Panera Bread Company Reports Fourth Quarter and Full Year Fiscal 2011 Diluted EPS of $1.42 and $4.65, Both Before One-Time Charge, Up 17% and 28% Over Fiscal 2010

Panera Bread Company (NASDAQ: PNRA)

HIGHLIGHTS

• Q4 2011 Company-owned comparable net bakery-cafe sales up 5.9%
• FY 2011 System-wide new unit AWS of $41,516 at all-time high and surpasses record year in FY 2010
• Acquisition of Raleigh-Durham franchise market for $48 million expected to close by end of Q1 2012
• Q1 2012 EPS target set at $1.33 to $1.35 (up 22% to 24% over Q1 2011)
• FY 2012 EPS target increased to $5.50 to $5.55 (up 18% to 19% versus adjusted FY 2011 EPS)

Panera Bread Company (NASDAQ: PNRA) reported adjusted net income of $42 million, or $1.42 per diluted share, for the thirteen weeks ended December 27, 2011, before a one-time pre-tax charge of $5 million. The fourth quarter of fiscal 2011 results compare to net income of $37 million, or $1.21 per diluted share, for the fourth quarter ended December 28, 2010, and represent a 17% year-over-year increase in diluted earnings per share.

For the fifty-two weeks ended December 27, 2011, adjusted net income was $139 million, or $4.65 per diluted share, before a one-time charge of $5 million. The full year fiscal 2011 results compare to net income of $112 million, or $3.62 per diluted share, for the fifty-two weeks ended December 28, 2010, and represent a 28% year-over-year increase in diluted earnings per share.

The following table sets forth, for the periods indicated, a reconciliation of GAAP and non-GAAP diluted earnings per share. The reconciliation of GAAP and non-GAAP information is attached as Schedule IV.

		For the 13 weeks Ended			For the 52 weeks Ended
		December 27, 2011			December 27, 2011
Diluted earnings per share, excluding settlement charge		$	1.42		$	4.65
Impact of settlement charge on diluted earnings per share (1)			0.11			0.10
Diluted earnings per share		$	1.31		$	4.55

The Company's fourth quarter and full year fiscal 2011 consolidated statements of operations and margin analyses are attached as Schedule I. The following tables set forth, for the periods indicated, certain items included in the Company's consolidated statements of operations (in thousands, except per share data and percentages):

		For the 13 Weeks Ended
		December 27, 2011			December 28, 2010			Percentage Change
Total Revenue		$	495,765		$	428,161		16	%
Net Income (1)		$	38,620		$	36,520		6	%
Diluted earnings per share (1)		$	1.31		$	1.21		8	%
Shares used in diluted EPS			29,402			30,092

		For the 52 Weeks Ended
		December 27, 2011			December 28, 2010			Percentage Change
Total Revenue		$	1,822,032		$	1,542,489		18	%
Net Income (1)		$	135,952		$	111,866		22	%
Diluted earnings per share (1)		$	4.55		$	3.62		26	%
Shares used in diluted EPS			29,903			30,922

Fourth Quarter Fiscal 2011 Results and Business Review

Comparable Net Bakery-Cafe Sales Growth

In the fourth quarter of fiscal 2011, Company-owned comparable net bakery-cafe sales increased 5.9%, franchise-operated comparable net bakery-cafe sales increased 3.2%, and system-wide comparable net bakery-cafe sales increased 4.4% compared to the comparable period in fiscal 2010. Two year Company-owned comparable net bakery-cafe sales increased 11.1%, two year franchise-operated comparable net bakery-cafe sales increased 9.3%, and two year system-wide comparable net bakery-cafe sales increased 10.2%.

The Company-owned comparable net bakery-cafe sales increase of 5.9% in the fourth quarter of fiscal 2011 was comprised of year-over-year transaction growth of 0.2% and average check growth of 5.7%. Average check growth was comprised of retail price increases of approximately 3.7% and positive mix impact of approximately 2.0%. A schedule of comparable net bakery-cafe sales information is attached as Schedule III.

New Unit Development and AWS

During the fourth quarter of fiscal 2011, the Company opened 24 new bakery-cafes and its franchisees opened 16 new bakery-cafes. For the full year fiscal 2011, the Company and its franchisees opened 112 new bakery-cafes. As a result, there were 1,541 bakery-cafes open system-wide as of December 27, 2011.

		Company-owned		Franchise-operated			Total System
Bakery-cafes as of September 27, 2011		716		788			1,504
Bakery-cafes opened		24		16			40
Bakery-cafes closed		-		(3	)		(3	)
Bakery-cafes as of December 27, 2011		740		801			1,541

AWS for Company-owned new units for full year fiscal 2011 was a record $41,637 compared to $40,808 in full year fiscal 2010. AWS for franchise-operated new units for full year fiscal 2011 was a record $41,438 compared to $38,841 in full year fiscal 2010. A schedule of the fourth quarter and full year fiscal 2011 AWS is attached as Schedule II.

Settlement of Legal Matter

On November 17, 2011, the Company entered into a Memorandum of Agreement recording a $5 million charge for the proposed settlement of a legal matter against the Company, alleging, among other things, violations of the California Labor Code related to breaks and meal periods. The Company has denied liability and wrongdoing of any kind with respect to any claims of the plaintiffs and makes no admission of any wrongdoing in connection with the proposed settlement.

A schedule of the impact on earnings per diluted share for the fourth quarter and full year fiscal 2011 is attached as Schedule IV.

Full Year 2012 Targets

Raising Full Year Fiscal 2012 Targets

Diluted EPS Target

The Company is raising its target for full year fiscal 2012 earnings per diluted share to $5.50 to $5.55 from its prior target range of $5.38 to $5.48. If the Company meets its target, it would generate diluted earnings per share growth of 18% to 19% versus adjusted fiscal 2011 diluted earnings per share. This increase in the full year fiscal 2012 target includes a favorable impact of $0.02 to $0.03 per diluted share in full year fiscal 2012 from the pending acquisition of the Raleigh-Durham market. The earnings per diluted share target does not assume additional share repurchases.

The full year fiscal 2012 diluted earnings per share target is based on the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth

The Company is raising its target for Company-owned comparable bakery-cafe sales growth for fiscal 2012 to 4.5% to 5.5% from its prior target of 4.0% to 5.0% based on improved expectations related to the Company's sales-building initiatives. This target assumes transaction growth of 50 to 100 basis points and average check growth of approximately 4.0% to 4.5% on average year-over-year pricing of approximately 3.25%, and mix impact on check of approximately 1.0%.

New Unit Development and AWS

The Company has increased its fiscal 2012 new unit target to approximately 115 to 120 system-wide new unit openings from 110 to 115 units. It has also increased its target for average weekly net sales performance for new Company-owned units to $40,000 to $42,000 from $39,000 to $41,000.

Operating Margin

The Company's fiscal 2012 EPS target assumes its fiscal 2012 operating margin will be roughly flat after the impact of the Raleigh-Durham acquisition on a year-over-year basis versus adjusted fiscal 2011.

First Quarter of Fiscal 2012 Outlook

Establishing First Quarter of Fiscal 2012 Targets

Diluted EPS Target

The Company's first quarter of fiscal 2012 diluted earnings per share target assumes earnings per diluted share of $1.33 to $1.35, which would represent an increase of 22% to 24% in the first quarter of fiscal 2012 versus the comparable period in fiscal 2011.

The first quarter of fiscal 2012 diluted earnings per share target includes the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth

The range for the Company's first quarter of fiscal 2012 Company-owned comparable bakery-cafe sales growth is targeted at 7.0% to 7.5% versus the comparable period in 2011. The two year Company-owned comparable net bakery-cafe sales target is 10.3% to 10.8%. The assumptions underlying this comparable net bakery-cafe sales growth target for the fiscal first quarter are transaction growth of 2.0% to 2.5%, including 200 basis points of favorable impact related to the inclement weather experienced last year, and average check growth of approximately 5.0%. Average check growth is comprised of retail price increases of approximately 3.75% and approximately 1.25% positive impact from mix, driven primarily by the Company's catering sales growth.

The Company announced today Company-owned comparable net bakery-cafe sales in the first 41 days of the first quarter of fiscal 2012 were up approximately 8.9%, including approximately 350 basis points of favorable impact from inclement weather experienced in the comparable period of fiscal 2011.

Operating Margin Target

In the first quarter of fiscal 2012, the Company is targeting operating margin to be modestly favorable versus the prior fiscal period reflecting operating leverage from sales growth.

Departure of Chief Financial Officer

The Company is also announcing today that Jeff Kip, Executive Vice President and Chief Financial Officer, is leaving the Company on March 15th to join IAC/InterActiveCorp as its Executive Vice President and Chief Financial Officer. The Company has initiated a search for Mr. Kip's replacement.

Bill Moreton, commented, "Jeff has been a key strategic partner to Ron and myself over the six years that he has served as our Chief Financial Officer and nine years that he has been with Panera. Jeff has been instrumental in helping think through our long-term capital deployment model and has brought financial discipline and rigor to our organization. We are very grateful for all of Jeff's contributions to Panera and we wish him all the best in his new role at IAC."

Mr. Kip said, "I am both very excited about the opportunity to join my new team at IAC and extremely thankful to Ron, Bill, and the entire Panera organization for my time here. While it is difficult to leave anywhere you have been as long as I have been here, I feel very good about not only what we have accomplished here over the last nine years, but also what the team has positioned the Company to achieve going forward."

Concluding Comment

Bill Moreton, CEO, commented, "As we close our fourth consecutive year of 24% plus EPS growth and look forward to another strong year in 2012, we continue to feel very good about our strategy of investing consistently in the quality of our concept and customer experience to drive competitive differentiation over the medium and long term. We have seen these investments manifest themselves in our strong, consistent comp store sales growth and our record-setting new unit volumes over a multi-year period. Additionally, we are very pleased that we have also been able to deploy a meaningful amount of our excess cash -- $400 million over the last year and a half -- to drive earnings growth and shareholder returns. We look forward to another strong year in 2012 with our EPS growth currently targeted at the high end of our long-term target range of 15-20%."

About Panera Bread Company

Panera Bread Company owns and franchises 1,541 bakery-cafes as of December 27, 2011 under the Panera Bread®, Saint Louis Bread Co.®, and Paradise Bakery & Café® names. Our bakery-cafes are principally located in suburban, strip mall and regional mall locations. We feature high quality, reasonably priced food in a warm, inviting, and comfortable environment. With our identity rooted in handcrafted, fresh-baked, artisan bread, we are committed to providing great tasting, quality food that people can trust. Nearly all of our bakery-cafes have a menu highlighted by antibiotic-free chicken, whole grain bread, and select organic and all-natural ingredients, with zero grams of artificial trans fat per serving, which provide flavorful, wholesome offerings. Our menu includes a wide variety of year-round favorites complemented by new items introduced seasonally with the goal of creating new standards in everyday food choices. In neighborhoods across the United States and in Ontario, Canada, our customers enjoy our warm and welcoming environment featuring comfortable gathering areas, relaxing decor, and free internet access. Our bakery-cafes routinely donate bread and baked goods to community organizations in need. 

Schedule I
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
					For the 13 Weeks Ended
					December 27, 2011				December 28, 2010
Revenues:
	Bakery-cafe sales, net				$	435,576			$	371,007
	Franchise royalties and fees					24,512				22,170
	Fresh dough and other product sales to franchisees					35,677				34,984
		Total revenues				495,765				428,161
Costs and expenses:
	Bakery-cafe expenses:
		Cost of food and paper products			$	127,422			$	103,922
		Labor				129,620				112,235
		Occupancy				30,610				26,859
		Other operating expenses				58,866				47,815
			Total bakery-cafe expenses			346,518				290,831
	Fresh dough and other product cost of sales to franchisees					30,335				28,077
	Depreciation and amortization					21,030				18,449
	General and administrative expenses					32,567				28,080
	Pre-opening expenses					2,769				1,915
		Total costs and expenses				433,219				367,352
Operating profit						62,546				60,809
Interest expense						206				177
Other (income) expense, net						(323	)			1,455
Income before income taxes						62,663				59,177
Income taxes						24,043				22,793
		Net income				38,620				36,384
Less: net loss attributable to noncontrolling interest						-				(136	)
		Net income attributable to Panera Bread Company			$	38,620			$	36,520
Earnings per common share attributable to Panera Bread Company:
	Basic				$	1.33			$	1.22
	Diluted				$	1.31			$	1.21
Weighted average shares of common and common equivalent shares outstanding:
	Basic					29,140				29,816
	Diluted					29,402				30,092

Schedule I (continued)
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
					For the 52 Weeks Ended
					December 27, 2011				December 28, 2010
Revenues:
	Bakery-cafe sales, net				$	1,592,951			$	1,321,162
	Franchise royalties and fees					92,793				86,195
	Fresh dough and other product sales to franchisees					136,288				135,132
		Total revenues				1,822,032				1,542,489
Costs and expenses:
	Bakery-cafe expenses:
		Cost of food and paper products			$	470,398			$	374,816
		Labor				484,014				419,140
		Occupancy				115,290				100,970
		Other operating expenses				216,237				177,059
			Total bakery-cafe expenses			1,285,939				1,071,985
	Fresh dough and other product cost of sales to franchisees					116,267				110,986
	Depreciation and amortization					79,899				68,673
	General and administrative expenses					113,083				101,494
	Pre-opening expenses					6,585				4,282
		Total costs and expenses				1,601,773				1,357,420
Operating profit						220,259				185,069
Interest expense						822				675
Other (income) expense, net						(466	)			4,232
Income before income taxes						219,903				180,162
Income taxes						83,951				68,563
		Net income				135,952				111,599
Less: net loss attributable to noncontrolling interest						-				(267	)
		Net income attributable to Panera Bread Company			$	135,952			$	111,866
Earnings per common share attributable to Panera Bread Company:
	Basic				$	4.59			$	3.65
	Diluted				$	4.55			$	3.62
Weighted average shares of common and common equivalent shares outstanding:
	Basic					29,601				30,614
	Diluted					29,903				30,922

						For the 13 Weeks Ended
						December 27, 2011			December 28, 2010
Revenues:
	Bakery-cafe sales, net					87.9	%		86.7	%
	Franchise royalties and fees					4.9			5.2
	Fresh dough and other product sales to franchisees					7.2			8.2
				Total revenues		100.0	%		100.0	%
Costs and expenses:
	Bakery-cafe expenses (1):
		Cost of food and paper products				29.3	%		28.0	%
		Labor				29.8			30.3
		Occupancy				7.0			7.2
		Other operating expenses				13.5			12.9
			Total bakery-cafe expenses			79.6			78.4
	Fresh dough and other product cost of sales to franchisees (2)					85.0			80.3
	Depreciation and amortization					4.2			4.3
	General and administrative expenses					6.6			6.6
	Pre-opening expenses					0.6			0.4
		Total costs and expenses				87.4			85.8
Operating profit						12.6			14.2
Interest expense						-			-
Other (income) expense, net						(0.1	)		0.3
Income before income taxes						12.6			13.8
Income taxes						4.8			5.3
		Net income				7.8	%		8.5	%
Less: net loss attributable to noncontrolling interest						-			-
		Net income attributable to Panera Bread Company				7.8	%		8.5	%

						For the 52 Weeks Ended
						December 27, 2011			December 28, 2010
Revenues:
	Bakery-cafe sales, net					87.4	%		85.7	%
	Franchise royalties and fees					5.1			5.6
	Fresh dough and other product sales to franchisees					7.5			8.8
				Total revenues		100.0	%		100.0	%
Costs and expenses:
	Bakery-cafe expenses (1):
		Cost of food and paper products				29.5	%		28.4	%
		Labor				30.4			31.7
		Occupancy				7.2			7.6
		Other operating expenses				13.6			13.4
			Total bakery-cafe expenses			80.7			81.1
	Fresh dough and other product cost of sales to franchisees (2)					85.3			82.1
	Depreciation and amortization					4.4			4.5
	General and administrative expenses					6.2			6.6
	Pre-opening expenses					0.4			0.3
		Total costs and expenses				87.9			88.0
Operating profit						12.1			12.0
Interest expense						-			-
Other (income) expense, net						-			0.3
Income before income taxes						12.1			11.7
Income taxes						4.6			4.4
		Net income				7.5	%		7.2	%
Less: net loss attributable to noncontrolling interest						-			-
		Net income attributable to Panera Bread Company				7.5	%		7.3	%

System-Wide AWS
		2011			2010			2009			2008			2007
AWS		$	44,313		$	42,852		$	39,926		$	39,239		$	38,668

		2011 Company-Owned AWS By Year Opened																		Year-Over-Year Change in Company-Owned AWS
		2011 Opens [a]			2010 Opens [a]			2009 Opens & Prior			2011 Acquisitions [c]			2010 Acquisitions			Total			2010 Opens [b]			2009 Opens & Prior			AWS Total
Bakery-Cafes			53			42			575			30			40			740
Q1 11		$	49,551		$	39,075		$	42,497		$	-		$	46,244		$	42,532		-30.4	%		3.7	%		3.6	%
Q2 11		$	42,184		$	39,255		$	44,021		$	45,493		$	50,516		$	44,118		-0.7	%		4.8	%		5.2	%
Q3 11		$	40,272		$	38,320		$	43,119		$	45,301		$	48,761		$	43,148		-4.2	%		6.3	%		6.6	%
Q4 11		$	41,808		$	42,177		$	46,520		$	46,686		$	51,920		$	46,336		3.7	%		6.2	%		5.2	%
2011 YTD		$	41,637		$	39,707		$	44,038		$	45,883		$	49,360		$	44,071		-2.7	%		5.3	%		5.2	%

	2011 Franchise-Operated AWS By Year Opened																		Year-Over-Year Change in Franchise-Operated AWS
	2011 Opens [d]			2010 Opens [d]			2009 Opens & Prior			2011 Acquisitions [f]			2010 Acquisitions			Total			2010 Opens [e]		2009 Opens & Prior		AWS Total
Bakery-Cafes		59			33			704			2			3			801
Q1 11	$	45,532		$	38,246		$	43,862		$	20,157		$	35,525		$	43,568		-13.5	%	2.9	%	2.2	%
Q2 11	$	44,313		$	38,305		$	44,783		$	18,768		$	35,813		$	44,398		-0.1	%	2.5	%	1.8	%
Q3 11	$	39,979		$	37,247		$	44,077		$	18,886		$	35,991		$	43,508		1.6	%	2.6	%	1.7	%
Q4 11	$	40,951		$	39,806		$	47,447		$	23,076		$	37,891		$	46,612		-0.1	%	4.2	%	2.9	%
2011 YTD	$	41,438		$	38,400		$	45,020		$	20,111		$	36,305		$	44,527		-1.1	%	3.1	%	2.2	%

[d]	2011 and 2010 Franchise-operated AWS excludes 2011 and 2010 acquisition data.
[e]	Change in Franchise-operated AWS in 2011 from 2010 compares 33 bakery-cafes in 2011 against 34 bakery-cafes at the end of the fiscal fourth quarter of 2010.
[f]	Represents two Paradise bakery-cafes.

		Bakery-Cafe Openings (excluding acquisitions)
		Company		Franchise		Total				Company		Franchise		Total
Q1 11		8		11		19		Q1 10		3		5		8
Q2 11		13		15		28		Q2 10		8		5		13
Q3 11		8		17		25		Q3 10		10		12		22
Q4 11		24		16		40		Q4 10		21		12		33
2011 YTD		53		59		112		2010 YTD		42		34		76

AWS - average weekly net sales for the time periods indicated.

PANERA BREAD COMPANY
Schedule III - Comparable Net Bakery-Cafe Sales Information
		For the 4 weeks ended			For the 5 weeks ended			For the 4 weeks ended			For the 13 weeks ended			For the 52 Weeks Ended
		October 25, 2011			November 29, 2011			December 27, 2011			December 27, 2011			December 27, 2011
Company-owned		6.5	%		5.3	%		6.0	%		5.9	%		4.9	%
Franchise-operated		3.9	%		2.3	%		3.8	%		3.2	%		3.4	%
System-wide		5.0	%		3.6	%		4.8	%		4.4	%		4.0	%

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. Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe concepts are included in our comparable net bakery-cafe sales percentages after we have acquired a 100 percent ownership interest and if such acquisition date occurred prior to the first day of our prior fiscal year. Comparable net bakery-cafe sales exclude closed locations.

PANERA BREAD COMPANY
Schedule IV - Reconciliation of GAAP and Non-GAAP Information
(in thousands, except per share information)
		For the 13 weeks Ended			For the 52 weeks Ended
		December 27, 2011			December 27, 2011
Net Income, excluding settlement charge		$	41,702		$	139,043
Amount reserved for settlement of a legal matter (1)			3,082			3,091
Net Income		$	38,620		$	135,952
Weighted average diluted shares of common and common equivalent shares outstanding			29,402			29,903
Diluted earnings per share, excluding settlement charge		$	1.42		$	4.65
Impact of settlement charge on diluted earnings per share			0.11			0.10
Diluted earnings per share		$	1.31		$	4.55

Logos, product and company names mentioned are the property of their respective owners.

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