UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-19253

Panera Bread Company

(Exact name of registrant as specified in its charter)

(314) 633-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $.0001 par value

(Title of class)

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of the registrant’s voting Class A and Class B Common Stock held by non-affiliates as of July 9, 2004 was $963,455,008. There is no public trading market for the registrant’s Class B Common Stock.

      Number of shares outstanding of each of the registrant’s classes of common stock as of March 2, 2005: 29,189,493 shares of Class A Common Stock ($.0001 par value) and 1,448,012 shares of Class B Common Stock ($.0001 par value).

      Portions of the proxy statement for the annual stockholders’ meeting to be held June 2, 2005 are incorporated by reference into Part III.

PART I

GENERAL

      Panera Bread Company (including its wholly owned subsidiaries) may be referred to as the “Company,” “Panera Bread” or in the first person notation of “we,” “us,” and “ours” in the following discussion.

      The Company was originally organized in March 1981 as a Massachusetts corporation under the name Au Bon Pain Co., Inc. and reincorporated in Delaware in June 1998. Originally the Company consisted of three Au Bon Pain bakery-cafes and one cookie store. The Company continued to grow the Au Bon Pain concept domestically, primarily on the east coast, and internationally throughout the 1980’s and 1990’s. On December 22, 1993, the Company purchased the Saint Louis Bread Company. At the time, the Saint Louis Bread Company consisted of 19 Company-owned and one franchised bakery-cafe primarily located in the Saint Louis, Missouri area. In August 1998, the Company entered into a Stock Purchase Agreement to sell the Au Bon Pain Division to ABP Corporation for $73.0 million in cash before contractual purchase price adjustments of $1.0 million. The sale was completed May 16, 1999. At that time, the Company changed its name to Panera Bread Company. As of December 25, 2004, the Company operates, directly and through area development agreements with 39 franchisee groups, bakery-cafes under the names Panera Bread and Saint Louis Bread Company. The Company operates as three business segments for accounting purposes. See Note 17 of the Company’s Consolidated Financial Statements for segment information. The Company is a Delaware corporation with its principal executive offices at 6710 Clayton Road, Richmond Heights, Missouri 63117.

      As of December 25, 2004, the Company’s retail operations consist of 226 Company-owned bakery-cafes and 515 franchise-operated bakery-cafes, all in the United States. The Company specializes in meeting consumer dining needs by providing high quality food, including fresh baked goods, made-to-order sandwiches on freshly baked breads, soups, salads, custom roasted coffees, and other cafe beverages, and targets suburban dwellers and workers by offering a premium specialty bakery and cafe experience with a neighborhood emphasis.

      Bakery-cafes are principally located in suburban strip mall and regional mall locations and currently operate in 35 states. The Company’s revenues were $479.1 million, consisting of $362.1 million of bakery-cafe sales, $44.4 million of franchise royalties and fees, and $72.6 million of fresh dough sales to franchisees. Franchisee bakery-cafe sales were $879.1 million for the fiscal year ended December 25, 2004.

      The following table sets forth certain bakery-cafe data relating to Company-owned and franchise-operated bakery-cafes:

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

      Following disclosure by several restaurant companies late in calendar 2004 and in connection with performing its 2004 year-end reporting control processes, the Company performed a comprehensive review of its lease accounting practices. Historically, the Company recorded rent expense on a straight-line basis over the initial non-cancelable term commencing upon location opening. The Company concluded that its calculation of straight-line rent should be based on the reasonably assured lease term as defined in SFAS 98, “Accounting for Leases,” which in most cases exceeds the initial non-cancelable lease term. The Company further concluded that any construction period and other rent holidays should also be included in its determination of straight-line rent expense. Additionally, the Company reassessed the depreciable lives of leasehold improvements at all locations to be the shorter of their estimated useful life or the reasonably assured lease term at the inception of the lease. The Company also concluded that landlord allowances for normal tenant improvements, which had previously been recorded as a reduction to related leasehold improvements, should be reflected as deferred rent and amortized over the reasonably assured lease term as a reduction to rent expense rather than depreciation.

      The Company evaluated the materiality of these corrections on its financial statements and concluded that the incremental impact of these corrections is not material to any quarterly or annual period; however, the cumulative effect of these corrections is material to the fourth quarter of fiscal 2004. As a result, the Company has recorded the cumulative effect as of the end of fiscal year 2001 and has restated previously issued consolidated financial statements for the fiscal years ended December 27, 2003 and December 28, 2002 to recognize the impact of recording rent expense over the reasonably assured lease period, to record depreciation on leasehold improvements over the shorter of their estimated useful lives or the reasonably assured lease term, and to classify landlord allowances for normal tenant improvements as deferred rent and amortize them over the reasonably assured lease term as a reduction to rent expense rather than depreciation. See Note 3 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases.

CONCEPT AND STRATEGY

      The Company’s concept focuses on the “Specialty Bread/ Bakery-Cafe” category. Its artisan breads, which are breads made with all natural ingredients and a craftsman’s attention to quality and detail, and overall award-winning bakery expertise are at the heart of the concept’s menu. The concept is designed to deliver against the key consumer trends of today, specifically the need for a more responsive and more special dining experience than that offered by traditional fast food. The Company’s goal is to make Panera Bread a nationally dominant brand name. Its menu, prototype, operating systems, design, and real estate strategy allow it to compete successfully in several sub-businesses: breakfast, lunch, PM “chill out,” lunch in the evening, and take home bread. The Company has achieved this success as evidenced by several awards it has received. The Company was rated the highest in customer satisfaction for the third consecutive year in the Sandelman and Associates survey of more than 67,000 consumers’ rating of 117 concepts. The Company also ranked number one in customer satisfaction in the J.D. Powers survey of 55,000 consumers in the midwest and northeast. Additionally, the Company has been rated number one in food quality in the Restaurant and Institutions magazine Choice in Chain survey in each of the last two years. On a system-wide basis, average weekly sales increased 1.1% to $36,008 for the fifty-two weeks ended December 25, 2004 compared to $35,617 for the fifty-two weeks ended December 27, 2003.

      The distinctive nature of the Company’s menu offerings (centered around the fresh artisan bread products), the quality of its bakery-cafe operations, the Company’s signature cafe design, and the prime locations of its cafes are integral to the Company’s success. The Company believes its concept has significant growth potential, which it hopes to realize through a combination of Company and franchisee efforts. Franchising is a key component of the Company’s success. Utilization of franchising has enabled the Company to grow more rapidly because of the added resources and capabilities they provide to implement the concepts and strategy developed by Panera. As of December 25, 2004, there were 515 franchised bakery-cafes operating and signed commitments to open an additional 406 bakery-cafes.

      The Company believes that providing bakery-cafe operators the opportunity to participate in the success of the bakery-cafe enables the Company to attract and retain experienced and highly motivated personnel, which will result in a better customer experience. As a result, the Company developed a program and began implementation in certain markets in 2003 to allow unit general managers and multi-unit managers to participate in the success of a bakery-cafe through a multi-year bonus structure. The Company expects to continue implementation of this bonus structure where appropriate as an alternative to its traditional Company-owned or franchised bakery-cafes to facilitate the development and operation of bakery-cafes.

MENU

      The menu is designed to provide the Company’s target customers with products which build on the strength of the Company’s bakery expertise. The key menu groups are fresh baked goods, made-to-order sandwiches and salads, soups, and cafe beverages. Included within these menu groups are a variety of freshly baked bagels, breads, muffins, scones, rolls, and sweet goods; made-to-order sandwiches; hearty, unique soups; custom roasted coffees and cafe beverages such as hot or cold espresso and cappuccino drinks. The Company’s concept emphasizes the sophisticated specialty and artisan breads that support a take-home bread business.

      The Company regularly reviews and revises its menu offerings to satisfy changing customer preferences. New menu items are developed in test kitchens and then introduced in a limited number of the Company’s bakery-cafes to determine customer response and verify that preparation and operating procedures maintain product consistency, high quality standards, and profitability. If successful, they are then introduced in the rest of the Company’s bakery-cafes and franchise bakery-cafes.

MARKETING

      The Company believes it competes on the basis of providing an entire experience rather than by price only. Pricing is structured so customers perceive good value with high quality food at reasonable prices to encourage frequent visits. The Company measures its average check per transaction. The total average check per transaction at the Company-owned bakery-cafes opened eighteen months or longer at December 25, 2004

was $6.97. Breakfast average check per transaction was $5.26, lunch average check per transaction was $7.99, PM “chill out” average check per transaction was $7.03, and lunch in the evening average check per transaction was $7.79. The Company attempts to increase its per location sales through menu development, product merchandising, and promotions at every day prices and by sponsorship of local community charitable events.

      Franchised bakery-cafes contribute to the Company 0.4% of their sales to a national advertising fund and 0.4% of their sales as a marketing administration fee and are required to spend 2.0% of their sales in their local markets on advertising. The Company contributes similar amounts from Company-owned bakery-cafes towards the national advertising fund and marketing administration. The national advertising fund and marketing administration contributions received from franchised bakery-cafes are consolidated with Company amounts in the Company’s financial statements. Liabilities for unexpended funds are included in accrued expenses in the consolidated balance sheets. The Company’s contributions to the national advertising fund and marketing administration as well as its own media costs are recorded as part of other operating expenses in the consolidated statements of operations. The Company may utilize external media when deemed appropriate and cost effective in specific markets.

SITE SELECTION AND BAKERY-CAFE ENVIRONMENT

      The bakery-cafe concept relies on a substantial volume of repeat business. In evaluating a potential location, the Company studies the surrounding trade area, demographic information within that area and information on breakfast and lunch competitors. Based on analysis of this information including utilization of predictive modeling using proprietary software, the Company determines projected sales and return on investment. The Panera concept has proven successful in a number of different types of real estate (i.e., in-line or end-cap locations in strip or power centers, regional malls, and free-standing).

      The Company designs each bakery-cafe to provide a differentiated environment, using in many cases fixtures and materials complementary to the neighborhood location of the bakery-cafe. Many locations incorporate the warmth of a fireplace and cozy seating areas and groupings which facilitate utilization as a gathering spot. The design visually reinforces the distinctive difference between the Company’s bakery-cafes and other bakery-cafes serving breakfast and lunch. Many of the Company’s cafes also feature outdoor cafe seating and free wifi internet access. In addition, the Company began its “Via Panera” catering business in 2004. The average construction, equipment, furniture and fixture, and signage cost for the 54 Company bakery-cafes opened in 2004 was $0.95 million per bakery-cafe after landlord allowances.

      The average bakery-cafe size is 4,480 square feet. The Company leases substantially all of its bakery-cafe locations. Lease terms are typically ten years with one, two, or three five-year renewal option periods thereafter. Leases typically have charges for minimum base occupancy, a proportionate share of building and common area operating expenses and real estate taxes, and contingent percentage rent based on sales above a stipulated sales level. Certain of the Company’s 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. See Note 3 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases.

BAKERY-CAFE SUPPLY CHAIN

      Bakery-cafes in the system use fresh dough for their artisan and sourdough breads and bagels. Fresh dough is supplied daily by a fresh dough facility to both Company-owned and franchise-operated bakery-cafes. The following table sets forth the number of fresh dough facilities:

      The Company believes its fresh dough facility system provides a competitive advantage. The fresh dough facilities ensure consistent quality and supply of fresh dough products to both Company-owned and franchised bakery-cafes. The Company focuses its growth in areas that allow it to continue to gain efficiencies through leveraging the fixed cost of the fresh dough facility structure and to selectively enter new markets which require the construction of additional facilities when sufficient numbers of bakery-cafes may be opened that permit efficient distribution of the fresh dough. The fresh dough distribution system delivers product daily to the bakery-cafes. Distribution is accomplished through a leased fleet of temperature controlled trucks operated by Company personnel. At December 25, 2004, 112 trucks were leased by the Company. The optimal distribution is approximately 200 miles, however, when necessary, distribution range may be 450 miles. An average distribution route delivers dough to 6 bakery-cafes. The Company is not dependent upon one or a few suppliers as there are numerous suppliers of needed product ingredient.

      The Company has contracted externally for the supply of the remaining baked goods in the bakery-cafes, referred to as sweet goods. In March 1998, the Company entered into a multi-year supply agreement with Bunge Food Corporation (“Bunge”) for the supply of substantially all of its sweet goods. The Company’s pricing was structured as a cost plus arrangement. In November 2002, the Company signed an agreement with Dawn Food Products, Inc. (“Dawn”) to provide sweet goods for the period 2003-2007. The agreement with Dawn is also structured as a cost plus agreement. The transition from Bunge to Dawn was completed in the first quarter of fiscal 2003.

COMPETITION

      The Company experiences competition from numerous sources in its trade areas. The Company’s bakery-cafes compete based on customers’ needs for breakfast, lunch, daytime “chill-out,” lunch in the evening, and take home bread sales. The competitive factors include location, environment, customer service, price, and quality of products. The Company competes for leased space in desirable locations. Certain of the Company’s competitors may have capital resources exceeding those available to the Company. Our primary competitors include specialty food and casual dining and quick service restaurant retailers including national, regional, and locally-owned concepts.

MANAGEMENT INFORMATION SYSTEMS

      Each Company-operated bakery-cafe has computerized cash registers to collect point-of-sale transaction data which is used to generate pertinent transactional information, including product mix and average check. All product prices are programmed into the system from the Company’s corporate office. The Company allows franchisees who elect to do so access to certain of its proprietary bakery-cafe systems and systems support.

      The Company’s in-store information system is designed to assist in labor scheduling and food cost management, to provide corporate and retail operations management quick access to retail data, and to reduce managers’ administrative time. The system supplies sales, bank deposit, and variance data to the Company’s accounting department on a daily basis. The Company uses this data to generate daily and weekly consolidated reports regarding sales and other key elements, as well as detailed profit and loss statements for each

Company-owned bakery-cafe every four weeks. Additionally, the Company monitors the average check, customer count, product mix, and other sales trends. The fresh dough facilities have computerized systems which allow the fresh dough facilities to accept electronic orders from the bakery-cafes and deliver the ordered product back to the bakery-cafes.

      The Company has network/integration systems which are corporate office electronic systems and tools which link various information subsystems and databases, encompassing e-mail and all major financial systems, such as general ledger database systems, and all major operational systems, such as store operating performance database systems.

DISTRIBUTION

      The Company uses independent distributors to distribute sweet goods products and other materials to bakery-cafes. With the exception of fresh dough products supplied by the fresh dough facilities, virtually all other food products and supplies for retail operations, including paper goods, coffee, and smallwares, are contracted for by the Company and delivered by the vendors to the distributor for delivery to the bakery-cafes. The individual bakery-cafes order directly from a distributor two to three times per week.

      Franchised bakery-cafes operate under individual contracts with one of the Company’s distributors or other regional distributors. As of December 25, 2004, there were three primary distributors serving the Panera Bread system.

FRANCHISE OPERATIONS

      The Company began a broad-based franchising program in 1996. The Company is actively seeking to extend its franchise relationships beyond its current franchisees and annually files a Uniform Franchise Offering Circular to facilitate sale of additional franchise development agreements. The franchise agreement typically requires the payment of a franchise fee of $35,000 per bakery-cafe (broken down into $5,000 at the signing of the area development agreement and $30,000 at or before the bakery-cafe opens) and continuing royalties of 4-5% on sales from each bakery-cafe. Franchise-operated bakery-cafes follow the same standards for in store operating standards, product quality, menu, site selection, and bakery-cafe construction as do Company-owned bakery-cafes. The franchisees are required to purchase all of their dough products from sources approved by the Company. The Company’s fresh dough facility system supplies fresh dough products to substantially all franchise-operated bakery-cafes. The Company does not finance franchisee construction or Area Development Agreement (ADA) purchases. In addition, the Company does not hold an equity interest in any of the franchised bakery-cafes.

      The Company had entered into franchise ADAs with 39 franchisee groups as of December 25, 2004. Also, as of December 25, 2004, there were 515 franchised bakery-cafes open and commitments to open 406 additional franchised bakery-cafes. The Company expects these bakery-cafes to open according to the timetables established in the various ADAs with franchisees, with the majority opening in the next four to five years. The ADAs require a franchisee to develop a specified number of bakery-cafes on or before specific dates. If a franchisee fails to develop bakery-cafes on schedule, the Company has the right to terminate the ADA and develop Company-owned locations or develop locations through new area developers in that market. At the present time, the Company does not have any international franchise development agreements.

EMPLOYEES

      As of December 25, 2004, the Company had 4,746 full-time associates (defined as associates who average 25 hours or more per week), of whom 381 were employed in general or administrative functions principally at or from the Company’s support centers (executive offices); 761 were employed in the Company’s fresh dough facility operations; and 3,604 were employed in the Company’s bakery-cafe operations as bakers, managers, and associates. The Company also had 4,741 part-time hourly associates at the bakery-cafes at December 25, 2004. The Company does not have any collective bargaining agreements with its employees. The Company considers its employee relations to be good. The Company places a priority on

staffing its bakery-cafes, fresh dough facilities, and support center operations with skilled associates and invests in training programs to ensure the quality of its operations.

TRADEMARKS

      The Panera Bread® and Saint Louis Bread Co.® names are of material importance to the Company and are trademarks registered with the United States Patent and Trademark Office. In addition, other marks of lesser importance have been filed with the United States Patent and Trademark Office.

ACCESS TO INFORMATION

      Our Internet address is www.panerabread.com. We make available at this address, free of charge, nutritional information, press releases, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC).

GOVERNMENT REGULATION

      Each fresh dough facility and Company-operated and franchised bakery-cafe is subject to regulation and licensing by federal agencies as well as to licensing and regulation by state and local health, sanitation, safety, fire, and other departments. Difficulties or failures in obtaining and retaining the required licensing or approval could result in delays or cancellations in the opening of fresh dough facilities and bakery-cafes as well as fines and possible closure relating to existing fresh dough facilities and bakery-cafes. In addition, the Company is subject to the Fair Labor Standards Act and various state laws governing such matters as minimum wages, overtime, and other working conditions.

      The Company is also subject to federal and a substantial number of state laws regulating the offer and sale of franchises. Such laws impose registration and disclosure requirements on franchisors in the offer and sale of the franchises and may also apply substantive standards to the relationship between franchisor and franchisee.

      The Company and its fresh dough facilities are subject to various federal, state, and local environmental regulations. Compliance with applicable environmental regulations is not believed to have a material effect on capital expenditures, financial condition, results of operations, or the competitive position of the Company.

      The Americans with Disabilities Act prohibits discrimination in employment and public accommodations on the basis of disability. Under the Americans with Disabilities Act, the Company could be required to expend funds to modify its Company-owned bakery-cafes to provide service to, or make reasonable accommodations for the employment of, disabled persons. Compliance with the requirements of the Americans with Disabilities Act is not believed to have a material effect on the Company’s financial condition or results of operations.

      The Company leases substantially all of its bakery-cafe locations and all of its fresh dough facilities with lease terms typically for ten years with one, two, or three five-year renewal option periods thereafter. Leases typically have charges for minimum base occupancy, a proportionate share of building and common area operating expenses and real estate taxes, and a contingent percentage rent based on sales above a stipulated sales level. Certain of the Company’s 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. See Note 3 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases.

      Information with respect to Company-operated leased fresh dough facilities as of December 25, 2004 is set forth below:

      Information with respect to the number of bakery-cafes operated by state at December 25, 2004 is set forth below:

Panera Bread/ St. Louis Bread Co. Bakery-Cafes

      The Company is not subject to any material litigation, but is subject to claims and legal action in the ordinary course of its business. The Company believes all such claims and actions currently pending against it would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

      The Company submitted no matters to a vote of security holders during the fourth quarter of the fiscal year ended December 25, 2004.

PART II

      The Company’s Class A Common Stock is traded on The Nasdaq National Market tier of the Nasdaq Stock Market under the symbol “PNRA.” There is no established public trading market for the Company’s Class B Common Stock. The following table sets forth the high and low sale prices for the Company’s Class A Common Stock as reported by Nasdaq for the fiscal periods indicated.

      On March 2, 2005, the last sale price for the Class A Common Stock, as reported on the Nasdaq National Market System, was $53.48.

      On March 2, 2005, the Company had 2,143 holders of record of its Class A Common Stock and 43 holders of record of its Class B Common Stock.

      The Company has never paid cash dividends on its capital stock and does not intend to pay cash dividends in 2005 as it intends to re-invest earnings in continued growth of its operations.

      The Company discloses information about its securities authorized for issuance under equity compensation plans in Item 12 of this annual report.

      The following selected financial data has been derived from the consolidated financial statements of the Company. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and Notes thereto.

Forward-Looking Statements

      Matters discussed in this report and in our public disclosures, whether written or oral, including any discussion, express or implied, of the Company’s anticipated growth, operating results, future earnings per share, plans and objectives, or statements of the underlying assumptions of forward-looking statements, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are often identified by the words “believe”, “positioned”, “estimate”, “project”, “target”, “continue”, “intend”, “expect”, “future”, “anticipates”, and similar expressions. All forward-looking statements, whether written or oral, are expressly qualified by the cautionary statements described in this provision. All forward-looking statements included in this report are made only as of the date of this report, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that occur or of which we hereafter become aware, after that date. Forward looking information expresses management’s present belief, expectations or intentions regarding the Company’s future performance. The Company’s actual results could differ materially from those set forth in the forward-looking statements due to known and unknown risks, uncertainties, and developments and could be negatively impacted by a number of factors. These factors include but are not limited to the following: the availability of sufficient capital to the Company and the developers party to franchise development agreements with the Company; variations in the number and timing of bakery-cafe openings; the ability by the Company and franchisees to operate additional bakery-cafes profitably; public acceptance of new bakery-cafes; competition; national and regional weather conditions; changes in restaurant operating costs, particularly market changes, food and labor costs, and inflation; changes in commodity costs; changes in consumer nutritional habits; changes in accounting principles generally accepted in the United States; and other factors that may affect retailers in general. For all of these reasons, our forward-looking statements should not be relied upon as a prediction of actual future events, objectives, strategies, trends, or results.

General

      The Company’s fiscal year ends on the last Saturday in December. The Company’s fiscal year consists of 13 four-week periods, with the first, second, and third quarters ending 16 weeks, 28 weeks, and 40 weeks, respectively, into the fiscal year. In 2005, the Company intends to change its fiscal week to end on Tuesday rather than Saturday. This change will allow the Company to better serve customers by shifting the weekly closing activities to a less busy day of the week. As a result, the Company’s 2005 fiscal year will end on December 27, 2005 instead of December 31, 2005 and, therefore, consist of fifty-two and a half weeks rather than the fifty-three week year that would have resulted without the calendar change. The additional days in

fiscal 2005 compared to fiscal 2004 will occur in the first quarter, resulting in the first quarter being sixteen and a half weeks instead of sixteen weeks. In fiscal year 2006, the Company intends to convert to a 4-5-4 fiscal calendar whereby each quarter will include 13 weeks.

      The Company includes information on Company, franchisee, and/or system-wide comparable bakery-cafe sales increases and average weekly sales. System-wide sales are a non-GAAP financial measure that includes sales at all Company and franchise bakery-cafes, as reported by franchisees. Management uses system-wide sales information internally in connection with store development decisions, planning and budgeting analyses, and believes it is useful in assessing consumer acceptance of the Company’s brand and facilitates understanding of financial performance as the Company’s franchisees pay royalties and contribute to advertising pools based on a percentage of their sales.

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

      Following disclosure by several restaurant companies late in calendar 2004 and in connection with performing its 2004 year-end reporting control processes, the Company performed a comprehensive review of its lease accounting practices. Historically, the Company recorded rent expense on a straight-line basis over the initial non-cancelable term commencing upon location opening. The Company concluded that its calculation of straight-line rent should be based on the reasonably assured lease term as defined in SFAS 98, “Accounting for Leases,” which in most cases exceeds the initial non-cancelable lease term. The Company further concluded that any construction period and other rent holidays should also be included in its determination of straight-line rent expense. Additionally, the Company reassessed the depreciable lives of leasehold improvements at all locations to be the shorter of their estimated useful life or the reasonably assured lease term at the inception of the lease. The Company also concluded that landlord allowances for normal tenant improvements, which had previously been recorded as a reduction to related leasehold improvements, should be reflected as deferred rent and amortized over the reasonably assured lease term as a reduction to rent expense rather than depreciation.

      The Company evaluated the materiality of these corrections on its financial statements and concluded that the incremental impact of these corrections is not material to any quarterly or annual period; however, the cumulative effect of these corrections is material to the fourth quarter of fiscal 2004. As a result, the Company has recorded the cumulative effect as of the end of fiscal year 2001 and has restated previously issued consolidated financial statements for the fiscal years ended December 27, 2003 and December 28, 2002 to recognize the impact of recording rent expense over the reasonably assured lease period, to record depreciation on leasehold improvements over the shorter of their estimated useful lives or the reasonably assured lease term, and to classify landlord allowances for normal tenant improvements as deferred rent and amortize them over the reasonably assured lease term as a reduction to rent expense rather than depreciation. See Note 3 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases.

      In fiscal 2004, the Company earned $1.25 per diluted share with the following system-wide performance on key metrics: 143 new bakery-cafes opened in fiscal 2004, including 54 new Company-owned bakery-cafes (nearly double new Company-owned bakery-cafes opened in fiscal 2003) and 89 new franchise bakery-cafes, comparable bakery-cafe sales growth of 2.7%, and average weekly sales of $36,008, and operating weeks of 34,470.

      The Company expects earnings per diluted share for the first quarter of 2005, which ends on April 19, 2005, of $0.42-$0.43, representing an increase of 35%-39% from the first quarter of 2004. The Company is changing its fiscal calendar in 2005 to have its operating week end on Tuesday rather than Saturday. This change will result in an additional three days being included in the first quarter of 2005 compared to the 2004

first quarter. The first quarter target assumes system-wide comparable sales growth of 5.0% to 6.5%. Additionally, the Company expects system-wide average weekly sales per bakery-cafe for the quarter to be in the range of $35,500 to $36,500 and expects operating weeks to be in the range of 11,900 to 12,000. Bakery-cafe openings in the quarter are expected to be 33 (18 company and 15 franchise) compared to 36 (11 company and 25 franchise) in the first quarter of 2004.

      The Company expects full year 2005 earnings per diluted share of $1.52 to $1.57, an increase of 22% to 26% from 2004 results. This target reflects the first quarter performance discussed above and continues to target full year system-wide comparable sales growth of 2% to 4% as the pricing portion of sales growth will decelerate as the year progresses. The Company expects system-wide average weekly sales for full year 2005 to be in the range of $36,000 to $37,000 and expects system-wide operating weeks to be in the range of 41,500 to 42,000. Bakery-cafe openings in 2005 are expected to be 150 to 160 (70 company and 80-90 franchise). Capital expenditures in 2005 are expected to be $95 million to $100 million for the Company. The 2005 earnings per share targets exclude the impact of expensing stock options. The Company is required to begin expensing stock option costs no later than the third quarter of fiscal 2005 under SFAS 123R, “Share-Based Payment.” See Note 2 of the Company’s Consolidated Financial Statements for further information.

      The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Company’s consolidated statements of operations for the periods indicated. Percentages may not add due to rounding:

      The following table sets forth certain information and other data relating to Company-owned and franchise-operated bakery-cafes:

      Increases in comparable bakery-cafe sales for the fifty-two weeks ended December 25, 2004, December 27, 2003, and December 28, 2002 were as follows:

      Comparable bakery-cafe sales exclude closed locations and are based on sales for bakery-cafes that have been in operation for at least 18 months.

      Comparable sales during the fifty-two weeks ended December 25, 2004 increased at a higher rate than comparable sales during the fifty-two weeks ended December 27, 2003 primarily as a result of sales from the roll-out of the “Via Panera” catering business which began in 2004, sales from strengthened new product development in 2004, the implementation of several Company initiatives by the franchised bakery-cafes in 2004 related to increased staffing, quality, and speed of customer service, and price increases. Sales in the first half of 2004 continued to be negatively impacted by “low carbohydrate” diet trends experienced in the second half of 2003.

      Comparable sales increases were lower during the fifty-two weeks ended December 27, 2003 than during the fifty-two weeks ended December 28, 2002 as a result of several factors. These factors include the more difficult winter weather in the first quarter of 2003, the negative impact of the power outage and hurricane in 2003, and the impact of ROI based real estate decisions relating to new stores that negatively impacted existing store performance in 2003. In addition, during the second quarter of 2003, the Company began to implement increased staffing and other initiatives that focused on quality and speed of customer service in Company-owned bakery-cafes. The implementation of these initiatives occurred on a trailing basis at franchised bakery-cafes, as the Company initially tests changes in Company-owned bakery cafes before recommending changes to its franchisees. Additionally, in the second half of 2003 the Company’s sales growth was negatively impacted by the increased popularity of “low carbohydrate” diet trends.

Results of Operations

Revenues

      Total Company revenues for the fifty-two weeks ended December 25, 2004 increased 31.7% to $479.1 million compared to $363.7 million for the fifty-two weeks ended December 27, 2003. The growth in total revenues for the fifty-two weeks ended December 25, 2004, as compared to the prior year, is primarily due to the opening of 143 new bakery-cafes in 2004 as well as increases in system-wide comparable bakery-cafe sales of 2.7% for the fifty-two weeks ended December 25, 2004. The system-wide average weekly sales per bakery-cafe and the related number of operating weeks for the fifty-two weeks ended December 25, 2004 and December 27, 2003 are as follows:

      Average weekly sales is calculated by dividing total net sales by operating weeks. Accordingly, year over year growth reflects all sales, whereas comp store sales reflects only sales for those bakery-cafes that have been open for more than 18 months.

      Bakery-cafe sales for the fifty-two weeks ended December 25, 2004 for the Company increased 36.2% to $362.1 million from $265.9 million for the fifty-two weeks ended December 27, 2003. Company bakery-cafe sales as a percentage of total revenue increased by 2.5 percentage points for the fifty-two weeks ended December 25, 2004 compared to the fifty-two weeks ended December 27, 2003, and fresh dough sales to franchisees as a percentage of total revenue decreased by 1.8 percentage points for the fifty-two weeks ended December 25, 2004 compared to the fifty-two weeks ended December 27, 2003, primarily as a result of the increase in the number of Company bakery-cafe openings. The increase in bakery-cafe sales is primarily due to the impact of a full year’s operations of the 29 Company bakery-cafes opened and 15 bakery-cafes acquired in 2003, the opening of 54 Company-owned bakery-cafes in 2004, and the 2.9% increase in comparable bakery-cafe sales for the fifty-two weeks ended December 25, 2004. The average weekly sales per Company-

owned bakery-cafe and the related number of operating weeks for the fifty-two weeks ended December 25, 2004 and December 27, 2003 are as follows:

      Franchise royalties and fees rose 22.7% to $44.4 million for the fifty-two weeks ended December 25, 2004 from $36.2 million for the fifty-two weeks ended December 27, 2003. The components of franchise royalties and fees are as follows (in thousands):

      The increase in royalty revenue can be attributed to the impact of a full year’s operations of the 102 franchised bakery-cafes opened in 2003, the opening of 89 franchised bakery-cafes in 2004, and the 2.6% increase in comparable franchise-operated bakery-cafe sales for the fifty-two weeks ended December 25, 2004. The average weekly sales per franchise-operated bakery-cafe and the related number of operating weeks for the fifty-two weeks ended December 25, 2004 and December 27, 2003 are as follows:

      As of December 25, 2004, there were 515 franchised bakery-cafes open and commitments to open 406 additional franchised bakery-cafes. The Company expects these bakery-cafes to open according to the timetables established in the various ADAs with franchisees, with the majority opening in the next four to five years. In 2005, the Company expects to open 80 to 90 new franchise bakery-cafes. The 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 schedule, the Company has the right to terminate the ADA and develop Company-owned locations or develop locations through new area developers in that market.

      Fresh dough facility sales to franchisees increased 18.0% to $72.6 million for the fifty-two weeks ended December 25, 2004 from $61.5 million for the fifty-two weeks ended December 27, 2003. The increase was primarily driven by the increased number of franchise bakery-cafes opened described previously partially offset by a decrease in average fresh dough sales per bakery-cafe to franchisees due to a change in the mix of product sold by franchisees.

Costs and Expenses

      The cost of food and paper products includes the costs associated with the fresh dough operations that sell fresh dough 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 the fresh dough operations that sell fresh dough products to the franchised bakery-cafes are excluded and are shown separately as fresh dough cost of sales to franchisees in the Consolidated Statements of Operations. The cost of food and paper products increased to 28.1% of bakery-cafe sales for the fifty-two weeks ended December 25, 2004 compared to 27.8% (as restated) of bakery-cafe sales for the fifty-two weeks ended December 27, 2003. This increase in the cost of food and paper products as a percentage of bakery-cafe sales is primarily due to higher commodity costs,

including higher fuel costs, which averaged $2.06 per gallon in 2004 compared to $1.71 in 2003, and higher fresh dough facility operational costs related to lease and related leasehold improvement accounting as described in Note 3 to the Consolidated Financial Statements, partially offset by improved leveraging of fresh dough manufacturing and distribution costs the Company achieves as more bakery-cafes are opened. For the fifty-two weeks ended December 25, 2004, there was an average of 39.2 bakery-cafes per fresh dough facility compared to an average of 32.7 for the fifty-two weeks ended December 27, 2003.

      Labor expense was $110.8 million, or 30.6% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to $81.2 million, or 30.5% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The labor expense as a percentage of bakery-cafe sales increased between the fifty-two weeks ended December 25, 2004 and the fifty-two weeks ended December 27, 2003 primarily as a result of start-up inefficiencies related to the increase in Company bakery-cafe openings in 2004 compared to 2003 and higher benefit costs partially offset by leveraging these costs over higher sales volumes.

      Occupancy costs were $26.7 million, or 7.4% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to $19.0 million (as restated), or 7.1% (as restated) of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The occupancy cost as a percentage of bakery-cafe sales increased for the fifty-two weeks ended December 25, 2004 primarily due to higher rent cost related to lease accounting as described in Note 3 to the Consolidated Financial Statements.

      Other bakery-cafe operating expenses, which include advertising, retail field overhead, utilities, and other bakery-cafe expenses, were $51.0 million, or 14.1% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to $36.8 million, or 13.8% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The increase in other bakery-cafe operating expenses as a percentage of bakery-cafe sales for the fifty-two weeks ended December 25, 2004 is primarily due to increased organizational costs for field management, including recruiting, training, and advertising, associated with new markets that do not yet have multi-unit leverage.

      For the fifty-two weeks ended December 25, 2004, fresh dough facility cost of sales to franchisees was $65.6 million, or 90.4% of fresh dough facility sales to franchisees, compared to $55.0 million, or 89.3% of fresh dough facility sales to franchisees, for the fifty-two weeks ended December 27, 2003. The increase in the fresh dough cost of sales rate in fiscal 2004 was primarily due to increased commodity costs, including butter, tuna, and cream cheese.

      Depreciation and amortization was $25.3 million, or 5.3% of total revenue, for the fifty-two weeks ended December 25, 2004 compared to $18.3 million, or 5.0% of total revenue, for the fifty-two weeks ended December 27, 2003. The increase in depreciation and amortization as a percentage of total revenue for the fifty-two weeks ended December 25, 2004 compared to the fifty-two weeks ended December 27, 2003 is primarily due to the impact of a full year’s depreciation of prior year’s capital expenditures and increased capital expenditures in the current year.

      General and administrative expenses were $33.3 million, or 7.0% of total revenue, and $28.1 million, or 7.7% of total revenue, for the fifty-two weeks ended December 25, 2004 and December 27, 2003, respectively. The decrease in the general and administrative expense rate between 2004 and 2003 is primarily the result of the improved leveraging of these costs over higher revenue.

      Pre-opening expenses, which consist primarily of labor and food costs incurred during in-store training and preparation for opening, exclusive of manager training costs which are included in general and administrative expenses, were $2.6 million, or 0.6% of total revenue, for the fifty-two weeks ended December 25, 2004 compared to $1.5 million, or 0.4% of total revenue, for the fifty-two weeks ended December 27, 2003. The increase in pre-opening expenses as a percentage of total revenue for the fifty-two weeks ended December 25, 2004 compared to the fifty-two weeks ended December 27, 2003 is primarily due to increased number of Company bakery-cafe openings in 2004 compared to 2003 as described above.

Operating Profit

      Operating profit for the fifty-two weeks ended December 25, 2004 increased to $61.8 million, or 12.9% of total revenue, from $49.9 million (as restated), or 13.7% (as restated) of total revenue, for the fifty-two weeks ended December 27, 2003. Operating profit as a percentage of total revenues for the fifty-two weeks ended December 25, 2004 declined as a result of the factors described above.

Other Expense

      Other expense for the fifty-two weeks ended December 25, 2004 decreased to $0.7 million, or 0.2% of total revenue, from $1.2 million, or 0.3% of total revenue, for the fifty-two weeks ended December 27, 2003. The decrease in other expense results primarily from increased interest income in 2004.

Minority Interest

      Minority interest represents the portion of the Company’s operating profit that is attributable to the ownership interest of our former minority interest owner. See Note 4 to the Consolidated Financial Statements for additional information.

Income Taxes

      The provision for income taxes increased to $22.2 million for the fifty-two weeks ended December 25, 2004 compared to $17.6 million (as restated) for the fifty-two weeks ended December 27, 2003. The tax provisions for the fifty-two weeks ended December 25, 2004 and December 27, 2003 reflects a consistent combined federal, state, and local effective tax rate of 36.5%.

Income Before Cumulative Effect of Accounting Change

      Income before cumulative effect of accounting change for the fifty-two weeks ended December 25, 2004 increased $7.9 million, or 25.7%, to $38.6 million, or $1.25 per diluted share, compared to income before cumulative effect of accounting change of $30.7 million (as restated), or $1.01 per diluted share (as restated), for the fifty-two weeks ended December 27, 2003. The 2004 increase in income before cumulative effect of accounting change was primarily due to an increase in bakery-cafe sales, franchise royalties and fees, and fresh dough sales to franchisees partially offset by higher costs as described above.

Net Income

      Net income for the fifty-two weeks ended December 25, 2004 increased $8.2 million, or 27.0%, to $38.6 million, or $1.25 per diluted share, compared to net income of $30.4 million (as restated), or $1.00 per diluted share (as restated), for the fifty-two weeks ended December 27, 2003. The increase in net income in 2004 is consistent with the factors described above.

Results of Operations

Revenues

      Total Company revenues for the fifty-two weeks ended December 27, 2003 increased 28.9% to $363.7 million compared to $282.2 million for the fifty-two weeks ended December 28, 2002. The growth in total revenues for the fifty-two weeks ended December 27, 2003, as compared to the prior year, is primarily due to the opening of 131 new bakery-cafes in 2003 as well as the increase in system-wide average weekly sales of 0.6% for the fifty-two weeks ended December 27, 2003.

      Bakery-cafe sales for the fifty-two weeks ended December 27, 2003 for the Company increased 25.1% to $265.9 million from $212.6 million for the fifty-two weeks ended December 28, 2002. The increase in bakery-cafe sales is primarily due to the impact of a full year’s operations of the 23 Company bakery-cafes opened in 2002, the opening of 29 Company-owned bakery-cafes in 2003, and the 1.7% increase in comparable bakery-

cafe sales for the fifty-two weeks ended December 27, 2003. The average weekly sales per Company-owned bakery-cafe and the related number of operating weeks for the fifty-two weeks ended December 27, 2003 and December 28, 2002 are as follows:

      Franchise royalties and fees rose 29.7% to $36.2 million for the fifty-two weeks ended December 27, 2003 from $27.9 million for the fifty-two weeks ended December 28, 2002. The components of franchise royalties and fees are as follows (in thousands):

      The increase in royalty revenue can be attributed to the impact of a full year’s operations of the 92 franchised bakery-cafes opened in 2002 and the addition of 102 franchised bakery-cafes in 2003. The average weekly sales per franchise-operated bakery-cafe and the related number of operating weeks for the fifty-two weeks ended December 27, 2003 and December 28, 2002 are as follows:

      As of December 27, 2003, there were 429 franchised bakery-cafes open and commitments to open 409 additional franchised bakery-cafes. We expect these bakery-cafes to open over the next ten years according to the timetable established in the ADAs, with the majority opening in the next four to five years. The 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 schedule, the Company has the right to terminate the ADA and develop Company-owned locations or develop locations through new area developers in that market.

      Fresh dough facility sales to franchisees increased 47.5% to $61.5 million for the fifty-two weeks ended December 27, 2003 from $41.7 million for the fifty-two weeks ended December 28, 2002. The increase was primarily driven by the increased number of franchise bakery-cafes opened, as well as a shift in certain product being distributed through the fresh dough facility system rather than a third party.

Costs and Expenses (as restated — see Note 3 to the Consolidated Financial Statements)

      The cost of food and paper products includes the costs associated with the fresh dough operations that sell fresh dough 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 the fresh dough operations that sell fresh dough products to the franchised bakery-cafes are excluded and are shown separately as fresh dough cost of sales to franchisees in the Consolidated Statements of Operations. The cost of food and paper products decreased to 27.8% of bakery-cafe sales for the fifty-two weeks ended December 27, 2003 compared to 29.8% of bakery-cafe sales for the fifty-two weeks ended December 28, 2002. This decrease in the cost of food and paper products as a percentage of bakery-cafe sales is primarily due to the Company’s improved leveraging of its fresh dough manufacturing and distribution costs as more bakery-cafes are opened. For the fifty-two weeks ended December 27, 2003, there was an average of 32.7 bakery-cafes per fresh dough facility compared to an

average of 27.3 for the fifty-two weeks ended December 28, 2002. Additionally, lower ingredient costs, including the benefits of our new sweet goods contract that commenced during the first quarter of fiscal 2003, further benefited food cost.

      Labor expense was $81.2 million, or 30.5% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003 compared to $63.2 million, or 29.7% of bakery-cafe sales, for the fifty-two weeks ended December 28, 2002. The labor expense as a percentage of bakery-cafe sales increased between the fifty-two weeks ended December 27, 2003 and the fifty-two weeks ended December 28, 2002 primarily as a result of our customer service initiatives in fiscal 2003 related to quality and speed of service as well as table delivery service testing and the continued commitment to training and staffing our bakery-cafes.

      Occupancy costs were $19.0 million, or 7.1% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003 compared to $15.4 million, or 7.2% of bakery-cafe sales, for the fifty-two weeks ended December 28, 2002. The occupancy cost as a percentage of bakery-cafe sales declined for the fifty-two weeks ended December 27, 2003 due to the leveraging of these costs over higher sales volumes.

      Other bakery-cafe operating expenses, which include advertising, retail field overhead, utilities, and other cafe expenses, were $36.8 million, or 13.8% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003 compared to $28.0 million, or 13.2% of bakery-cafe sales, for the fifty-two weeks ended December 28, 2002. The increase in other bakery-cafe operating expenses as a percentage of bakery-cafe sales for the fifty-two weeks ended December 27, 2003 is primarily due to increased organizational costs for field management, costs associated with new markets opened which do not yet have multi-unit leverage, and increased recruiting and training, repair and maintenance, and advertising costs.

      For the fifty-two weeks ended December 27, 2003, fresh dough facility cost of sales to franchisees was $55.0 million, or 89.3% of fresh dough facility sales to franchisees, compared to $38.4 million, or 92.2% of fresh dough facility sales to franchisees, for the fifty-two weeks ended December 28, 2002. The decrease in the fresh dough cost of sales rate in fiscal 2003 was primarily due to favorable ingredient costs and the impact of the favorable change in our sweet goods supply agreement, which took effect during the first quarter of fiscal 2003.

      Depreciation and amortization was $18.3 million, or 5.0% of total revenue, for the fifty-two weeks ended December 27, 2003 compared to $13.8 million, or 4.9% of total revenue, for the fifty-two weeks ended December 28, 2002. The increase in depreciation and amortization as a percentage of total revenue for the fifty-two weeks ended December 27, 2003 compared to the fifty-two weeks ended December 28, 2002 is primarily due to the impact of a full year’s depreciation of prior year’s capital expenditures and increased capital expenditures in the current year.

      General and administrative expenses were $28.1 million, or 7.7% of total revenue, and $25.0 million, or 8.9% of total revenue, for the fifty-two weeks ended December 27, 2003 and December 28, 2002, respectively. The decrease in the general and administrative expense rate between 2003 and 2002 results primarily from higher revenues, which help leverage general and administrative expenses, and from decreased bonus costs.

      Pre-opening expenses, which consist primarily of labor and food costs incurred during in-store training and preparation for opening, exclusive of manager training costs which are included in general and administrative expenses, of $1.5 million, or 0.4% of total revenue, for the fifty-two weeks ended December 27, 2003 were consistent with the $1.1 million, or 0.4% of total revenue, of pre-opening expenses for the fifty-two weeks ended December 28, 2002.

Operating Profit (as restated — see Note 3 to the Consolidated Financial Statements)

      Operating profit for the fifty-two weeks ended December 27, 2003 increased to $49.9 million, or 13.7% of total revenue, from $34.0 million, or 12.1% of total revenue, for the fifty-two weeks ended December 28, 2002. Operating profit for the fifty-two weeks ended December 27, 2003 rose as a result of operating leverage that results from opening 29 Company bakery-cafes in 2003 as well as the factors described above.

Other Expense

      Other expense for the fifty-two weeks ended December 27, 2003 increased to $1.2 million, or 0.3% of total revenue, from $0.3 million, or 0.1% of total revenue, for the fifty-two weeks ended December 28, 2002. The increase in other expense results primarily from increased operating fee payments to the minority interest owner. See Note 13 to the Consolidated Financial Statements for additional information.

Minority Interest

      Minority interest represents the portion of the Company’s operating profit that is attributable to the ownership interest of our former minority interest owner.

Income Taxes

      The provision for income taxes increased to $17.6 million for the fifty-two weeks ended December 27, 2003 compared to $12.2 million for the fifty-two weeks ended December 28, 2002. The tax provisions for the fifty-two weeks ended December 27, 2003 and December 28, 2002 reflect a consistent combined federal, state, and local effective tax rate of 36.5%.

Income Before Cumulative Effect of Accounting Change (as restated)

      Income before cumulative effect of accounting change for the fifty-two weeks ended December 27, 2003 increased $9.4 million, or 44.1%, to $30.7 million, or $1.01 per diluted share, compared to income before cumulative effect of accounting change of $21.3 million, or $0.71 per diluted share, for the fifty-two weeks ended December 28, 2002. The increase in income before cumulative effect of accounting change in 2003 was primarily due to the operating leverage from the opening of 23 bakery-cafes in 2002 that were open for a full year in 2003 and leverage from opening 29 bakery-cafes in 2003.

Cumulative Effect of Accounting Change

      Effective December 29, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement requires the Company to record an estimate for costs of retirement obligations that may be incurred at the end of lease terms of existing bakery-cafes or other facilities. Upon adoption of SFAS 143, the Company recognized a one-time cumulative effect charge of approximately $0.2 million (net of deferred tax benefit of approximately $0.1 million), or $.01 per diluted share. For further information, see Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements.

Net Income (as restated)

      Net income for the fifty-two weeks ended December 27, 2003 increased $9.1 million, or 42.7%, to $30.4 million, or $1.00 per diluted share, compared to net income of $21.3 million, or $0.71 per diluted share, for the fifty-two weeks ended December 28, 2002. The increase in net income in 2003 is consistent with the factors described above.

Critical Accounting Policies & Estimates

      The Consolidated Financial Statements and Notes to the Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities. The Company believes the following critical accounting policies involve additional management judgment due to the sensitivity of the methods, assumptions, and estimates necessary in determining the related asset and liability amounts.

      The Company recognizes revenue upon delivery of product or performance of services as follows. Bakery-cafe sales are recorded upon delivery of food and other products to a customer. In addition, fresh dough sales to franchisees are recorded upon delivery of fresh dough to franchisees. Also, a liability is recorded in the period in which a gift card is issued and proceeds are received. As gift cards are redeemed, this liability is reduced and revenue is recognized as a sale. Further, franchise fees are the result of sales of area development rights and the sale of individual franchise locations to third parties. The initial franchise fee is $35,000 per bakery-cafe to be developed under the Area Development Agreement (ADA). Of this fee, $5,000 is paid at the time of signing of the ADA and is recognized as revenue when it is received as it is non-refundable and the Company has to perform no other service to earn this fee. The remaining $30,000 is paid at the time an individual franchise agreement is signed and is recognized as revenue upon the commencement of franchise operations of the bakery-cafes. Royalties are paid weekly based on a percentage of sales, ranging from 4.0% to 5.0%, as defined in the agreement. Royalties are recognized as revenue when they are earned.

      The Company has recorded a valuation allowance to reduce its deferred tax asset arising from charitable contribution carryforwards which it may not be able to utilize prior to their expiration. The Company’s recorded net deferred tax asset is limited by the underlying tax benefit that it expects to ultimately realize. An adjustment to income could be required if the Company were to determine that it could realize tax benefits in amounts greater to or less than the amounts previously recorded.

      Intangible assets consist primarily of goodwill arising from the excess of cost over the fair value of net assets acquired. Annually, and whenever an event or circumstance indicates it is more likely than not the Company’s goodwill has been impaired, management assesses the carrying value of its recorded goodwill. The Company performs its impairment assessment by comparing discounted cash flows from acquired businesses with the carrying value of the underlying net assets inclusive of goodwill. In performing this analysis, management considers such factors as current results, trends, future prospects and other economic factors. No event has been identified indicating an impairment in the value of the Company’s intangible assets.

      The Company is self-insured for a significant portion of our workers’ compensation and general, auto, and property liability insurance. We utilize third party actuarial experts’ estimates of expected losses based on statistical analyses of historical industry data as well as our own estimates based on our actual historical data to determine required insurance reserves. These assumptions are closely reviewed, monitored, and adjusted when warranted by changing circumstances. Actual experience related to number of claims and cost per claim could be more or less favorable than estimated resulting in expense reduction or increase.

      The Company recognizes rent expense on a straight-line basis over the reasonably assured lease period. 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. We include any rent escalations and construction and other rent holidays in our straight-line rent expense. In addition, we record landlord allowances for normal tenant improvements as deferred rent, which is included in accrued expenses or deferred rent in the consolidated balance sheets based on their short-term or long-term nature. This deferred rent is amortized over the reasonably assured lease term as a reduction of rent expense. Also, leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the related reasonably assured lease term. See Note 3 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases.

Liquidity and Capital Resources

      As described in Note 3 to the Consolidated Financial Statements, the Company restated previously issued consolidated financial statements for the fiscal years ended December 27, 2003 and December 28, 2002 to correct its accounting for leases and related leasehold improvements. While this restatement changed several cash flow components, cash and cash equivalents were not impacted for any fiscal year.

      Cash and cash equivalents were $29.6 million at December 25, 2004 compared with $42.4 million at December 27, 2003. The Company’s principal requirements for cash are capital expenditures for the development of new bakery-cafes, for maintaining or remodeling existing bakery-cafes, for developing, remodeling, and maintaining fresh dough facilities, and for enhancements of information systems. For the

fifty-two weeks ended December 25, 2004, the Company met its requirements for capital with cash from operations and proceeds from the exercise of stock options.

      As of December 25, 2004 and December 27, 2003, the Company had investments of $28.4 million and $9.0 million, respectively, in United States Treasury Notes and Mortgage Backed Government Notes. Investments are classified as short or long-term in the accompanying consolidated balance sheet based upon their stated maturity dates. As of December 25, 2004, all investments were classified as held-to-maturity as the Company has the intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums to maturity, which approximates fair value at December 25, 2004.

      Funds provided by operating activities for the fifty-two weeks ended December 25, 2004 were $84.3 million compared to $73.1 million (as restated) for the fifty-two weeks ended December 27, 2003. For 2004, funds provided consisted primarily of $38.6 million from net income, $25.3 million from depreciation and amortization, $4.3 million from the tax benefit from stock option exercises, $6.0 million from decreased deferred taxes due principally to utilization of net operating loss carryforwards, $10.6 million from increased accrued expenses, and $7.7 million from increased deferred rent, partially offset by $4.9 million from increased trade and other accounts receivable. For 2003, funds provided consisted primarily of $30.4 million from net income, $18.3 million (as restated) from depreciation, $6.8 million from the tax benefit from stock option exercises, $8.8 million from decreased deferred taxes due principally to utilization of net operating loss carryforwards, and $5.6 million (as restated) from increased accrued expenses.

      At December 25, 2004 and December 27, 2003, the Company had charitable contribution carryforwards of $3.6 million and $8.6 million, respectively, which expire in the years 2005-2008. At December 27, 2003, the Company had federal jobs tax credit carryforwards of $0.1 million and federal alternative minimum tax credit carryforwards of $3.5, million which were both fully utilized during the fiscal year ended December 25, 2004. The Company reevaluates the positive and negative evidence impacting the realizability of its deferred income tax assets on an annual basis. A valuation allowance of $0.5 million and $3.6 million at December 25, 2004 and December 27, 2003, respectively, is provided to reduce the deferred tax assets to a level which, more likely than not, will be realized.

      Total capital expenditures for the fifty-two weeks ended December 25, 2004 were $80.4 million and were primarily related to the opening of 54 Company-owned bakery-cafes in 2004, costs incurred on Company-owned bakery-cafes to be opened in the first and second quarter of 2005, and the maintaining or remodeling of existing bakery-cafes and fresh dough facilities. Additionally, the Company acquired one operating bakery-cafe from a franchisee for $0.2 million and acquired the membership interest of the former minority interest owner for $4.9 million plus the transfer of two operating bakery-cafes and one bakery-cafe under construction. See Note 4 to the Consolidated Financial Statements for further information on this transaction. Total capital expenditures were $45.8 million for the fifty-two weeks ended December 27, 2003 and were primarily related to the opening of 29 Company-owned bakery-cafes in 2003, costs incurred on Company-owned bakery-cafes to be opened in the first and second quarter of 2004, the opening of three fresh dough facilities, and the maintaining or remodeling of existing bakery-cafes and fresh dough facilities. Additionally, the Company acquired 15 operating bakery-cafes, two closed bakery-cafes, and two bakery-cafes under construction from franchisees for $21.0 million in 2003. These expenditures were funded by cash from operating activities and the proceeds from the exercise of stock options.

      On December 19, 2003, the Company entered into a $10.0 million unsecured revolving line of credit (revolver). The revolver matures December 19, 2006 and has an interest rate of LIBOR plus 0.75% to 1.5% depending on the Company’s leverage ratio and type of loan (resulting in interest rates of approximately 3.1% to 3.8% at December 25, 2004). The revolver contains restrictions relating to future indebtedness, liens, investments, distributions, mergers, acquisition, or sale of assets and certain leasing transactions. The revolver also requires the maintenance of certain financial ratios and covenants. As of December 25, 2004, the Company was in compliance with all debt covenants. At December 25, 2004, the Company had $9.8 million available under the revolver with $0.2 million utilized by an outstanding letter of credit. The Company has not borrowed under its revolver in any of the last three fiscal years.

      Financing activities provided $5.2 million for the fifty-two weeks ended December 25, 2004 and $6.2 million for the fifty-two weeks ended December 27, 2003. The financing activities in the fifty-two weeks ended December 25, 2004 included $3.6 million from the exercise of stock options, $1.1 million from the issuance of common stock under employee benefit plans, and $0.6 million from capital investments by our former minority interest owner. The financing activities for the fifty-two weeks ended December 27, 2003 included $4.2 million from the exercise of stock options, $0.8 million from the issuance of common stock under employee benefit plans, and $1.2 million from capital investments by our minority interest owner.

      The Company had working capital of $2.5 million at December 25, 2004 and $21.5 million at December 27, 2003. The $19.0 million decrease and $2.8 million decrease in working capital for the fifty-two weeks ended December 25, 2004 and December 27, 2003, respectively, is net of the $26.4 million and $4.0 million, respectively, of the long-term portion of cash invested in government securities previously described. The Company has experienced no liquidity difficulties and has historically been able to finance its operations through internally generated cash flow, cash from the exercise of employee stock options, and, when necessary, borrowings under its revolving line of credit.

Other Commitments

      The Company currently anticipates total capital expenditures for fiscal year 2005 of approximately $95 million to $100 million principally for the opening of 70 new Company-owned bakery-cafes, the costs incurred on early 2006 openings, the maintaining and remodeling of existing bakery-cafes, and the remodeling and expansion of existing fresh dough facilities. The Company expects future bakery-cafes will require, on average, an investment per bakery-cafe (excluding pre-opening expenses which are expensed as incurred) of approximately $0.95 million, which is net of landlord allowance. The Company expects to fund these expenditures principally through internally generated cash flow and cash from the exercise of employee stock options supplemented, where necessary, by borrowings on its revolver.

      In addition to our capital expenditure requirements, the Company has certain other contractual and committed cash obligations. The Company’s contractual cash obligations consist of noncancelable operating leases for its bakery-cafes, fresh dough facilities and trucks, and administrative offices. Lease terms for its trucks are generally for five to seven years. Lease terms for its bakery-cafes, fresh dough facilities, and administrative offices are generally for ten years with renewal options at most locations and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs. Many bakery-cafe leases provide for contingent rental (i.e., percentage rent) payments based on sales in excess of specified amounts. Certain of the Company’s 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. See Note 2 to the Consolidated Financial Statements for further information on the Company’s accounting for its leases. We expect cash expenditures under these lease obligations to be as follows:

      Off-Balance Sheet Arrangement — The Company’s commercial commitments consist of subleases for certain of the operating leases of ten franchise locations and guarantees for certain of the operating leases of 42 locations of the former Au Bon Pain Division, or its franchisees. Theses leases have terms expiring on various dates from January 31, 2005 to January 1, 2019 and a potential amount of future rental payments of approximately $33.6 million. These leases will continue to decrease over time as these operating leases expire or are not renewed. As the guarantees were initiated prior to December 31, 2002, the Company has not recorded a liability for these guarantees pursuant to the provisions of FASB Interpretation Number (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements For Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” Also, the Company has not had to make any payments related to these leases. Au Bon

Pain and the respective franchisees continue to have primary liability for these operating leases. Potential future commitments consist of:

      In November 2002, the Company signed an agreement with Dawn Food Products, Inc. (“Dawn”) to provide sweet goods for the period 2003-2007. The agreement with Dawn is structured as a cost plus agreement. The transition from our previous provider of sweet goods to Dawn was completed in the first quarter of fiscal 2003.

      Beginning in fiscal 2003, the Company executed Confidential and Proprietary Information and Non-Competition Agreements (Agreements) with certain employees. These Agreements contain a provision whereby employees would be due a certain number of weeks of their salary if their employment was terminated by the Company as specified in the Agreement. In accordance with SFAS 5, the Company has not recorded a liability for these amounts potentially due employees. Rather, the Company will record a liability for these amounts when an amount becomes due to an employee. As of December 25, 2004, the total amount potentially owed employees under these Agreements was approximately $5.4 million.

      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 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 the arrangements negotiated with landlords. We believe that our cash flow from operations and the exercise of employee stock options, supplemented, where necessary, by borrowings on our revolver, will be sufficient to fund our capital requirements for the foreseeable future.

Impact of Inflation

      In the past, the Company has been able to recover inflationary cost and commodity price increases, including, among other things, fuel, butter, tuna, and cream cheese costs, through increased menu prices. There have been, and there may be in the future, delays in implementing such menu price increases, and competitive pressures may limit the Company’s ability to recover such cost increases in their entirety. Historically, the effects of inflation on the Company’s net income have not been materially adverse.

      A majority of the Company’s employees are paid hourly rates related to federal and state minimum wage laws. Although the Company has and will continue to attempt to pass along any increased labor costs through food price increases, there can be no assurance that all such increased labor costs can be reflected in its prices or that increased prices will be absorbed by consumers without diminishing to some degree consumer spending at the bakery-cafes. However, the Company has not experienced to date a significant reduction in bakery-cafe profit margins as a result of changes in such laws, and management does not anticipate any related future significant reductions in gross profit margins.

Recent Accounting Pronouncement

      In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” The primary objective of this interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights; such entities are known as variable-interest entities (VIE’s). This interpretation applies immediately to VIE’s created after January 31, 2003 and in the first fiscal year or interim period beginning after June 15, 2003, to VIE’s in which an enterprise held an interest prior to February 1, 2003. In October 2003, the FASB issued FASB Staff Position

(FSP) No. FIN 46-6, “Effective Date of FASB Interpretation 46.” This interpretation deferred the effective date for applying FIN 46 to an interest held in a VIE or potential VIE that was created before February 1, 2003 until the end of the first interim or annual period ending after December 15, 2003, except if the company had already issued statements reflecting a VIE in accordance with FIN 46. In December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R), “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” Special provisions apply to enterprises that have fully or partially applied FIN 46 prior to issuance of FIN 46R. Otherwise, application of FIN 46 and FIN 46R is required in financial statements for public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities for all other types of entities is required in financial statements for periods ending after March 15, 2004. Adoption of FIN 46, as modified and interpreted, including the provisions of FIN 46R, in the first quarter of fiscal 2004 did not have a material effect on the Company’s consolidated financial statements or disclosures.

      In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS 123R will require the Company to, among other things, measure employee stock-based compensation awards where applicable using a fair value method and record related expense in the Company’s consolidated financial statements. The provisions of SFAS 123R are effective for the first interim or annual reporting period that begins after June 15, 2005; therefore, the Company will adopt the new requirements no later than the beginning of its third quarter of fiscal 2005. Adoption of the expensing requirements will reduce the Company’s reported earnings. Management is currently evaluating the specific impacts of adoption, which include whether the Company should adopt the requirements on a retrospective basis and which valuation model is most appropriate.

      In December 2004, the FASB issued Staff Position No. FAS 109-1, “Application of SFAS No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities provided by the American Jobs Creation Act of 2004” (“FSP 109-1”). FSP 109-1 states that qualified domestic production activities should be accounted for as a special deduction under SFAS No. 109, “Accounting for Income Taxes.” The provisions of FSP 109-1 are effective immediately. The Company is currently evaluating the impact of the new Act, which may allow the Company to qualify for a benefit beginning in fiscal 2005.

      As of December 25, 2004, the Company had no derivative financial interests or derivative commodity instruments. We do however purchase certain commodities, such as flour, butter, and coffee, for use in our business. These purchases are sometimes purchased under agreements of one to three year time frames usually at a fixed price. As a result, we are subject to market risk that current market prices may be above or below our contractual price. However, we were not using financial instruments to hedge commodity prices as of December 25, 2004.

      The Company’s unsecured revolver bears an interest rate using LIBOR as the basis, and therefore is subject to additional expense should there be an increase in LIBOR interest rates. The Company has not borrowed under the revolver in the last three years. As of December 25, 2005, the Company had no foreign operations, and accordingly, no foreign exchange rate fluctuation risk at that time.

      The following consolidated financial statements of the Company are included in response to this item:

      All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Panera Bread Company:

      We have completed an integrated audit of Panera Bread Company’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 25, 2004 and audits of its December 27, 2003 and December 28, 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

      In our opinion, the consolidated financial statements listed in the accompanying index, present fairly, in all material respects, the financial position of Panera Bread Company and its subsidiaries at December 25, 2004 and December 27, 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      As discussed in Note 3 of the notes to consolidated financial statements, the consolidated financial statements for the years ended December 27, 2003 and December 28, 2002 have been restated.

      As discussed in Note 2 to the consolidated financial statements, in 2003 the Company changed its method of accounting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs to conform to Statement of Financial Accounting Standards No. 143.

Internal control over financial reporting

      Also, in our opinion, management’s assessment, included in “Management’s Report on Internal Control Over Financial Reporting,” appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 25, 2004 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 25, 2004, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating

effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

St. Louis, Missouri

March 17, 2005

PANERA BREAD COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

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

PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

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

PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)