Panera Bread 2012 Annual Report Download - page 5

To that end, allow us to address the implementation of the Affordable Health Care Act at Panera in 2014. It remains a core tenet of
Panera that we treat all associates with the dignity and respect they deserve. Indeed, we presently offer health coverage to team
members who work more than 25 hours a week. We therefore concluded the appropriate course of action for Panera is to refrain from
scheduling employees simply to avoid the full time classification. Rather, our intention is to treat any increase in healthcare costs as an
inflationary line item on our P&L.
Societal Impact Activities
As an organization, we have always aspired to elevate the lives of our customers and associates while also making a difference in the
communities we serve. As well, our commitment to use the Panera network to help make a difference in society offers the potential to
deepen the companies bond with our customers – many of whom share our values. As you know Panera is committed to taking a
leadership role in fighting food insecurity in our country and we are proud to report that, in 2012, we and our franchisees donated,
system-wide, more than $100 million worth of unsold bread and baked goods to local hunger relief efforts. In addition, last summer
we launched a strategic alliance with Feeding America, the nation’s leading domestic hunger-relief agency, to provide member food
banks in more than 75 markets with Panera’s Black Bean soup. Additionally, in early 2013 and 2012, the Panera Bread Foundation
opened two more Panera Cares® Community Cafes in Boston, MA and Chicago, IL. These locations are non-profit donation based
community cafes of shared responsibility. These cafes are committed to giving each and every person who walks through their doors a
dignified dining experience regardless of their ability to pay. We estimate that more than 1 million people will be served by Panera
Cares cafes in 2013. Look for us to continue in 2013 to find innovative ways to expand our activities to positively impact our society
and deepen the relationship customers have with our company.
Capital Utilization
A significant strength of our company is our balance sheet and the cash flow we generate from operations. We ended 2012 with just
under $300 million of cash on our balance sheet and no debt. We have been able to deploy more than $440 million in excess capital
since the first half of 2010 to increase shareholder value and drive EPS through a variety of investments.
We believe the best use of our capital is to build new, high return on investment (ROI) Panera Bread bakery-cafes. In 2012, we opened
123 new bakery-cafes (59 company and 64 franchise), which represented an 8% increase in our total number of bakery-cafes. More
importantly, our company new unit opening volumes were $47,029 and our franchise new unit openings were $46,781, which were
the highest in our Company’s history. We believe these sales volumes are, first and foremost, a reflection of how well Panera is
resonating with our customers as we continue to build on our national footprint.
We and our Board of Directors have a disciplined focus on our use of capital. In 2012, we were able to acquire 16 bakery-cafes from
our franchisee in the Raleigh-Durham market at a multiple that made this transaction accretive to our earnings in 2012 and beyond.
Also, under our Board-approved share repurchase program, we repurchased approximately $25 million of our shares at an average
price of approximately $157 per share. We believe this use of capital will provide a good long-term return for our shareholders.
Expect us to continue to look for opportunities to invest in ways that will allow us to build competitive advantage while generating an
attractive return on investment.
How Do We Build Upon the Success We’ve Achieved and Ensure the Future Holds Equal Promise?
We believe that our strategy of increasing store profit by investing in the quality of our customers’ experience, developing new units,
driving operating leverage and deploying our excess capital in high-ROI investments positions us well to continue to deliver our
targeted long-term EPS growth rate of 15% to 20% annually. Indeed, as successful as Panera has been over the past several years, we
continue to feel that our best days lie ahead.
In conclusion we would like to extend our appreciation to our Board of Directors for their guidance and perspective, to our franchisees
for their continued investment in the concept we share, to our team members for their willingness to do whatever it takes to get the job
done well and to you, our shareholders, for your continued confidence in us. We pledge to each of you our commitment to do all in
our power to steward this company well.
Sincerely,
Ronald M. Shaich William W. Moreton
Chairman and Co-Chief Executive Officer President and Co-Chief Executive Officer