Panera Bread 2006 Annual Report Download - page 26

Reconciliation of Non-GAAP Measurements to GAAP Results
In addition to the results provided in accordance with Generally Accepted Accounting Principles (or GAAP)
throughout this report, we have provided certain non-GAAP measurements to conform 2005 results to the 2006
presentation related to our stock option expense and to exclude the impact of a non-recurring charge on the 2006
results relative to the Paradise transaction. Effective December 28, 2005, the beginning of our first quarter of 2006,
we adopted the fair value recognition provisions of SFAS 123R, which required all stock-based compensation,
including grants of employee stock options to be recognized in the statement of operations based on their fair
values. We adopted this accounting treatment using the modified prospective transition method, as permitted under
SFAS 123R; therefore results for prior periods have not been restated. Prior to the adoption of SFAS 123R, we
accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, stock-
based compensation was included as pro forma disclosure in the financial statement footnotes. Further, we incurred
a non-recurring charge of $0.03 per diluted share in the fourth quarter of fiscal 2006 related to the Paradise
acquisition.
We are providing the table below because management believes it provides useful information to investors
regarding our results of operations by providing current and prior reported amounts on a comparable basis. The pro
forma net income of $59.9 million and earnings per share of $1.87 for the fiscal year ended December 26, 2006, and
pro forma net income of $48.1 million and earnings per share of $1.52 for the fiscal year ended December 27, 2005
are considered “non-GAAP financial measures” under applicable SEC rules because they are adjusted to include
stock-based compensation expense in 2005, and to exclude a non-recurring charge in the fourth quarter of fiscal
2006 relative to the Paradise transaction, which are not included in the directly comparable measures calculated in
accordance with GAAP. These non-GAAP financial measures are not a substitute for the reported GAAP measures.
The adjustment for stock-based compensation expense and Paradise charge had the following effect on
reported amounts (in thousands, except earnings per share):
December 26,
2006
December 27,
2005
Percentage
Increase
For the Fiscal Year Ended
(pro-forma)
Net income, as reported .......................... $58,849 $52,183
Less: Stock-based compensation expense included in
footnote, net of tax ............................ — (4,115)
Net income, as reported/pro forma fiscal year ended
December 27, 2005 ............................ 58,849 48,068 22%
Plus: Paradise non-recurring charge, net of tax .......... 1,072
Net income pro forma fiscal year ended December 26,
2006 and December 27, 2005, respectively ........... $59,921 $48,068 25%
Diluted earnings per share, as reported ............... $ 1.84 $ 1.65
Less: Stock-based compensation expense included in
footnote, net of tax ............................ — (0.13)
Diluted earnings per share, as reported/pro forma fiscal
year ended December 27, 2005 ................... 1.84 1.52 21%
Plus: Paradise non-recurring charge, net of tax .......... 0.03 —
Diluted earnings per share, pro forma fiscal year ended
December 26, 2006 and December 27, 2005,
respectively .................................. $ 1.87 $ 1.52 23%
Shares used in diluted earnings per share calculation ..... 32,044 31,651
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