Panera Bread 2003 Annual Report Download - page 41

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The Company's policy is to record advertising costs as expense in the period in which the cost is incurred.
The total amounts recorded as advertising expense were $7.5 million, $5.4 million, and $3.5 million for the
years ended December 27, 2003, December 28, 2002, and December 29, 2001, respectively.
Pre-Opening Costs
All pre-opening costs directly associated with the opening of new bakery-cafe locations, which consists
primarily of labor and food costs incurred during in-store training and preparation for opening, exclusive of
manager training costs which are included in other operating expenses, are expensed when incurred. Direct
costs to open bakery-cafes amounted to $1.5 million, $1.1 million and $0.9 million in 2003, 2002, and 2001,
respectively.
Fiscal Year
The Company's Ñscal year ends on the last Saturday in December. The Company's Ñscal year consists of
13 four-week periods, with the Ñrst, second, and third quarters ending 16 weeks, 28 weeks, and 40 weeks,
respectively, into the Ñscal year.
Earnings Per Share Data
Earnings per share is based on the weighted average number of shares outstanding during the period after
consideration of the dilutive eÅect, if any, for common stock equivalents, including stock options. Earnings per
common share are computed in accordance with SFAS No. 128 ""Earnings Per Share,'' which requires
companies to present basic earnings per share and diluted earnings per share. Basic earnings per share are
computed by dividing net income by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per common share are computed by dividing net income by the weighted
average number of shares of common stock outstanding and dilutive securities outstanding during the year.
Shares of common stock outstanding have been retroactively adjusted to give eÅect to the two-for-one stock
split on June 24, 2002.
Fair Value of Financial Instruments
The carrying amount of the Company's accounts receivable and accounts payable approximate their fair
values due to the short-term maturity of these instruments. In addition, held-to-maturity securities are stated
at amortized cost, adjusted for amortization of premiums to maturity using the eÅective interest method,
which approximates fair value at December 27, 2003.
Stock-Based Compensation
In accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123), ""Accounting for
Stock-Based Compensation,'' as amended by SFAS 148, ""Accounting for Stock-Based Compensation Ì
Transition and Disclosure Ì an Amendment of SFAS 123,'' the Company elected to follow the provisions of
Accounting Principles Board Opinion No. 25 (APB 25), ""Accounting for Stock Issued to Employees,'' and
provide the required pro forma disclosure in the footnotes to the Ñnancial statements as if the measurement
provisions of SFAS 123 had been adopted. Accordingly, no compensation costs have been recognized in the
Consolidated Statements of Operations for the stock option plans as the exercise price of stock options equals
the market price of the underlying stock on the grant date. Had compensation costs for the Company's stock
option plans been determined under the fair value based method and recognition provisions of SFAS 123 at
the grant date, the Company's net income and earnings per share for the Ñscal year ended December 27, 2003
37