2012.06.26. 10Q



	June 26, 2012			December 27, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	255,799		$	222,640
Trade accounts receivable, net	26,815			30,700
Other accounts receivable	7,411			24,009
Inventories	16,786			17,016
Prepaid expenses and other	30,758			31,228
Deferred income taxes	31,592			27,526
Total current assets	369,161			353,119
Property and equipment, net	520,784			492,022
Other assets:
Goodwill	121,752			108,071
Other intangible assets, net	92,514			67,269
Deposits and other	6,803			6,841
Total other assets	221,069			182,181
Total assets	$	1,111,014		$	1,027,322
LIABILITIES
Current liabilities:
Accounts payable	$	13,574		$	15,884
Accrued expenses	216,548			222,450
Total current liabilities	230,122			238,334
Deferred rent	56,662			54,055
Deferred income taxes	35,205			34,345
Other long-term liabilities	43,617			45,512
Total liabilities	365,606			372,246
Commitments and contingencies (Note 8)
STOCKHOLDERS’ EQUITY
Common stock, $.0001 par value per share:
Class A, 112,500,000 shares authorized; 30,335,327 issued and 28,250,091 outstanding at June 26, 2012; and 30,330,759 issued and 28,265,672 outstanding at December 27, 2011	3			3
Class B, 10,000,000 shares authorized; 1,383,687 issued and outstanding at June 26, 2012 and December 27, 2011	—			—
Treasury stock, carried at cost; 2,085,236 shares at June 26, 2012 and 2,048,338 shares at December 27, 2011	(180,882		)	(175,595		)
Preferred stock, $.0001 par value per share; 2,000,000 shares authorized and no shares issued or outstanding at June 26, 2012 and December 27, 2011	—			—
Additional paid-in capital	160,363			150,093
Accumulated other comprehensive income	336			308
Retained earnings	765,588			680,267
Total stockholders’ equity	745,408			655,076
Total liabilities and stockholders’ equity	$	1,111,014		$	1,027,322



	For the 13 Weeks Ended					For the 26 Weeks Ended
	June 26, 2012		June 28, 2011			June 26, 2012		June 28, 2011
Revenues:
Bakery-cafe sales, net	$	468,645	$	394,525		$	907,860	$	760,104
Franchise royalties and fees	24,757		23,022			49,579		45,604
Fresh dough and other product sales to franchisees	37,189		33,533			71,731		67,472
Total revenues	530,591		451,080			1,029,170		873,180
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products	136,498		117,249			265,526		223,458
Labor	136,947		118,926			270,774		232,976
Occupancy	32,253		28,144			63,361		54,917
Other operating expenses	64,183		54,741			121,699		102,068
Total bakery-cafe expenses	369,881		319,060			721,360		613,419
Fresh dough and other product cost of sales to franchisees	33,046		28,625			63,191		56,649
Depreciation and amortization	22,141		19,707			43,462		38,801
General and administrative expenses	30,844		25,001			57,511		51,672
Pre-opening expenses	2,476		1,555			4,087		2,533
Total costs and expenses	458,388		393,948			889,611		763,074
Operating profit	72,203		57,132			139,559		110,106
Interest expense	202		197			412		422
Other (income) expense, net	288		(176		)	726		(980		)
Income before income taxes	71,713		57,111			138,421		110,664
Income taxes	27,576		21,401			53,100		42,180
Net income	$	44,137	$	35,710		$	85,321	$	68,484

Earnings per common share:
Basic	$	1.51	$	1.20		$	2.92	$	2.29
Diluted	$	1.50	$	1.18		$	2.90	$	2.27

Weighted average shares of common and common equivalent shares outstanding:
Basic	29,201		29,867			29,192		29,848
Diluted	29,466		30,198			29,464		30,173

Other comprehensive income, net of tax:
Foreign currency translation adjustment	$	56	$	5		$	28	$	8
Other comprehensive income	$	56	$	5		28		8
Comprehensive income	$	44,193	$	35,715		$	85,349	$	68,492



	For the 26 Weeks Ended
	June 26, 2012			June 28, 2011
Cash flows from operations:
Net income	$	85,321		$	68,484
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	43,462			38,801
Stock-based compensation expense	4,354			5,140
Excess tax benefit from exercise of stock options	(2,096		)	(925		)
Deferred income taxes	(3,206		)	6,430
Other	1,116			1,566
Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions:
Trade and other accounts receivable, net	20,622			(10,151		)
Inventories	488			414
Prepaid expenses and other	470			(10,723		)
Deposits and other	38			(367		)
Accounts payable	(2,310		)	4,589
Accrued expenses	(3,223		)	(18,898		)
Deferred rent	2,607			2,815
Other long-term liabilities	(2,465		)	(2,306		)
Net cash provided by operating activities	145,178			84,869
Cash flows from investing activities:
Additions to property and equipment	(64,697		)	(46,982		)
Acquisitions, net of cash acquired	(47,951		)	(39,746		)
Proceeds from sale of bakery-cafes	—			115
Net cash used in investing activities	(112,648		)	(86,613		)
Cash flows from financing activities:
Repurchase of common stock	(5,287		)	(891		)
Exercise of employee stock options	2,675			1,004
Excess tax benefit from exercise of stock options	2,096			925
Proceeds from issuance of common stock under employee benefit plans	1,145			976
Net cash provided by financing activities	629			2,014
Net increase in cash and cash equivalents	33,159			270
Cash and cash equivalents at beginning of period	222,640			229,299
Cash and cash equivalents at end of period	$	255,799		$	229,569

The unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, which consist of the accounts of Panera Bread Company and its wholly owned direct and indirect subsidiaries (collectively, 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 27, 2011. These unaudited consolidated financial statements should be read in conjunction with such audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2011, as filed with the SEC on February 21, 2012 and amended by Form 10-K/A, filed with the SEC on March 20, 2012. All intercompany balances and transactions have been eliminated in consolidation. The Consolidated Balance Sheet data as of December 27, 2011 was derived from audited financial statements, but does not include all disclosures required by GAAP contained herein.

In June 2011 and December 2011, the Financial Accounting Standards Board updated its guidance regarding comprehensive income to require companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This updated guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in equity. This updated guidance applies to fiscal years beginning after December 15, 2011. The adoption of this updated guidance concerns presentation and disclosure only and had no impact on the Company's consolidated financial statements.

On March 28, 2012, the Company purchased substantially all the assets and certain liabilities of 16 bakery-cafes and the related area development rights from its Raleigh-Durham, North Carolina franchisee for a purchase price of $48.0 million. Approximately $44.4 million of the purchase price was paid on March 27, 2012, with $3.6 million retained by the Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on September 28, 2013, the 18 month anniversary of the transaction closing date, with any remaining holdback amounts reverting to the prior franchisee. The Consolidated Statements of Comprehensive Income include the results of operations from the operating bakery-cafes from the date of the acquisition.

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: $0.1 million to accounts receivable, $0.3 million to inventories, $6.4 million to property and equipment, $29.1 million to intangible assets, which represents the fair value of re-acquired territory rights and favorable lease agreements and are expected to be amortized on average over approximately 12 years, $1.4 million to liabilities, and $13.5 million to goodwill. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a Level 3 measurement.

On July 26, 2011, the Company purchased substantially all the assets and certain liabilities of five Paradise Bakery & Café (“Paradise”) bakery-cafes and the related area development rights from an Indiana franchisee for a purchase price of approximately $5.1 million. Approximately $4.6 million of the purchase price was paid on July 26, 2011, with $0.5 million retained by the Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on July 26, 2013, the second anniversary of the transaction closing date, with any remaining holdback amounts reverting to the prior franchisee. The Consolidated Statements of Comprehensive Income include the results of operations from these five bakery-cafes from the date of their acquisition. The pro-forma impact of the acquisition on prior periods is not presented, as the impact was not material to reported results.

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: $0.1 million to inventories, $1.3 million to property and equipment, $1.3 million to intangible assets, which represent the fair value of re-acquired territory rights and are expected to be amortized on average over approximately six years, $0.7 million to liabilities, and $3.1 million to goodwill. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a Level 3 measurement.

On April 19, 2011 the Company purchased substantially all the assets and certain liabilities of 25 bakery-cafes and the related area development rights from a Milwaukee franchisee for a purchase price of approximately $41.9 million. Approximately $39.8 million of the purchase price was paid on April 19, 2011, with $2.1 million retained by the Company for certain holdbacks. The holdbacks are primarily for certain indemnifications and expire on October 19, 2012, the 18 month anniversary of the transaction closing date, with any remaining holdback amounts reverting to the prior franchisee. The Consolidated Statements of Comprehensive Income include the results of operations from the operating bakery-cafes from the date of the acquisition.

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: $0.4 million to inventories, $9.3 million to property and equipment, $23.3 million to intangible assets, which represents the fair value of re-acquired territory rights and favorable lease agreements and are expected to be amortized on average over approximately 13 years, $1.7 million to liabilities, and $10.6 million to goodwill. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a Level 3 measurement. In addition, the Company recorded a $0.2 million measurement period adjustment increasing goodwill during the thirteen weeks ended June 26, 2012.



	June 26, 2012		December 27, 2011
Unredeemed gift cards, net	$	47,403	$	58,321
Compensation and related employment taxes	44,457		41,491
Insurance	25,706		23,629
Taxes, other than income tax	17,870		18,512
Capital expenditures	17,514		19,116
Advertising	7,672		5,334
Fresh dough and other product operations	6,863		7,101
Litigation settlements (Note 8)	6,500		5,000
Deferred revenue	6,286		2,236
Deferred purchase price	6,169		2,565
Rent	5,990		5,958
Utilities	4,213		4,170
Loyalty program	3,868		5,916
Other	16,037		23,101
Total	$	216,548	$	222,450

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, permitted acquisitions, and share repurchases. The Amended and Restated Credit Agreement, which is collateralized by the capital stock of the Company’s present and future material subsidiaries, will become due on March 7, 2013, subject to acceleration upon certain specified events of default.

As of June 26, 2012 and December 27, 2011, 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 June 26, 2012 and June 28, 2011 and $0.2 million and $0.3 million for the twenty-six weeks ended June 26, 2012 and June 28, 2011, respectively. Accrued interest related to the commitment fees was $0.1 million at June 26, 2012 and December 27, 2011, respectively. As of June 26, 2012, the Company was in compliance with all covenants under the Amended and Restated Credit Agreement.

As of June 26, 2012, the Company guaranteed operating leases of 24 franchisee or affiliate locations, which the Company accounted for in accordance with the accounting standard for guarantees. These leases have terms expiring on various dates from July 31, 2012 to December 31, 2023 and a potential amount of future rental payments of approximately $22.6 million as of June 26, 2012. The obligations under these leases will decrease over time as these operating leases expire. The Company has not recorded a liability for certain of these guarantees as they arose prior to the implementation of the accounting standard for guarantees and, unless modified, are exempt from its requirements. The Company has not recorded 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 franchisee’s performance, and the Company did not believe it was probable it would be required to perform under any guarantees at the time the guarantees were issued. The Company has not had to make any payments related to any of these guaranteed leases. The applicable franchisees or affiliates have primary liability for these operating leases.

On December 9, 2009, a purported class action lawsuit was filed against Panera Bread Company and one of its subsidiaries by Nick Sotoudeh, a former employee of a subsidiary of Panera Bread Company. The lawsuit was filed in the California Superior Court, County of Contra Costa. On April 22, 2011, the complaint was amended to add another former employee, Gabriela Brizuela, as a plaintiff. The complaint alleged, 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 California’s Business and Professions Code. The complaint sought, among other relief, 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. On November 17, 2011, the parties entered into a Memorandum of Agreement regarding settlement of this purported class action lawsuit and the purported class action lawsuit filed by David Carter, which is described in the subsequent paragraph. Under the terms of the Memorandum of Agreement, the parties have agreed to settle this matter for a maximum aggregate amount of $5.0 million for settlement payments to purported class members, plaintiffs' attorneys' fees, and costs of administering the settlement. The Memorandum of Agreement contains no admission of wrongdoing. The terms and conditions of the settlement were preliminarily approved by the Court on June 8, 2012. The aggregate settlement amount of $5.0 million is included in accrued expenses in the Company's Consolidated Balance Sheets as of June 26, 2012 and December 27, 2011.

On July 22, 2011, a purported class action lawsuit was filed against Panera Bread Company and one of its subsidiaries by David Carter, a former employee of a subsidiary of Panera Bread Company, and Nikole Benavides, a purported former employee of one of the Company's franchisees. The lawsuit was filed in the California Superior Court, County of San Bernardino. 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 California's Business and Professions Code. 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. This matter was consolidated with the lawsuit described in the immediately preceding paragraph and is the subject of the Memorandum of Agreement described above.

On December 16, 2010, a purported class action lawsuit was filed against Panera Bread Company and one of its subsidiaries by Denarius Lewis, Caroll Ruiz, and Corey Weiner, former employees of a subsidiary of Panera Bread Company. The lawsuit was filed in the United States District Court for Middle District of Florida. The complaint alleged, among other things, violations of the Fair Labor Standards Act. 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. On February 29, 2012, the parties agreed to settle this matter for an amount up to an aggregate of $1.5 million for settlement payments to purported class members, plaintiffs' attorneys' fees, and costs of administering the settlement. The agreement includes no admission of wrongdoing. The terms and conditions of the settlement were approved by the Court on June 26, 2012, and the matter was dismissed with prejudice. The settlement amount of $1.5 million is included in accrued expenses in the Company's Consolidated Balance Sheets as of June 26, 2012 and December 27, 2011.

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 believe the ultimate resolution of these actions will have a material adverse effect on its consolidated financial statements. However, a significant increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than is currently anticipated, could materially and adversely affect its consolidated financial statements.

The Company is subject to on-going federal and state income tax audits and sales tax audits. The Company does not believe the ultimate resolution of these actions will have a material adverse effect on its consolidated financial statements. However, a significant increase in the number of these audits, or one or more successful audits under which the Company incurs greater liabilities than is currently anticipated, could materially and adversely affect its consolidated financial statements.

The Company operates three business segments. The Company Bakery-Cafe Operations segment is comprised of the operating activities of the bakery-cafes owned directly 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 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 Comprehensive Income. 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 Comprehensive Income.



	For the 13 Weeks Ended						For the 26 Weeks Ended
	June 26, 2012			June 28, 2011			June 26, 2012			June 28, 2011
Revenues:
Company bakery-cafe operations	$	468,645		$	394,525		$	907,860		$	760,104
Franchise operations	24,757			23,022			49,579			45,604
Fresh dough and other product operations	78,489			67,676			149,832			133,701
Intercompany sales eliminations	(41,300		)	(34,143		)	(78,101		)	(66,229		)
Total revenues	$	530,591		$	451,080		$	1,029,170		$	873,180
Segment profit:
Company bakery-cafe operations	$	98,764		$	75,465		$	186,500		$	146,685
Franchise operations	23,212			21,444			46,013			42,451
Fresh dough and other product operations	4,143			4,908			8,540			10,823
Total segment profit	$	126,119		$	101,817		$	241,053		$	199,959

Depreciation and amortization	$	22,141		$	19,707		$	43,462		$	38,801
Unallocated general and administrative expenses	29,299			23,423			53,945			48,519
Pre-opening expenses	2,476			1,555			4,087			2,533
Interest expense	202			197			412			422
Other (income) expense, net	288			(176		)	726			(980		)
Income before income taxes	$	71,713		$	57,111		$	138,421		$	110,664
Depreciation and amortization:
Company bakery-cafe operations	$	19,279		$	16,903		$	37,779		$	33,147
Fresh dough and other product operations	1,661			1,707			3,310			3,451
Corporate administration	1,201			1,097			2,373			2,203
Total depreciation and amortization	$	22,141		$	19,707		$	43,462		$	38,801
Capital expenditures:
Company bakery-cafe operations	$	29,970		$	19,893		$	54,891		$	41,783
Fresh dough and other product operations	2,059			2,131			3,976			2,348
Corporate administration	2,549			2,244			5,830			2,851
Total capital expenditures	$	34,578		$	24,268		$	64,697		$	46,982



	June 26, 2012		December 27, 2011
Segment assets:
Company bakery-cafe operations	$	732,827	$	682,246
Franchise operations	7,481		7,502
Fresh dough and other product operations	51,409		47,710
Total segment assets	$	791,717	$	737,458
Unallocated trade and other accounts receivable	1,486		3,359
Unallocated property and equipment	25,078		21,565
Unallocated deposits and other	4,109		4,234
Other unallocated assets	288,624		260,706
Total assets	$	1,111,014	$	1,027,322



	For the 13 Weeks Ended				For the 26 Weeks Ended
	June 26, 2012		June 28, 2011		June 26, 2012		June 28, 2011
Amounts used for basic and diluted per share calculations:
Net income	$	44,137	$	35,710	$	85,321	$	68,484

Weighted average number of shares outstanding — basic	29,201		29,867		29,192		29,848
Effect of dilutive stock-based employee compensation awards	265		331		272		325
Weighted average number of shares outstanding — diluted	29,466		30,198		29,464		30,173

Earnings per common share:
Basic	$	1.51	$	1.20	$	2.92	$	2.29
Diluted	$	1.50	$	1.18	$	2.90	$	2.27

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, future earnings per share, plans, and objectives contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These statements are often identified by the words “believe”, “positioned”, “estimate”, “project”, “plan”, “goal”, “target”, “assume”, “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, and you should not place undue reliance on our forward-looking statements. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this report and in our other public filings with the Securities and Exchange Commission, or SEC, including our Form 10-K for the year ended December 27, 2011 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 represent our estimates as of the date made and should not be relied upon as representing our estimates as of any subsequent date. We expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Our revenues are derived from Company-owned net 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 net 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.

We include in this report information on Company-owned, franchise-operated, and system-wide comparable net bakery-cafe sales percentages. Company-owned comparable net bakery-cafe sales percentages are based on net sales from Company-owned bakery-cafes included in our base store bakery-cafes. Franchise-operated comparable net bakery-cafe sales percentages are based on net sales from franchised bakery-cafes, as reported by franchisees, that are included in our base store bakery-cafes. System-wide comparable net bakery-cafe sales percentages are based on net sales at Company-owned and franchise-operated bakery-cafes that are included in our base store bakery-cafes. Bakery-cafes and other restaurant or bakery-cafe concepts are included in the comparable net bakery-cafe sales percentages only if we or our franchisee previously held or acquired a 100 percent ownership interest prior to the first day of the prior fiscal year. Comparable net bakery-cafe sales exclude closed locations.

Comparable net 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, or GAAP, and may not be equivalent to comparable net bakery-cafe sales as defined or used by other companies. We do not record franchise-operated net bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated net bakery-cafe sales, as reported by franchisees. We use franchise-operated and system-wide net sales information internally in connection with store development decisions, planning, and budgeting analyses. We believe franchise-operated and system-wide net 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 net 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 net 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 net sales. Average weekly net sales are calculated by dividing total net sales in the period by operating weeks in the period. Accordingly, year-over-year results reflect net sales for all locations, whereas comparable net bakery-cafe sales exclude closed locations and are based on net 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 net 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 net sales during the “honeymoon” period. As a result, year-over-year results of average weekly net sales are generally lower than the results in comparable net 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.

For the thirteen weeks ended June 26, 2012, we earned $1.50 per diluted share with the following performance on key metrics: system-wide comparable net bakery-cafe sales grew 5.9 percent compared to the thirteen weeks ended June 28, 2011 (growth of 7.1 percent for Company-owned bakery-cafes and growth of 4.8 percent for franchise-operated bakery-cafes); system-wide average weekly net sales increased 5.5 percent to $46,690 ($47,113 for Company-owned bakery-cafes and $46,289 for franchise-operated bakery-cafes); 33 new bakery-cafes opened system-wide (17 Company-owned bakery-cafes and 16 franchise-operated bakery-cafes); and four bakery-cafes closed system-wide (three Company-owned bakery-cafes and one franchise-operated bakery-cafes). Additionally, during the thirteen weeks ended June 26, 2012, we acquired 16 bakery-cafes in the Raleigh-Durham, North Carolina market from a franchisee, as described in Note 2 in the accompanying consolidated financial statements.

For the thirteen weeks ended June 28, 2011, we earned $1.18 per diluted share with the following performance on key metrics: system-wide comparable bakery-cafe sales grew 3.9 percent compared to the thirteen weeks ended June 29, 2010 (growth of 4.4 percent for Company-owned bakery-cafes and growth of 3.6 percent for franchise-operated bakery-cafes); system-wide average weekly net sales increased 3.2 percent to $44,268 ($44,118 for Company-owned bakery-cafes and $44,398 for franchise-operated bakery-cafes); and 28 new bakery-cafes opened system-wide (13 Company-owned bakery-cafes and 15 franchise-operated bakery-cafes) and two franchise-operated bakery-cafes closed. Additionally, during the thirteen weeks ended June 28, 2011, we acquired 25 bakery-cafes in the Milwaukee market from a franchisee, as described in Note 2 in the accompanying consolidated financial statements.

For the twenty-six weeks ended June 26, 2012, we earned $2.90 per diluted share with the following performance on key metrics: system-wide comparable net bakery-cafe sales grew 6.1 percent compared to the twenty-six weeks ended June 28, 2011 (growth of 7.3 percent for Company-owned bakery-cafes and growth of 5.0 percent for franchise-operated bakery-cafes); system-wide average weekly net sales increased 5.6 percent to $46,137 ($46,281 for Company-owned bakery-cafes and $46,001 for franchise-operated bakery-cafes); 55 new bakery-cafes opened system-wide (24 Company-owned bakery-cafes and 31 franchise-operated bakery-cafes); and five bakery-cafes closed system-wide (four Company-owned bakery-cafes and one franchise-operated bakery-cafes). Additionally, during the twenty-six weeks ended June 26, 2012, we acquired 16 bakery-cafes in the Raleigh-Durham, North Carolina market from a franchisee, as described in Note 2 in the accompanying consolidated financial statements.

For the twenty-six weeks ended June 28, 2011, we earned $2.27 per diluted share with the following performance on key metrics: system-wide comparable net bakery-cafe sales grew 3.7 percent compared to the twenty-six weeks ended June 29, 2010 (growth of 3.8 percent for Company-owned bakery-cafes and growth of 3.5 percent for franchise-operated bakery-cafes); system-wide average weekly net sales increased 3.0 percent to $43,687 ($43,340 for Company-owned bakery-cafes and $43,982 for franchise-operated bakery-cafes); 47 new bakery-cafes opened system-wide (21 Company-owned bakery-cafes and 26 franchise-operated bakery-cafes); and seven bakery-cafes closed system-wide (three Company-owned bakery-cafes and four franchise-operated bakery-cafes). Additionally, during the twenty-six weeks ended June 28, 2011, we acquired 25 bakery-cafes in the Milwaukee market from a franchisee, as described in Note 2 in the accompanying consolidated financial statements.



	For the 13 Weeks Ended				For the 26 Weeks Ended
	June 26, 2012		June 28, 2011		June 26, 2012		June 28, 2011
Revenues:
Bakery-cafe sales, net	88.3	%	87.5	%	88.2	%	87.1	%
Franchise royalties and fees	4.7		5.1		4.8		5.2
Fresh dough and other product sales to franchisees	7.0		7.4		7.0		7.7
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products	29.1	%	29.7	%	29.2	%	29.4	%
Labor	29.2		30.1		29.8		30.7
Occupancy	6.9		7.1		7.0		7.2
Other operating expenses	13.7		13.9		13.4		13.4
Total bakery-cafe expenses	78.9		80.9		79.5		80.7
Fresh dough and other product cost of sales to franchisees (2)	88.9		85.4		88.1		84.0
Depreciation and amortization	4.2		4.4		4.2		4.4
General and administrative expenses	5.8		5.5		5.6		5.9
Pre-opening expenses	0.5		0.3		0.4		0.3
Total costs and expenses	86.4		87.3		86.4		87.4
Operating profit	13.6		12.7		13.6		12.6
Interest expense	—		—		—		—
Other (income) expense, net	0.1		—		0.1		(0.1	)
Income before income taxes	13.5		12.7		13.4		12.7
Income taxes	5.2		4.7		5.2		4.8
Net income	8.3		7.9		8.3		7.8
Other comprehensive income	—		—		—		—
Comprehensive income	8.3	%	7.9	%	8.3	%	7.8	%



	For the 13 Weeks Ended				For the 26 Weeks Ended
	June 26, 2012		June 28, 2011		June 26, 2012		June 28, 2011
Number of bakery-cafes:
Company-owned:
Beginning of period	746		665		740		662
Bakery-cafes opened	17		13		24		21
Bakery-cafes closed	(3	)	—		(4	)	(3	)
Bakery-cafes acquired from franchisees	16		25		16		25
Bakery-cafes sold to franchisees	—		—		—		(2	)
End of period	776		703		776		703
Franchise-operated:
Beginning of period	816		802		801		791
Bakery-cafes opened	16		15		31		26
Bakery-cafes closed	(1	)	(2	)	(1	)	(4	)
Bakery-cafes sold to Company	(16	)	(25	)	(16	)	(25	)
Bakery-cafes purchased from Company	—		—		—		2
End of period	815		790		815		790
System-wide:
Beginning of period	1,562		1,467		1,541		1,453
Bakery-cafes opened	33		28		55		47
Bakery-cafes closed	(4	)	(2	)	(5	)	(7	)
End of period	1,591		1,493		1,591		1,493

Total revenues for the thirteen weeks ended June 26, 2012 increased 17.6 percent to $530.6 million compared to $451.1 million for the thirteen weeks ended June 28, 2011. The growth in total revenues for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 120 new bakery-cafes system-wide since June 28, 2011 and the 5.9 percent increase in system-wide comparable net bakery-cafe sales for the thirteen weeks ended June 26, 2012. The system-wide average weekly net sales per bakery-cafe for the periods indicated were as follows:

Total revenues for the twenty-six weeks ended June 26, 2012 increased 17.9 percent to $1,029.2 million compared to $873.2 million for the twenty-six weeks ended June 28, 2011. The growth in total revenues for the twenty-six weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 120 new bakery-cafes system-wide since June 28, 2011 and the 6.1 percent increase in system-wide comparable net bakery-cafe sales for the twenty-six weeks ended June 26, 2012. The system-wide average weekly net sales per bakery-cafe for the periods indicated were as follows:

Net bakery-cafe sales for the thirteen weeks ended June 26, 2012 increased 18.8 percent to $468.6 million compared to $394.5 million for the thirteen weeks ended June 28, 2011. The increase in net bakery-cafe sales for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 56 new Company-owned bakery-cafes, the acquisition of 21 franchise-operated bakery-cafes since June 28, 2011, and the 7.1 percent increase in Company-owned comparable net bakery-cafe sales for the thirteen weeks ended June 26, 2012. This 7.1 percent increase in comparable net bakery-cafe sales was driven by approximately 0.9 percent of transaction growth and approximately 6.2 percent average check growth in Company-owned bakery-cafes. Average check growth, in turn, was comprised of retail price increases of approximately 3.0 percent and positive mix impact of approximately 3.2 percent in comparison to the same period in the prior year. In total, Company-owned net bakery-cafe sales as a percentage of total revenues increased to 88.3 percent for the thirteen weeks ended June 26, 2012 as compared to 87.5 percent for the same period in fiscal 2011. The increase in average weekly net sales for Company-owned bakery-cafes for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to an increase in transactions and average check growth. The average weekly net sales per Company-owned bakery-cafe and the number of operating weeks for the periods indicated were as follows:

Net bakery-cafe sales for the twenty-six weeks ended June 26, 2012 increased 19.4 percent to $907.9 million compared to $760.1 million for the twenty-six weeks ended June 28, 2011. The increase in net bakery-cafe sales for the twenty-six weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 56 new Company-owned bakery-cafes, the acquisition of 21 franchise-operated bakery-cafes since June 28, 2011, and the 7.3 percent increase in Company-owned comparable net bakery-cafe sales for the twenty-six weeks ended June 26, 2012. This 7.3 percent increase in comparable net bakery-cafe sales was driven by approximately 1.5 percent of transaction growth and approximately 5.8 percent average check growth in Company-owned bakery-cafes. Average check growth, in turn, was comprised of retail price increases of approximately 3.3 percent and positive mix impact of approximately 2.5 percent in comparison to the same period in the prior year. In total, Company-owned net bakery-cafe sales as a percentage of total revenues increased to 88.2 percent for the twenty-six weeks ended June 26, 2012 as compared to 87.1 percent for the same period in fiscal 2011. The increase in average weekly net sales for Company-owned bakery-cafes for the twenty-six weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to an increase in transactions and average check growth. The average weekly net sales per Company-owned bakery-cafe and the number of operating weeks for the periods indicated were as follows:

The increase in franchise royalty and fee revenues for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 64 franchise-operated bakery-cafes since June 28, 2011 and the 4.8 percent increase in comparable franchise-operated net bakery-cafe sales for the thirteen weeks ended June 26, 2012, partially offset by our purchase of 21 franchise-operated bakery-cafes and the closure of 18 franchise-operated bakery cafes since June 28, 2011. The average weekly net sales per franchise-operated bakery-cafe and the related number of operating weeks for the periods indicated were as follows:

The increase in franchise royalty and fee revenues for the twenty-six weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to the opening of 64 franchise-operated bakery-cafes since June 28, 2011 and the 5.0 percent increase in comparable franchise-operated net bakery-cafe sales for the twenty-six weeks ended June 26, 2012, partially offset by our purchase of 21 franchise-operated bakery-cafes and the closure of 18 franchise-operated bakery cafes since June 28, 2011. The average weekly net sales per franchise-operated bakery-cafe and the related number of operating weeks for the periods indicated were as follows:

As of June 26, 2012, we had 815 franchise-operated bakery-cafes open and we had received commitments to open 173 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 bakery-cafes or develop locations through new franchisees in that market. We may exercise alternative remedies to address defaults by franchisees, including those with respect to franchisee development obligations, compliance with our operating and brand standards and other covenants included in the ADAs and franchise agreements. We may waive compliance with certain requirements included

Fresh dough and other product sales to franchisees for the thirteen weeks ended June 26, 2012 increased 10.9 percent to $37.2 million compared to $33.5 million for the thirteen weeks ended June 28, 2011. Fresh dough and other product sales to franchisees for the twenty-six weeks ended June 26, 2012 increased 6.3 percent to $71.7 million compared to $67.5 million for the twenty-six weeks ended June 28, 2011. The increase in fresh dough and other product sales to franchisees for the thirteen weeks ended June 26, 2012 was primarily due to the 4.8 percent increase in franchise-operated comparable net bakery-cafe sales and opening of 64 franchise-operated bakery-cafes since June 28, 2011, partially offset by our purchase of 21 franchise-operated bakery-cafes and the closure of 18 franchise-operated bakery-cafes since June 28, 2011. The increase in fresh dough and other product sales to franchisees for the twenty-six weeks ended June 26, 2012 was primarily due to the 5.0 percent increase in franchise-operated comparable net bakery-cafe sales and opening of 64 franchise-operated bakery-cafes since June 28, 2011, partially offset by our purchase of 21 franchise-operated bakery-cafes and the closure of 18 franchise-operated bakery-cafes since June 28, 2011.

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 Comprehensive Income.

The cost of food and paper products was $136.5 million, or 29.1 percent of net bakery-cafe sales, for the thirteen weeks ended June 26, 2012 compared to $117.2 million, or 29.7 percent of net bakery-cafe sales, for the thirteen weeks ended June 28, 2011. The cost of food and paper products was $265.5 million, or 29.2 percent of net bakery-cafe sales, for the twenty-six weeks ended June 26, 2012 compared to $223.5 million, or 29.4 percent of net bakery-cafe sales, for the twenty-six weeks ended June 28, 2011. This decrease in the cost of food and paper products as a percentage of net bakery-cafe sales for the thirteen and twenty-six weeks ended June 26, 2012 compared to the same periods in fiscal 2011 was primarily due to improved leverage from higher comparable net bakery-cafe sales. For the thirteen and twenty-six weeks ended June 26, 2012, there was an average of 74 and 74 bakery-cafes per fresh dough facility compared to an average of 69 and 68 as of June 28, 2011, respectively.

Labor expense was $136.9 million, or 29.2 percent of net bakery-cafe sales, for the thirteen weeks ended June 26, 2012 compared to $118.9 million, or 30.1 percent of net bakery-cafe sales, for the thirteen weeks ended June 28, 2011. Labor expense was $270.8 million, or 29.8 percent of net bakery-cafe sales, for the twenty-six weeks ended June 26, 2012 compared to $233.0 million, or 30.7 percent of net bakery-cafe sales, for the twenty-six weeks ended June 28, 2011. The decrease in labor expense as a percentage of net bakery-cafe sales for the thirteen and twenty-six weeks ended June 26, 2012 compared to the same periods in fiscal 2011 was primarily a result of improved leverage from higher comparable net bakery-cafe sales.

Occupancy cost was $32.3 million, or 6.9 percent of net bakery-cafe sales, for the thirteen weeks ended June 26, 2012 compared to $28.1 million, or 7.1 percent of net bakery-cafe sales, for the thirteen weeks ended June 28, 2011. Occupancy cost was $63.4 million, or 7.0 percent of net bakery-cafe sales, for the twenty-six weeks ended June 26, 2012 compared to $54.9 million, or 7.2 percent of net bakery-cafe sales, for the twenty-six weeks ended June 28, 2011. The decrease in occupancy cost as a percentage of net bakery-cafe sales for the thirteen and twenty-six weeks ended June 26, 2012 compared to the same periods in fiscal 2011 was primarily a result of improved leverage from higher comparable net bakery-cafe sales, lower average occupancy costs in new bakery-cafes, and favorably negotiated leases in existing bakery-cafes.

Other operating expenses were $64.2 million, or 13.7 percent of net bakery-cafe sales, for the thirteen weeks ended June 26, 2012 compared to $54.7 million, or 13.9 percent of net bakery-cafe sales, for the thirteen weeks ended June 28, 2011. Other operating expenses were $121.7 million, or 13.4 percent of net bakery-cafe sales, for the twenty-six weeks ended June 26, 2012 compared to $102.1 million, or 13.4 percent of net bakery-cafe sales, for the twenty-six weeks ended June 28, 2011. The decrease in other operating expenses as a percentage of net bakery-cafe sales for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily a result of leverage from higher comparable net bakery-cafe sales, partially offset by increased marketing expense and timing of certain other controllable expenses.

Fresh dough and other product cost of sales to franchisees were $33.0 million, or 88.9 percent of fresh dough and other product sales to franchisees, for the thirteen weeks ended June 26, 2012, compared to $28.6 million, or 85.4 percent of fresh dough and other product sales to franchisees, for the thirteen weeks ended June 28, 2011. Fresh dough and other product cost of sales to franchisees were $63.2 million, or 88.1 percent of fresh dough and other product sales to franchisees, for the twenty-six weeks ended June 26, 2012, compared to $56.6 million, or 84.0 percent of fresh dough and other product sales to franchisees, for the twenty-six weeks ended June 28, 2011. The increase in fresh dough and other product costs of sales to franchisees as a percentage

General and administrative expenses were $30.8 million, or 5.8 percent of total revenues, for the thirteen weeks ended June 26, 2012 compared to $25.0 million, or 5.5 percent of total revenues, for the thirteen weeks ended June 28, 2011. General and administrative expenses were $57.5 million, or 5.6 percent of total revenues, for the twenty-six weeks ended June 26, 2012 compared to $51.7 million, or 5.9 percent of total revenues, for the twenty-six weeks ended June 28, 2011. The increase in general and administrative expenses as a percent of total revenues for the thirteen weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to increased year-over-year long term compensation expense, partially offset by improved leverage from higher comparable net bakery-cafe sales. The decrease in general and administrative expenses as a percent of total revenues for the twenty-six weeks ended June 26, 2012 compared to the same period in fiscal 2011 was primarily due to improved leverage from higher comparable net bakery-cafe sales.

Other (income) expense, net was $0.3 million of expense, or 0.1 percent of total revenues, for the thirteen weeks ended June 26, 2012 compared to $0.2 million of income, or less than 0.1 percent of total revenues, for the thirteen weeks ended June 28, 2011. Other (income) expense, net was $0.7 million of expense, or 0.1 percent of total revenues, for the twenty-six weeks ended June 26, 2012 compared to $1.0 million of income, or 0.1 percent of total revenues, for the twenty-six weeks ended June 28, 2011. Other (income) expense, net for the thirteen and twenty-six weeks ended June 26, 2012 and June 28, 2011 was comprised of immaterial items.

The provision for income taxes increased to $27.6 million for the thirteen weeks ended June 26, 2012 compared to $21.4 million for the thirteen weeks ended June 28, 2011. The tax provision for the thirteen weeks ended June 26, 2012 and June 28, 2011 reflects a combined federal, state, and local effective tax rate of 38.5 percent and 37.5 percent, respectively. The provision for income taxes increased to $53.1 million for the twenty-six weeks ended June 26, 2012 compared to $42.2 million for the twenty-six weeks ended June 28, 2011. The tax provision for the twenty-six weeks ended June 26, 2012 and June 28, 2011 reflects a combined federal, state, and local effective tax rate of 38.4 percent and 38.1 percent, respectively. The increase in the period tax rates for both the thirteen and twenty-six weeks ended June 26, 2012 was primarily due to an increase in discrete items recognized in the current period as opposed to the same period in the prior fiscal year.

Cash and cash equivalents were $255.8 million at June 26, 2012 compared with $222.6 million at December 27, 2011. This increase was primarily a result of $145.2 million of cash generated from operations and $0.6 million of cash provided by financing activities, partially offset by $64.7 million used for capital expenditures and $48.0 million used for acquisitions during the twenty-six weeks ended June 26, 2012. 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 related to the cost of food and paper products, employee labor, and 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 $139.0 million at June 26, 2012 compared to $114.8 million at December 27, 2011. The increase in working capital from December 27, 2011 to June 26, 2012 resulted primarily from an increase in cash of $33.2 million, a decrease of $5.9 million in accrued expenses, an increase in deferred income taxes of $4.1 million, and a decrease in accounts payable of $2.3 million, partially offset by a decrease in trade and other accounts receivable, net of $20.5 million, and other immaterial items. 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.

Cash flows provided by operating activities for the twenty-six weeks ended June 26, 2012 resulted primarily from net income, adjusted for items such as depreciation and amortization, stock-based compensation expense, a decrease in trade and other receivables, inventories, prepaid expenses, and deposits and other, and an increase in deferred rent, partially offset by an increase in net deferred income taxes, excess tax benefit from exercise of stock options, and a decrease in accrued expenses, accounts payable, and other long-term liabilities. Cash flows provided by operating activities for the twenty-six weeks ended June 28, 2011 primarily resulted from net income, adjusted for items such as depreciation and amortization, a decrease in net deferred income taxes and stock-based compensation expense, partially offset by a decrease in accrued expenses and increases in both prepaid expenses and other and trade and other accounts receivable, net.

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 115 to 120 system-wide bakery-cafe openings in the fiscal year ended December 25, 2012, or fiscal 2012.

Financing activities for the twenty-six weeks ended June 26, 2012 included $2.7 million received from the exercise of employee stock options, $2.1 million received from an excess tax benefit from exercise of stock options, and $1.1 million received from the issuance of common stock, partially offset by $5.3 million used to repurchase shares of our Class A common stock. Financing activities for the twenty-six weeks ended June 28, 2011 included $1.0 million received from the exercise of employee stock options, $1.0 million received from the issuance of common stock, and $0.9 million received from an excess tax benefit from exercise of stock options, partially offset by $0.9 million used to repurchase shares of our Class A common stock.

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, pursuant to which share repurchases may be effected from time to time on the open market or in privately negotiated transactions and which may be made under a Rule 10b5-1 plan. Repurchased shares may be retired immediately and will 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 twenty-six weeks ended June 26, 2012, we repurchased 34,600 shares under the share repurchase authorization at an average price of $144.24. During the twenty-six weeks ended June 28, 2011, we did not repurchase any shares under the share repurchase authorization. As of June 26, 2012, we had repurchased a total of 2,844,669 shares of our Class A common stock under the share repurchase authorization at a weighted-average price of $87.03 per share for an aggregate purchase price of approximately $247.6 million. As of June 26, 2012, we had approximately $352.4 million available under the existing $600.0 million repurchase authorization.

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 twenty-six weeks ended June 26, 2012, we repurchased 1,882 shares of Class A common stock surrendered by participants of the Plans at a weighted-average price of $157.26 per share for an aggregate purchase price of $0.3 million. During the twenty-six weeks ended June 28, 2011, we repurchased 7,306 shares of Class A common stock surrendered by participants of the Plans at a weighted-average price of $122.03 per share for an aggregate purchase price of $0.9 million. These share repurchases were made pursuant to the terms of the Plans and the applicable award agreements and were not made pursuant to publicly announced share repurchase authorizations.

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 June 26, 2012 and December 27, 2011, we had no balance outstanding under the Amended and Restated Credit Agreement. As of June 26, 2012, we were in compliance with all covenants under the Amended and Restated Credit Agreement.

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

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., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 27, 2011, 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 27, 2011.

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 maintenance, and other operating costs. Many bakery-cafe leases provide for contingent rental (i.e. percentage rent) payments based on net sales in excess of specified amounts or changes in external indices. 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.

As of June 26, 2012, we guaranteed operating leases of 24 franchisee or affiliate locations, which we account for in accordance with the accounting standard for guarantees. These leases have terms expiring on various dates from July 31, 2012 to December 31, 2023 and a potential amount of future rental payments of approximately $22.6 million as of June 26, 2012. Our obligation under these leases will generally continue to 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 implementation of the accounting standard 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 analysis of the facts and circumstances of each such lease and each such franchisee’s performance, and we did not believe it was probable we would be required to perform under any guarantees at the time the guarantees were issued. We have not had to make any payments related to any of these guaranteed leases. The applicable franchisees or affiliates continue to have primary liability for these operating leases.

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 SEC’s 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 company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures were designed to provide 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 June 26, 2012, our Co-Chief Executive Officers and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

On December 9, 2009, a purported class action lawsuit was filed against Panera Bread Company and one of our subsidiaries by Nick Sotoudeh, a former employee of a subsidiary of Panera Bread Company. The lawsuit was filed in the California Superior Court, County of Contra Costa. On April 22, 2011, the complaint was amended to add another former employee, Gabriela Brizuela, as a plaintiff. The complaint alleged, 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 California’s Business and Professions Code. The complaint sought, among other relief, 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. On November 17, 2011, the parties entered into a Memorandum of Agreement regarding settlement of this purported class action lawsuit and the purported class action lawsuit filed by David Carter, which is described in the subsequent paragraph. Under the terms of the Memorandum of Agreement, the parties have agreed to settle this matter for a maximum aggregate amount of $5.0 million for settlement payments to purported class members, plaintiffs' attorneys' fees, and costs of administering the settlement. The Memorandum of Agreement contains no admission of wrongdoing. The terms and conditions of the settlement were preliminarily approved by the Court on June 8, 2012. The aggregate settlement amount of $5.0 million is included in accrued expenses in our Consolidated Balance Sheets as of June 26, 2012 and December 27, 2011.

On July 22, 2011, a purported class action lawsuit was filed against Panera Bread Company and one of our subsidiaries by David Carter, a former employee of a subsidiary of Panera Bread Company, and Nikole Benavides, a purported former employee of one of our franchisees. The lawsuit was filed in the California Superior Court, County of San Bernardino. 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 California's Business and Professions Code. 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. This matter was consolidated with the lawsuit described in the immediately preceding paragraph and is the subject of the Memorandum of Agreement described above.

On December 16, 2010, a purported class action lawsuit was filed against Panera Bread Company and one of our subsidiaries by Denarius Lewis, Caroll Ruiz, and Corey Weiner, former employees of a subsidiary of Panera Bread Company. The lawsuit was filed in the United States District Court for the Middle District of Florida. The complaint alleged, among other things, violations of the Fair Labor Standards Act. 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. On February 29, 2012, the parties agreed to settle this matter for an amount up to an aggregate of $1.5 million for settlement payments to purported class members, plaintiffs' attorneys' fees, and costs of administering the settlement. The agreement includes no admission of wrongdoing. The terms and conditions of the settlement were approved by the Court on June 26, 2012, and the matter was dismissed with prejudice. The settlement amount of $1.5 million is included in accrued expenses in our Consolidated Balance Sheets as of June 26, 2012 and December 27, 2011.

In addition, we are subject to other routine legal proceedings, claims and litigation in the ordinary course of 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 believe the ultimate resolution of these actions will have a material adverse effect on our consolidated financial statements. However, a significant increase in the number of these claims, or one or more

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 27, 2011, as filed with the SEC on February 21, 2012 and amended by Form 10-K/A, filed with the SEC on March 20, 2012, that could have a material adverse 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 June 26, 2012, 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.



Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
March 28, 2012 - April 24, 2012	—			$	—	—	$	357,414,869
April 25, 2012 - May 29, 2012	26,181	(2	)	144.75		25,900	353,667,381
May 30, 2012 - June 26, 2012	8,700			142.89		8,700	352,424,244
Total	34,881			$	144.28	34,600	$	352,424,244



Exhibit Number		Description

31.1		Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3		Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Principal Executive Officer and Principal Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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



		Panera Bread Company
		(Registrant)

Dated:	July 25, 2012	By:	/s/ WILLIAM W. MORETON
			William W. Moreton
			President and Co-Chief Executive Officer
			(principal executive officer)

Dated:	July 25, 2012	By:	/s/ RONALD M. SHAICH
			Ronald M. Shaich
			Chairman and Co-Chief Executive Officer
			(principal executive officer)

Dated:	July 25, 2012	By:	/s/ THOMAS P. KELLY
			Thomas P. Kelly
			Interim Chief Financial Officer
			(principal financial officer)

Dated:	July 25, 2012	By:	/s/ MARK D. WOOLDRIDGE
			Mark D. Wooldridge
			Vice President of Accounting, Associate Controller, and Chief Accounting Officer



Exhibit Number	Description

31.1	Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Principal Executive Officer and Principal Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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



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



3630 South Geyer Road, Suite 100, St. Louis, MO	63127
(Address of Principal Executive Offices)	(Zip Code)



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



		Page
PART I	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS (unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
ITEM 4.	CONTROLS AND PROCEDURES	23
PART II	OTHER INFORMATION	24
ITEM 1.	LEGAL PROCEEDINGS	24
ITEM 1A.	RISK FACTORS	25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
ITEM 6.	EXHIBITS	26
	Signatures	27
	Exhibit Index	28
	EX-31.1
	EX-31.2
	EX-31.3
	EX-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



	June 26, 2012		December 27, 2011
Food:
Fresh dough facilities:
Raw materials	$	3,053	$	2,998
Finished goods	353		261
Bakery-cafes:
Raw materials	10,734		11,048
Paper goods	2,646		2,709
Total	$	16,786	$	17,016


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


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



	Pro Forma for the Fiscal Period Ended
	For the 13 Weeks Ended		For the 26 Weeks Ended
	June 28, 2011		June 26, 2012		June 28, 2011
Bakery-cafe sales, net	$	404,242	$	917,494	$	779,455
Net income	35,969		85,638		69,058



	Company Bakery- Cafe Operations			Franchise Operations		Fresh Dough Operations		Total
Balance as of December 27, 2011	$	104,442		$	1,934	$	1,695	$	108,071
North Carolina Acquisition	13,509			—		—		13,509
Currency translation	(9		)	—		—		(9		)
Other	181			—		—		181
Balance as of June 26, 2012	$	118,123		$	1,934	$	1,695	$	121,752


(2)	As a percentage of fresh dough and other product sales to franchisees.



	For the 13 Weeks Ended				Percentage
	June 26, 2012		June 28, 2011		Change
System-wide average weekly net sales	$	46,690	$	44,268	5.5	%


(1)	Number of Class A common stock shares that were repurchased under a Rule 10b5-1 Plan. See Part 1, Item 2. for further information regarding the share repurchase authorization.