 percent increase in franchise-operated comparable bakery-cafe
sales, and increased produce distribution program sales, which occur at nearly zero profit volume,
as compared to the same thirteen and thirty-nine periods in the prior year, respectively.
Costs and Expenses
The cost of food and paper products includes the costs associated with our fresh dough and other
product operations that sell fresh dough and other products to Company-owned bakery-cafes, as well
as the cost of food and paper products supplied by third-party vendors and distributors. The costs
associated with our fresh dough and other product operations that sell fresh dough and other
products to the franchise-operated bakery-cafes are excluded from the cost of food and paper
products and are shown separately as fresh dough and other product cost of sales to franchisees in
the Consolidated Statements of Operations.
The cost of food and paper products was $89.9 million, or 28.5 percent of bakery-cafe sales, for
the thirteen weeks ended September 28, 2010 compared to $83.7 million, or 29.3 percent of
bakery-cafe sales, for the thirteen weeks ended September 29, 2009. The cost of food and paper
products was $270.9 million, or 28.5 percent of bakery-cafe sales, for the thirty-nine weeks ended
September 28, 2010 compared to $248.8 million, or 29.6 percent of bakery-cafe sales, for the
thirty-nine weeks ended September 29, 2009. This decrease in the cost of food and paper products
as a percentage of bakery-cafe sales between the thirteen and thirty-nine weeks ended September 28,
2010 compared to the same periods in 2009 was principally due to category management initiatives,
purchasing improvements, food cost deflation, improved leverage of our fresh dough manufacturing
costs due to additional bakery-cafe openings, and improved leverage overall from higher comparable
bakery-cafe sales, partially offset by costs incurred related to the roll-out of our
MyPaneraTM loyalty program. For the thirteen and thirty-nine weeks ended September 28,
2010, there was an average of 65.4 and 64.8 bakery-cafes per fresh dough facility compared to an
average of 62.7 and 62.1 as of September 29, 2009, respectively.
Labor expense was $103.2 million, or 32.7 percent of bakery-cafe sales, for the thirteen weeks
ended September 28, 2010 compared to $92.7 million, or 32.4 percent of bakery-cafe sales, for the
thirteen weeks ended September 29, 2009. Labor expense was $306.9 million, or 32.3 percent of
bakery-cafe sales, for the thirty-nine weeks ended September 28, 2010 compared to $272.9 million,
or 32.5 percent of bakery-cafe sales, for the thirty-nine weeks ended September 29, 2009. The
increase in labor expense as a percentage of bakery-cafe sales between the thirteen weeks ended
September 28, 2010 compared to the same period in 2009 was primarily a result of increased labor
investment related to the rollout of our MyPaneraTM loyalty program partially offset by
improved leverage from higher comparable bakery-cafe sales and lower costs due to lower than normal
self-insurance claims. The decrease in labor expense as a percentage of bakery-cafe sales between
the thirty-nine weeks ended September 28, 2010 compared to the same period in 2009 was primarily a
result of improved leverage from higher comparable bakery-cafe sales and lower costs due to lower
than normal self-insurance claims, partially offset by increased labor investment related to the
rollout of our MyPaneraTM loyalty program.
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Occupancy cost was $25.1 million, or 8.0 percent of bakery-cafe sales, for the thirteen weeks ended
September 28, 2010 compared to $24.2 million, or 8.5 percent of bakery-cafe sales, for the thirteen
weeks ended September 29, 2009. Occupancy cost was $74.1 million, or 7.8 percent of bakery-cafe
sales, for the thirty-nine weeks ended September 28, 2010 compared to $71.6 million, or 8.5 percent
of bakery-cafe sales, for the thirty-nine weeks ended September 29, 2009. The decrease in
occupancy cost as a percentage of bakery-cafe sales between the thirteen and thirty-nine weeks
ended September 28, 2010 compared to the same periods in 2009 was primarily a result of common area
maintenance credits received in 2010, as landlords spent less on common area maintenance in prior
years than anticipated, and improved leverage from higher comparable bakery-cafe sales and lower
occupancy costs in new bakery-cafes.
Other operating expenses were $45.8 million, or 14.5 percent of bakery-cafe sales, for the thirteen
weeks ended September 28, 2010 compared to $39.9 million, or 14.0 percent of bakery-cafe sales, for
the thirteen weeks ended September 29, 2009. Other operating expenses were $129.2 million, or 13.6
percent of bakery-cafe sales, for the thirty-nine weeks ended September 28, 2010 compared to $114.7
million, or 13.7 percent of bakery-cafe sales, for the thirty-nine weeks ended September 29, 2009.
The increase in other operating expenses as a percentage of bakery-cafe sales for the thirteen
weeks ended September 28, 2010 compared to the same period in 2009 was primarily a result of the
in-store promotion of the roll-out of our MyPaneraTM loyalty program and the cost of the
MyPaneraTM loyalty cards partially offset by leverage from higher comparable bakery-cafe
sales and timing of advertising and other controllable expenses. The decrease in other operating
expenses as a percentage of bakery-cafe sales for the thirty-nine weeks ended September 28, 2010
compared to the same period in 2009 was primarily a result of improved leverage from higher
comparable bakery-cafe sales and timing of advertising and other controllable expenses.
Fresh dough and other product cost of sales to franchisees were $30.3 million, or 85.9 percent of
fresh dough and other product sales to franchisees, for the thirteen weeks ended September 28,
2010, compared to $24.8 million, or 83.3 percent of fresh dough and other product sales to
franchisees, for the thirteen weeks ended September 29, 2009. Fresh dough and other product cost
of sales to franchisees were $82.9 million, or 82.8 percent of fresh dough and other product sales
to franchisees, for the thirty-nine weeks ended September 28, 2010, compared to $74.6 million, or
83.8 percent of fresh dough and other product sales to franchisees, for the thirty-nine weeks ended
September 29, 2009. The increase in fresh dough and other product costs of sales to franchisees as
a percentage of fresh dough and other product sales to franchisees for the thirteen weeks ended
September 28, 2010 compared to the same period in 2009 was driven by the nearly zero profit volume
in our produce distribution program, partially offset by the year-over-year decrease in ingredient
costs, improved leverage from new bakery-cafes, and higher comparable bakery-cafe sales. The
decrease in the fresh dough and other product cost of sales to franchisees as a percentage of fresh
dough and other product sales to franchisees for the thirty-nine weeks ended September 28, 2010
compared to the same period in 2009 was primarily the result of the year-over-year decrease in
ingredient costs, improved leverage from new bakery-cafes, and higher comparable bakery-cafe sales,
partially offset by the nearly zero profit volume in our produce distribution program.
General and administrative expenses were $24.3 million, or 6.5 percent of total revenues, for the
thirteen weeks ended September 28, 2010 compared to $20.2 million, or 6.0 percent of total
revenues, for the thirteen weeks ended September 29, 2009. General and administrative expenses
were $73.4 million, or 6.6 percent of total revenues, for the thirty-nine weeks ended September 28,
2010 compared to $59.0 million, or 6.0 percent of total revenues, for the thirty-nine weeks ended
September 29, 2009. The increase in general and administrative expenses as a percent of total
revenues for the thirteen and thirty-nine weeks ended September 28, 2010 compared to the same
periods in 2009 was primarily due to investments made in our marketing and MyPaneraTM
loyalty infrastructure and higher
incentive compensation expense compared to the prior year driven by our 2010 fiscal year-to-date
performance exceeding original targets, partially offset by improved leverage from increased
revenues.
Interest Expense
Interest expense was $0.2 million, or 0.0 percent of total revenues, for both the thirteen weeks
ended September 28, 2010 and September 29, 2009. Interest expense was $0.5 million, or 0.0 percent
of total revenues, for the thirty-nine weeks ended September 28, 2010 compared to $0.5 million, or
0.1 percent of total revenues, for the thirty-nine weeks ended September 29, 2009. The decrease in
interest expense as a percent of total revenues for the thirty-nine weeks ended September 28, 2010
as compared to the same period in 2009 was primarily a result of increased revenues.
18
Table of Contents
Other (Income) and Expense, net
Other (income) and expense, net was $0.5 million of income, or 0.1 percent of total revenues, for
the thirteen weeks ended September 28, 2010 compared to $1.2 million of expense, or 0.4 percent of
total revenues, for the thirteen weeks ended September 29, 2009. Other (income) and expense, net
was $2.8 million of expense, or 0.2 percent of total revenues, for the thirty-nine weeks ended
September 28, 2010 compared to $1.1 million of income, or 0.1 percent of total revenues, for the
thirty-nine weeks ended September 29, 2009. Other (income) and expense, net for the thirteen weeks
ended September 28, 2010 was primarily comprised of immaterial items. Other (income) and expense,
net for the thirty-nine weeks ended September 28, 2010 was primarily comprised of charges related
to unclaimed property audit exposures, certain state sales tax audit exposures, and immaterial
items.
Income Taxes
The provision for income taxes increased to $13.7 million for the thirteen weeks ended September
28, 2010 compared to $11.6 million for the thirteen weeks ended September 29, 2009. The tax
provision for the thirteen weeks ended September 28, 2010 and September 29, 2009 reflects a
combined federal, state, and local effective tax rate of 37.5 percent and 38.1 percent,
respectively. The provision for income taxes increased to $45.8 million for the thirty-nine weeks
ended September 28, 2010 compared to $34.8 million for the thirty-nine weeks ended September 29,
2009. The tax provision for both the thirty-nine weeks ended September 28, 2010 and September 29,
2009 reflects a combined federal, state, and local effective tax rate of 37.8 percent. The
decrease in the thirteen week period rate was primarily driven by an increase in permanent benefits
recognized in the current period relating to differences between financial and tax reporting
requirements.
Liquidity and Capital Resources
Cash and cash equivalents were $231.7 million at September 28, 2010 compared with $246.4 million at
December 29, 2009. This decrease was primarily a result of $153.4 million used to repurchase
common stock and $49.3 million used on capital expenditures, partially offset by $154.2 million of
cash generated from operations and $24.3 million received from the exercise of employee stock
options during the thirty-nine weeks ended September 28, 2010. Our primary source of liquidity is
cash provided by operations, although we have the ability to borrow under a credit facility, as
described below. Historically, our principal requirements for cash have primarily resulted from
our capital expenditures for the development of new Company-owned bakery-cafes, for maintaining or
remodeling existing Company-owned bakery-cafes, for purchasing existing franchise-operated
bakery-cafes or ownership interests in other restaurant or bakery-cafe concepts, for developing,
maintaining or remodeling fresh dough facilities, and for other capital needs such as enhancements
to information systems and other infrastructure.
We had working capital of $143.6 million at September 28, 2010 compared to $179.8 million at
December 29, 2009. The decrease in working capital from December 29, 2009 to September 28, 2010
resulted primarily from the previously described decrease in cash and cash equivalents of $14.7
million and an increase in accrued expenses of $33.4 million, partially offset by an increase in
prepaid expenses of $9.1 million and an increase of $5.4 million in deferred income taxes. We
believe that cash provided by our operations and available borrowings under our existing credit
facility will be sufficient to fund our cash requirements for the foreseeable future.
A summary of our cash flows, for the periods indicated, were as follows (in thousands):
For the 39 Weeks Ended | ||||||||
September 28, 2010 | September 29, 2009 | |||||||
Cash provided by (used in): |
||||||||
Operating activities |
$ | 154,168 | $ | 134,254 | ||||
Investing activities |
(47,093 | ) | (33,362 | ) | ||||
Financing activities |
(121,735 | ) | (3,189 | ) | ||||
Total |
$ | (14,660 | ) | $ | 97,703 | |||
Operating Activities
Cash flows provided by operating activities for the thirty-nine weeks ended September 28, 2010
resulted primarily from net income, adjusted for non-cash items such as depreciation and
amortization, stock-based compensation expense, deferred income taxes and the tax benefit from the
exercise of stock options, an increase in accrued expenses and other long-term liabilities,
partially offset by an increase in prepaid expenses and trade and other accounts receivable, net.
Cash flows provided by operating activities for the thirty-nine weeks ended September 29, 2009
primarily resulted from net income, adjusted for non-cash items such as depreciation and
amortization, stock-based compensation expense and deferred income taxes, as well as an increase in
accrued expenses, partially offset by an increase in prepaid expenses.
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Table of Contents
Investing Activities
Capital Expenditures
Capital expenditures are the largest ongoing component of our investing activities and include
expenditures for new bakery-cafes and fresh dough facilities, improvements to existing bakery-cafes
and fresh dough facilities, and other capital needs. A summary of capital expenditures for the
periods indicated consisted of the following (in thousands):
For the 39 Weeks Ended | ||||||||
September 28, 2010 | September 29, 2009 | |||||||
New bakery-cafe and fresh dough facilities |
$ | 25,443 | $ | 17,472 | ||||
Bakery-cafe and fresh dough facility
improvements |
10,614 | 15,760 | ||||||
Other capital needs |
13,240 | 4,446 | ||||||
Total |
$ | 49,297 | $ | 37,678 | ||||
Our capital requirements, including development costs related to the opening or acquisition of
additional bakery-cafes and fresh dough facilities and maintenance and remodel expenditures, have
been and will continue to be significant. Our future capital requirements and the adequacy of
available funds will depend on many factors, including the pace of expansion, real estate markets,
site locations, and the nature of arrangements negotiated with landlords. We believe that cash
provided by our operations and available borrowings under our existing credit facility will be
sufficient to fund our capital requirements in both our short-term and long-term future. We
currently anticipate 80 to 90 system-wide bakery-cafe openings in fiscal 2010.
Investing activities for the thirty-nine weeks ended September 28, 2010 included additions to
property and equipment of $49.3 million offset by $2.2 million received from the sale of the three
bakery-cafes.
Investments
Historically, we invested a portion of our cash balances on hand in a private placement of units of
beneficial interest in the Columbia Strategic Cash Portfolio, or Columbia Portfolio, which was an
enhanced cash fund previously sold as an alternative to traditional money-market funds. The
Columbia Portfolio included investments in certain asset-backed securities and structured
investment vehicles that were collateralized by sub-prime mortgage securities or related to
mortgage securities, among other assets. As a result of adverse market conditions that 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.
During the thirty-nine weeks ended September 29, 2009, we received $4.3 million of cash redemptions
at an average net asset value of $0.859 per unit, which we classified as investment maturity
proceeds provided by investing activities. We recognized a net realized and unrealized loss of
$1.1 million during the thirty-nine weeks ended September 29, 2009 related to the fair value
measurements and redemptions received. As the Columbia Portfolio units were no longer trading and,
therefore, had little or no price transparency, we assessed the fair value of the underlying
collateral for the Columbia Portfolio through 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. We 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. During the fourth quarter of fiscal
2009, we received cash redemptions fully redeeming our remaining units in the Columbia Portfolio.
Financing Activities
Financing activities for the thirty-nine weeks ended September 28, 2010 included $153.4 million
used to repurchase shares of our Class A common stock offset by $24.3 million received from the
exercise of employee stock options, $6.0 million received from the tax benefit from exercise of
stock options, and $1.4 million received from the issuance of common stock. Financing activities
for the thirty-nine weeks ended September 29, 2009 included $20.1 million used to purchase the
remaining interest of Paradise Bakery & Café, Inc. (Paradise) and $1.7 million to repurchase our
Class A common stock, partially offset by $14.2 million received from the exercise of employee
stock options, $3.1 million received from the tax benefit from the exercise of stock options, and
$1.2 million received from the issuance of common stock under employee benefit plans.
Purchase of Noncontrolling Interest
On June 2, 2009, we purchased 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 us by the former
shareholders of the remaining 49 percent of Paradise, which we refer to as the Prior Shareholders.
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 us for certain
holdbacks. The holdbacks are primarily for certain indemnifications and expire on June 2, 2011,
with any remaining holdback amounts reverting to the Prior Shareholders. The transaction was
accounted for as an equity transaction, by adjusting the carrying amount of the noncontrolling
interest balance to reflect the change in our 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 us.
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Share Repurchases
On November 17, 2009, our Board of Directors approved a three year share repurchase authorization
of up to $600.0 million of our Class A common stock. Such share repurchases will be effected from
time to time on the open market or in privately negotiated transactions and we may make such
repurchases under a Rule 10b5-1 Plan. Repurchased shares may be retired immediately and resume the
status of authorized but unissued shares or they may be held by us as treasury stock. The
repurchase authorization may be modified, suspended, or discontinued by our Board of Directors at
any time. During the thirty-nine weeks ended September 28, 2010, we repurchased 1,905,540 shares
under the share repurchase authorization at an average price of $78.72.
We have historically repurchased shares of our Class A common stock through a share repurchase
authorization approved by our Board of Directors from participants of the Panera Bread 1992 Stock
Incentive Plan and the Panera Bread 2006 Stock Incentive Plan, or collectively, the Plans.
Repurchased shares are netted and surrendered as payment for applicable tax withholding on the
vesting of participants restricted stock. During the thirty-nine weeks ended September 28, 2010,
we repurchased 42,750 shares of Class A common stock surrendered by participants of the Plans at a
weighted-average price of $77.55 per share for an aggregate purchase price of $3.3 million pursuant
to the terms of the Plans and the applicable award agreements. During the thirty-nine weeks ended
September 29, 2009, we repurchased 31,427 shares of Class A common stock surrendered by
participants of the Plans at a weighted-average price of $53.48 per share for an aggregate purchase
price of $1.7 million pursuant to the respective terms of the Plans and the applicable award
agreements. These share repurchases were not made pursuant to publicly announced share repurchase
authorizations.
Credit Facility
On March 7, 2008, we, and certain of our direct and indirect subsidiaries, as guarantors, entered
into an amended and restated credit agreement, referred to as the Amended and Restated Credit
Agreement, with Bank of America, N.A., and other lenders party thereto to amend and restate in its
entirety our Credit Agreement, dated as of November 27, 2007, by and among us, Bank of America,
N.A., and the lenders party thereto, referred to as the Original Credit Agreement. Pursuant to our
request under the terms of the Original Credit Agreement, the Amended and Restated Credit Agreement
increased the size of our secured revolving credit facility from $75.0 million to $250.0 million.
We may select interest rates equal to (a) the Base Rate (which is defined as the higher of Bank of
America prime rate and the Federal Funds Rate plus 0.50 percent), or (b) LIBOR plus an Applicable
Rate, ranging from 0.75 percent to 1.50 percent, based on our Consolidated Leverage Ratio, as each
term is defined in the Amended and Restated Credit Agreement. The Amended and Restated Credit
Agreement allows us from time to time to request that the credit facility be further increased by
an amount not to exceed, in the aggregate, $150.0 million, subject to receipt of lender commitments
and other conditions precedent. The Amended and Restated Credit Agreement contains financial
covenants that, among other things, require the maintenance of certain leverage and fixed charges
coverage ratios. The credit facility, which is secured by the capital stock of our present and
future material subsidiaries, will become due on March 7, 2013, subject to acceleration upon
certain specified events of defaults, including breaches of representations or covenants, failure
to pay other material indebtedness or a change of control of our Company, as defined in the Amended
and Restated Credit Agreement. The proceeds from the credit facility will be used for general
corporate purposes, including working capital, capital expenditures, and permitted acquisitions and
share repurchases. As of September 28, 2010 and December 29, 2009, we had no balance outstanding
under the Amended and Restated Credit Agreement.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon the
consolidated financial statements and notes to the consolidated financial statements, which have
been prepared in accordance with GAAP. The preparation of the consolidated financial statements
requires us to make estimates, judgments and assumptions, which we believe to be reasonable, based
on the information available. These estimates and assumptions affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosures of contingent assets and
liabilities. Variances in the estimates or assumptions used could yield materially different
accounting results. On an ongoing basis, we evaluate the continued appropriateness of our
accounting policies and resulting estimates to make adjustments we consider appropriate under the
facts and circumstances.
We have chosen accounting policies we believe are appropriate to report accurately and fairly our
operating results and financial position, and we apply those accounting policies in a consistent
manner. As described in Item 7., Managements Discussion and Analysis of Financial Condition and
Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 29,
2009, we consider our policies on accounting for revenue recognition, valuation of goodwill,
self-insurance, income taxes, lease obligations, and stock-based compensation to be the most
critical in the preparation of the consolidated financial statements because they involve the most
difficult, subjective, or complex judgments about the effect of matters that are inherently
uncertain. There have been no material changes to our application of critical accounting policies
and significant judgments and estimates since December 29, 2009.
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Contractual Obligations and Other Commitments
We currently anticipate 80 to 90 system-wide bakery-cafe openings in fiscal 2010. We expect to
fund our capital expenditures principally through internally generated cash flow and available
borrowings under our existing credit facility, if needed.
In addition to our planned capital expenditure requirements, we have certain other contractual and
committed cash obligations. Our contractual cash obligations consist of noncancelable operating
leases for our bakery-cafes, fresh dough facilities and trucks, and support centers; purchase
obligations primarily for certain commodities; and uncertain tax positions. Lease terms for our
trucks are generally for six to eight years. Lease terms for our bakery-cafes, fresh dough
facilities, and support centers are generally for ten years with renewal options at most locations
and generally require us to pay a proportionate share of real estate taxes, insurance, common area,
and other operating costs. Many bakery-cafe leases provide for contingent rental (i.e. percentage
rent) payments based on sales in excess of specified amounts. Certain of our lease agreements
provide for scheduled rent increases during the lease terms or for rental payments commencing at a
date other than the date of initial occupancy.
Off-Balance Sheet Arrangements
As of September 28, 2010, we guaranteed operating leases of 28 franchisee locations and two
locations of our former Au Bon Pain division, or its franchisees, which we account for in
accordance with the accounting requirements for guarantees. These leases have terms expiring on
various dates from November 23, 2010 to December 31, 2023 and a potential amount of future rental
payments of approximately $31.3 million as of September 28, 2010. Our obligation under these
leases will generally decrease over time as these operating leases expire. We have not recorded a
liability for certain of these guarantees as they arose prior to the issuance of the accounting
requirements for guarantees and, unless modified, are exempt from its requirements. We have not
recorded a liability for those guarantees issued after the effective date of the accounting
requirements because the fair value of each such lease guarantee was determined by us to be
insignificant based on an analysis of the facts and circumstances of each such lease and each such
franchisees performance, and we did not believe it was probable we would be required to perform
under any guarantees at the time the guarantees were issued. We have not had to make any payments
related to any of these guaranteed leases. Au Bon Pain or the applicable franchisees continue to
have primary liability for these operating leases.
Related Party Credit Agreement
On September 10, 2008, our Canadian subsidiary, Panera Bread ULC, as lender, entered into a Cdn.
$3.5 million secured revolving credit facility agreement and franchise agreements with Millennium
Bread Inc., or Millennium, and certain of Millenniums present and future subsidiaries, which we
refer to as Franchisee Guarantors, pursuant to which Millennium would operate three Panera Bread
bakery-cafes in Ontario, Canada. On April 7, 2009, Millennium requested a Cdn. $3.5 million
advance under the credit agreement for payment of the costs to develop the bakery-cafes, which was
included in other accounts receivable in the Consolidated Balance Sheet as of December 29, 2009.
The proceeds from the credit facility were used by Millennium to pay costs to develop and construct
the Franchisee Guarantors bakery-cafes and for their day-to-day operating requirements. On March
31, 2010, the credit facility was terminated through a separate transaction with Millennium, as
described in Note 2.
Accounting Standards Issued Not Yet Adopted
On December 30, 2009, we adopted the updated guidance issued by the Financial Accounting Standards
Board (FASB) related to fair value measurements and disclosures, which requires a reporting
entity to separately disclose the amounts of significant transfers in and out of Level 1 and Level
2 fair value measurements and to describe the reasons for the transfers. The updated guidance also
requires that an entity provide fair value measurement disclosures for each class of assets and
liabilities and disclosures about the valuation techniques and inputs used to measure fair value
for both recurring and non-recurring Level 2 and Level 3 fair value measurements. This guidance
was effective for interim or annual financial reporting periods beginning after December 15, 2009.
The adoption of this updated guidance did not have an impact on our consolidated results of
operations or financial condition. In addition, the updated guidance requires that in the
reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a
reporting entity separately disclose information about purchases, sales, issuances and settlements
on a gross basis rather than as one net number. This guidance is effective for fiscal years
beginning after December 15, 2010 and for interim periods therein. Therefore, we have not yet
adopted the guidance with respect to the roll forward activity in Level 3 fair value measurements.
We expect that the adoption of this new guidance will not have a material effect on our financial
position or results of operations.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
There were no material changes in the quantitative and qualitative information about market risk
since the end of our most recent fiscal year. For further information, see Item 7A. of our Annual
Report on Form 10-K for the fiscal year ended December 29, 2009.
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Item 4. | Controls and Procedures |
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as of September 28, 2010.
The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act are recorded, processed, summarized and reported, within the time periods specified in
the United States Securities and Exchange Commission (the SEC), rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act are accumulated and communicated to the companys
management, including its principal executive and principal financial officers, as appropriate to
allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of September 28, 2010, our Chief Executive Officer and Chief
Financial Officer concluded that, as of such date, our disclosure controls and procedures were
effective at the reasonable assurance level.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the third fiscal quarter ended September 28, 2010
that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
On January 25, 2008 and February 26, 2008, purported class action lawsuits were filed against us
and three of our current or former executive officers by the Western Washington Laborers-Employers
Pension Trust and Sue Trachet, respectively, on behalf of investors who purchased our 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 we 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 our 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. On August 7, 2008, the plaintiff filed an amended complaint, which
extended the class period to November 1, 2005 through July 26, 2007. We believe that we and the
other defendants have meritorious defenses to each of the claims in this lawsuit and we are
vigorously defending the lawsuit. On October 6, 2008, we filed a motion to dismiss all of the
claims in this lawsuit. Following filings by both parties on our motion to dismiss, on June 25,
2009, the Court converted our motion to one for summary judgment and denied it without prejudice.
The Court simultaneously gave us 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, we filed
a motion for summary judgment. On September 9, 2009, the plaintiff filed a request to deny or
continue our motion for summary judgment to allow the plaintiff to conduct discovery. Following a
hearing and subsequent filings by both parties on the plaintiffs request for discovery, on
November 6, 2009, the Court denied the plaintiffs request. The plaintiff filed an opposition to
our motion for summary judgment on December 12, 2009, and we filed our reply in support of our
motion on December 21, 2009. On March 16, 2010, the Court granted in part and denied in part our
motion for summary judgment. On April 5, 2010, the Court granted a joint motion by the parties to
stay the case through July 6, 2010, which stay was subsequently extended by the Court until July
30, 2010, pending an attempt by the parties to resolve through mediation. Mediation was not
successful and on August 30, 2010 we answered the complaint. An adverse resolution of the lawsuit
could have a material adverse effect on our consolidated financial position and results of
operations in the period in which the lawsuit is resolved. We are not presently able to reasonably
estimate potential losses, if any, related to the lawsuit and as such, have not recorded a
liability in our Consolidated Balance Sheets.
On February 22, 2008, a shareholder derivative lawsuit was filed against us as nominal defendant
and against certain of our 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 us
to implement certain corporate governance reforms, restitution from the defendants and such other
relief as the Court might find just and proper. We believe that we and the other defendants have
meritorious defenses to each of the claims in this lawsuit and we are vigorously defending the
lawsuit. On July 18, 2008, we filed a motion to dismiss all of the claims in this lawsuit.
Following filings by both parties on our motion to dismiss, on December 14, 2009, the Court denied
our motion. We filed an answer to the complaint on January 27, 2010. On July 28, 2010, we filed a
motion for summary judgment. The Court will hold a hearing on the motion for summary judgment on
November 19, 2010. There can be no assurance that we will be successful, and an adverse resolution
of the lawsuit could have a material adverse effect on our consolidated financial position and
results of operations in the period in which the lawsuit is resolved. We are not presently able to
reasonably estimate potential losses, if any, related to the lawsuit and as such, have not recorded
a liability in our Consolidated Balance Sheets.
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On December 9, 2009, a purported class action lawsuit was filed against us and one of our
subsidiaries by Nick Sotoudeh, a former employee of ours. The lawsuit was filed in the California
Superior Court, County of Contra Costa. The complaint alleges, among other things, violations of
the California Labor Code, failure to pay overtime, failure to provide meal and rest periods and
termination compensation and violations of Californias Unfair Competition Law. The complaint
seeks, among other relief, collective and class certification of the lawsuit, unspecified damages,
costs and expenses, including attorneys fees, and such other relief as the Court might
find just and proper. We believe we and the other defendant have meritorious defenses to each of
the claims in this lawsuit and we are prepared to vigorously defend the lawsuit. There can be no
assurance, however, that we will be successful, and an adverse resolution of the lawsuit could have
a material adverse effect on our consolidated financial position and results of operations in the
period in which the lawsuit is resolved. We are not presently able to reasonably estimate potential
losses, if any, related to the lawsuit and as such, have not recorded a liability in our
Consolidated Balance Sheets.
In addition, we are 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. We do not, however, currently expect that the costs to resolve these routine
matters will have a material adverse effect on our consolidated financial position, results of
operations or cash flows.
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Table of Contents
Item 1A. | Risk Factors |
Our business is subject to a number of risks, some of which are beyond our control. In addition to
the other information set forth in this report, you should carefully consider the factors discussed
in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December
29, 2009, as filed with the SEC on February 26, 2010, that could have a material effect on our
business, results of operations, financial condition and/or liquidity and that could cause our
operating results to vary significantly from period to period. As of September 28, 2010, there
have been no material changes to the risk factors disclosed in our most recent Annual Report on
Form 10-K, although we may disclose changes to such factors or disclose additional factors from
time to time in our future filings with the SEC. Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially adversely affect our
business, financial condition, or operating results.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
During the thirteen weeks ended September 28, 2010, we repurchased Class A common stock as follows:
Approximate | ||||||||||||||||
Dollar | ||||||||||||||||
Total Number of | Value of Shares That | |||||||||||||||
Total Number of | Shares Purchased as | May Yet Be | ||||||||||||||
Shares | Average Price | Part of Publicly | Purchased Under the | |||||||||||||
Period | Purchased | Paid per Share | Announced Program | Announced Program | ||||||||||||
June 30, 2010 July 27, 2010 |
101,001 | $ | 74.67 | 101,001 | $ | 519,868,880 | ||||||||||
July 28, 2010 August 31, 2010 |
834,094 | (1)(2) | 78.27 | 803,266 | 456,936,405 | |||||||||||
September 1, 2010 September
28, 2010 |
109,105 | (1)(3) | 79.72 | 103,717 | 448,238,968 | |||||||||||
Total |
1,044,200 | $ | 77.94 | 1,007,984 | $ | 448,238,968 | ||||||||||
(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 amended, 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 authorizations. |
|
(2) | Includes 803,266 shares of Class A common stock that were repurchased under a Rule 10b5-1
Plan, as described above. See Part 1, Item 2. for further information regarding the share
repurchase authorization. |
|
(3) | Includes 103,717 shares of Class A common stock that were repurchased under a Rule 10b5-1
Plan, as described above. See Part 1, Item 2. for further information regarding the share
repurchase authorization. |
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Item 6. | Exhibits |
Exhibit | ||||
Number | Description | |||
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 |
|||
101.INS | * | XBRL Instance Document |
||
101.SCH | * | XBRL Taxonomy Extension Schema Document |
||
101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document |
||
101.LAB | * | XBRL Taxonomy Extension Label Linkbase Document |
||
101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document |
||
101.DEF | * | XBRL Taxonomy Extension Definition Linkbase Document |
* | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly
Report on Form 10-Q shall be deemed to be furnished and not filed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Panera Bread Company | ||||||
(Registrant) | ||||||
Dated: November 5, 2010
|
By: | /s/ William W. Moreton
|
||||
Chief Executive Officer, President | ||||||
(on behalf of registrant and as principal executive officer) | ||||||
Dated: November 5, 2010
|
By: | /s/ Jeffrey W. Kip
|
||||
Senior Vice President, Chief Financial Officer | ||||||
(principal financial officer) | ||||||
Dated: November 5, 2010
|
By: | /s/ Amy L. Kuzdowicz
|
||||
Vice President, Controller | ||||||
Dated: November 5, 2010
|
By: | /s/ Mark D. Wooldridge
|
||||
Assistant Controller and Chief Accounting Officer |
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EXHIBIT INDEX
Exhibit | ||||
Number | Description | |||
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 |
|||
101.INS | * | XBRL Instance Document |
||
101.SCH | * | XBRL Taxonomy Extension Schema Document |
||
101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document |
||
101.LAB | * | XBRL Taxonomy Extension Label Linkbase Document |
||
101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document |
||
101.DEF | * | XBRL Taxonomy Extension Definition Linkbase Document |
* | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly
Report on Form 10-Q shall be deemed to be furnished and not filed. |
28