Panera Bread Reports Second Quarter EPS of $0.39

HIGHLIGHTS

-- Second quarter 2007 revenues increased 28% from second quarter 2006 to

$253 million

-- 39 new bakery-cafes opened in the quarter and system-wide bakery-cafes

open of 1,135

-- Third quarter 2007 diluted EPS target set at $0.32 to $0.38

-- Second half 2007 diluted EPS target set at $0.86 to $1.02

-- System-wide comparable bakery-cafe sales growth for the four weeks ended

July 24, 2007 expected to be 3.6% to 3.9%

    ST. LOUIS, July 24 /PRNewswire-FirstCall/ -- Panera Bread Company
 ( PNRA) today reported net income of $13 million, or $0.39 per
 diluted share, for the second quarter ended June 26, 2007, compared to net
 income of $14 million, or $0.44 per diluted share, for the second quarter
 ended June 27, 2006. For the twenty-six weeks ended June 26, 2007, net
 income decreased to $28 million, or $0.86 per diluted share, compared to
 $29 million, or $0.91 per diluted share, for the twenty-six weeks ended
 June 27, 2006.
     The Company's second quarter and year-to-date fiscal 2007 consolidated
 statements of operations and margin analysis are attached as Schedule I.
 The following tables set forth, for the periods indicated, certain items
 included in the Company's consolidated statements of operations (in
 thousands, except per share data and percentages):
                                        For the 13 Weeks Ended    Percentage
                                    June 26, 2007  June 27, 2006    Change
 
     Total revenue                       $252,959     $197,135        28%
     Net income                           $12,635      $14,052       -10%
     Diluted earnings per share             $0.39        $0.44       -11%
     Shares used in diluted EPS            32,250       32,042
 
                                        For the 26 Weeks Ended    Percentage
                                    June 26, 2007  June 27, 2006    Change
 
     Total revenue                       $492,634     $391,106        26%
     Net income                           $27,679      $29,065        -5%
     Diluted earnings per share             $0.86        $0.91        -5%
     Shares used in diluted EPS            32,225       32,010
     Second Quarter 2007 Key Metrics & Business Review
     During the second quarter of 2007, system-wide comparable bakery-cafe
 sales increased 2.1% (1.7% Company-owned and 2.3% franchise-operated).
 System-wide average weekly sales decreased by 0.9% to $38,273 ($37,050
 Company-owned and $39,056 franchise-operated), while system-wide operating
 weeks in the second quarter totaled 14,500 (5,658 Company-owned and 8,842
 franchise-operated).
     During the second quarter of 2007, the Company opened 39 new
 bakery-cafes system-wide (17 Company-owned and 22 franchise-operated);
 acquired 32 bakery- cafes from franchisees; sold one bakery-cafe to a
 franchisee; and closed five bakery-cafes system-wide (three Company-owned
 and two franchise-operated).
     As of June 26, 2007, there were 1,135 bakery-cafes open system-wide.
 The breakdown of bakery-cafes between Company-owned and franchise-operated
 is as follows:
                                            Company-   Franchise-     Total
                                             owned      operated     System
 
     Bakery-cafes as of March 27, 2007        430         671        1,101
     Bakery-cafes opened                       17          22           39
     Bakery-cafes closed                       (3)         (2)          (5)
     Bakery-cafe sold to franchisee            (1)          1          -
     Bakery-cafes acquired from
      franchisees                              32         (32)         -
     Bakery-cafes as of June 26, 2007         475         660        1,135
     During the second quarter of 2007, earnings per diluted share were
 $0.39 in comparison to $0.44 per diluted share in the second quarter of
 2006 primarily as a result of: a mix shift from self-manufactured bread and
 bagels towards outsourced souffl�s, scones and muffins; a mix shift within
 the bakery-cafe menu from soups and sandwiches to higher food cost salads;
 input prices outpacing product price increases; deleverage from lower
 bakery-cafe sales increases against fixed costs; and incremental labor
 investment in the evening day-part as compared to the prior year. Also
 included in the Company's second quarter 2007 results was a one-time tax
 benefit of $0.02 per diluted share and a gain of $0.01 per diluted share on
 the sale of a Company bakery-cafe to a new franchisee, partially offset by
 a charge of $0.02 per diluted share from the second quarter 32 bakery-cafe
 acquisition relating to the termination of franchise agreements for certain
 bakery-cafes that operated at a royalty rate lower than the current market
 royalty rates.
     2007 Business Outlook
     The Company is today setting an earnings per diluted share target for
 the third quarter of 2007 of $0.32 to $0.38. Actual earnings per share
 results for the third quarter ended September 26, 2006 were $0.34 per
 diluted share. The third quarter 2007 target assumes system-wide comparable
 bakery-cafe sales growth of 2.5% to 4.5% and system-wide average weekly
 sales of $37,900 to $38,900. Bakery-cafe openings are forecasted to be 35
 system-wide (21 Company- owned and 14 franchise-operated), compared to 38
 system-wide (17 Company-owned and 21 franchise-operated) in the third
 quarter of 2006, resulting in expected system-wide operating weeks in the
 third quarter of 2007 of 14,950 to 15,000.
     Based upon 27 days of actual sales data for Company-owned bakery-cafes
 and 21 days of actual sales data for franchise-operated bakery-cafes, the
 Company is today projecting that system-wide comparable bakery-cafe sales
 growth for the four weeks ended July 24, 2007 will be 3.6% to 3.9%.
     Based on continued margin pressures the Company is experiencing, the
 Company today is setting its 2007 earnings per diluted share target for the
 remainder of the year at $0.86 to $1.02. This second half of 2007 target
 assumes system-wide comparable bakery-cafe sales growth of 2.25% to 4.75%,
 system-wide average weekly sales of $38,800 to $39,900, and system-wide
 operating weeks of 30,650 to 30,750. Bakery-cafe openings are expected to
 be 110 to 124 (59 to 66 Company-owned and 51 to 58 franchise-operated).
     Chairman and Chief Executive Officer Ron Shaich commented, "While
 second quarter results are somewhat disappointing, we are pleased to see
 some of our investments in the bakery-cafes pay off with higher comp store
 sales increases. We look forward to continuing our positive sales trends
 while at the same time addressing the margin issues currently impacting our
 results."
     The Company will discuss second quarter 2007 results and preliminary
 comparable bakery-cafe sales results for the four weeks ended July 24, 2007
 in a conference call that will be broadcast on the Internet at 8:30 A.M.
 Eastern Daylight Time on Wednesday, July 25, 2007. To access the call or
 view a copy of this release, go to http://www.panerabread.com/investor.
 Access to the call and the release will be archived for one year.
     Included above are franchise-operated and system-wide comparable
 bakery- cafe sales percentages. System-wide sales is a non-GAAP financial
 measure which includes sales at all Company-owned bakery-cafes and
 franchise-operated bakery-cafes, as reported by franchisees. Management
 uses system-wide sales information internally in connection with store
 development decisions, planning, and budgeting analyses. Management
 believes system-wide sales information is useful in assessing consumer
 acceptance of the Company's brand and facilitates an understanding of
 financial performance as the Company's franchisees pay royalties and
 contribute to advertising pools based on a percentage of their sales.
     Panera Bread Company owns and franchises bakery-cafes under the Panera
 Bread(R) and Saint Louis Bread Co.(R) names. With its identity rooted in
 handcrafted, fresh-baked, artisan bread, Panera Bread is committed to
 providing great tasting, quality food that people can trust. Highlighted by
 antibiotic free chicken, whole grain bread, select organic and all-natural
 ingredients and a menu free of man-made trans fat, Panera's bakery-cafe
 selection offers flavorful, wholesome offerings. The menu includes a wide
 variety of year-round favorites, complemented by new items introduced
 seasonally with the goal of creating new standards in everyday food
 choices. In neighborhoods across the country, guests are enjoying Panera's
 warm and welcoming environment featuring comfortable gathering areas,
 relaxing decor, and free internet access provided through a managed WiFi
 network. At the close of each day, Panera Bread bakery-cafes donate bread
 and baked goods to community organizations in need. Additional information
 is available on the Company's website, panerabread.com. Panera also holds a
 51% interest in Paradise Bakery & Cafe, Inc., owner and franchisor of 46
 bakery-cafes.
     Matters discussed in this news release, including any discussion or
 impact, express or implied, on the Company's anticipated growth, operating
 results, and future earnings per share, 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 included in this
 release are made only as of the date of this release, and we do not
 undertake any obligation to publicly update or correct any forward-looking
 statements to reflect events or circumstances that occur or 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 and uncertainties and could be
 negatively impacted by a number of factors. These factors include, but are
 not limited to, the following: inability to execute our growth strategy,
 including, among other things, variations in the number, timing, and
 successful nature of Company-owned and franchise-operated bakery- cafe
 openings and continued successful operation of bakery-cafes; failure to
 comply with government regulations; loss of a member of senior management;
 inability to recruit qualified personnel; failure or inability to protect
 our brand, trademarks, or other proprietary rights; competition; rising
 insurance costs; disruption in our supply chain or increases in ingredient,
 product, or other supply costs; disruptions or supply issues in our fresh
 dough facilities; health concerns about the consumption of certain
 products; complaints and litigation; risks associated with the acquisition
 of franchise- operated bakery-cafes; other factors, some of which may be
 beyond our control, effecting our operating results; and other factors that
 may affect restaurant owners or retailers in general. These and other risks
 are discussed from time to time in the Company's SEC reports, including its
 Form 10-K for the year ended December 26, 2006 and its quarterly reports on
 Form 10-Q.
 PANERA BREAD COMPANY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 (In thousands, except per share amounts)
 
                                                    For the 13 Weeks Ended
                                               June 26, 2007     June 27, 2006
     Revenues:
       Bakery-cafe sales                           $209,626          $157,151
       Franchise royalties and fees                  17,010            15,346
       Fresh dough sales to franchisees              26,323            24,638
         Total revenue                              252,959           197,135
     Costs and expenses:
       Bakery-cafe expenses:
         Cost of food and paper products             66,125            46,215
         Labor                                       67,389            48,104
         Occupancy                                   16,356            11,511
         Other operating expenses                    29,560            22,276
           Total bakery-cafe expenses               179,430           128,106
       Fresh dough cost of sales to franchisees      21,595            20,783
       Depreciation and amortization                 14,063            10,517
       General and administrative expenses           17,377            14,640
       Pre-opening expenses                           1,642             1,674
         Total costs and expenses                   234,107           175,720
     Operating profit                                18,852            21,415
     Interest expense                                    39                 4
     Other (income) expense, net                          4              (717)
     Income before minority interest and
      income taxes                                   18,809            22,128
     Minority interest                                   79               -
     Income before income taxes                      18,730            22,128
     Income taxes                                     6,095             8,076
         Net income                                 $12,635           $14,052
 
     Basic net income per share                       $0.40             $0.45
     Diluted net income per share                     $0.39             $0.44
     Shares used in calculation of basic EPS         31,683            31,269
     Shares used in calculation of diluted EPS       32,250            32,042
 
 
 
 PANERA BREAD COMPANY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 (In thousands, except per share amounts)
 
                                                    For the 26 Weeks Ended
                                               June 26, 2007     June 27, 2006
     Revenues:
       Bakery-cafe sales                           $406,744          $312,231
       Franchise royalties and fees                  33,269            29,814
       Fresh dough sales to franchisees              52,621            49,061
         Total revenue                              492,634           391,106
     Costs and expenses:
       Bakery-cafe expenses:
         Cost of food and paper products            125,120            91,958
         Labor                                      129,860            95,455
         Occupancy                                   31,893            22,519
         Other operating expenses                    55,320            42,519
           Total bakery-cafe expenses               342,193           252,451
       Fresh dough cost of sales to franchisees      43,437            42,517
       Depreciation and amortization                 27,398            20,724
       General and administrative expenses           34,514            28,848
       Pre-opening expenses                           2,779             2,484
         Total costs and expenses                   450,321           347,024
     Operating profit                                42,313            44,082
     Interest expense                                   171                 7
     Other (income) expense, net                       (586)           (1,696)
     Income before minority interest and
      income taxes                                   42,728            45,771
     Minority interest                                  192               -
     Income before income taxes                      42,536            45,771
     Income taxes                                    14,857            16,706
         Net income                                 $27,679           $29,065
 
     Basic net income per share                       $0.88             $0.93
     Diluted net income per share                     $0.86             $0.91
     Shares used in calculation of basic EPS         31,616            31,218
     Shares used in calculation of diluted EPS       32,225            32,010
 
 
 
 PANERA BREAD COMPANY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 MARGIN ANALYSIS
 (unaudited)
     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 period
 indicated. Percentages may not add due to rounding:
                                                     For the 13 Weeks Ended
                                               June 26, 2007      June 27, 2006
     Revenues:
        Bakery-cafe sales                            82.9 %             79.7 %
        Franchise royalties and fees                  6.7                7.8
        Fresh dough sales to franchisees             10.4               12.5
              Total revenue                         100.0 %            100.0 %
     Costs and expenses:
        Bakery-cafe expenses (1):
           Cost of food and paper products           31.5 %             29.4 %
           Labor                                     32.1               30.6
           Occupancy                                  7.8                7.3
           Other operating expenses                  14.1               14.2
              Total bakery-cafe expenses             85.6               81.5
        Fresh dough cost of sales to
         franchisees (2)                             82.0               84.4
        Depreciation and amortization                 5.6                5.3
        General and administrative expenses           6.9                7.4
        Pre-opening expenses                          0.6                0.8
           Total costs and expenses                  92.5               89.1
     Operating profit                                 7.5               10.9
     Interest expense                                 -                  -
     Other (income) expense, net                      -                 (0.4)
     Income before minority interest and
      income taxes                                    7.4               11.2
     Minority interest                                -                  -
     Income before income taxes                       7.4               11.2
     Income taxes                                     2.4                4.1
     Net income                                       5.0 %              7.1 %
 
     (1)  As a percentage of Company bakery-cafe sales.
 
     (2)  As a percentage of fresh dough sales to franchisees.
 
 
 
 PANERA BREAD COMPANY
 CONSOLIDATED STATEMENTS OF OPERATIONS
 MARGIN ANALYSIS
 (unaudited)
     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 period
 indicated. Percentages may not add due to rounding:
                                                     For the 26 Weeks Ended
                                               June 26, 2007      June 27, 2006
     Revenues:
        Bakery-cafe sales                            82.6 %             79.8 %
        Franchise royalties and fees                  6.7                7.6
        Fresh dough sales to franchisees             10.7               12.6
              Total revenue                         100.0 %            100.0 %
     Costs and expenses:
        Bakery-cafe expenses (1):
           Cost of food and paper products           30.8 %             29.5 %
           Labor                                     31.9               30.6
           Occupancy                                  7.8                7.2
           Other operating expenses                  13.6               13.6
              Total bakery-cafe expenses             84.1               80.9
        Fresh dough cost of sales to
         franchisees (2)                             82.5               86.7
        Depreciation and amortization                 5.6                5.3
        General and administrative expenses           7.0                7.4
        Pre-opening expenses                          0.6                0.6
           Total costs and expenses                  91.4               88.7
     Operating profit                                 8.6               11.3
     Interest expense                                 -                  -
     Other (income) expense, net                     (0.1)              (0.4)
     Income before minority interest and
      income taxes                                    8.6               11.7
     Minority interest                                -                  -
     Income before income taxes                       8.6               11.7
     Income taxes                                     3.0                4.3
     Net income                                       5.6 %              7.4 %
 
     (1) As a percentage of Company bakery-cafe sales.
 
     (2) As a percentage of fresh dough sales to franchisees.
 
 

SOURCE Panera Bread Company