Panera Bread Company Reports Q2 2013 Diluted EPS of $1.74, Up 16%

Marketwired

ST. LOUIS, MO--(Marketwired - Jul 23, 2013) - Panera Bread Company (NASDAQ: PNRA)

HIGHLIGHTS

  • Q2 2013 Company-owned comparable net bakery-cafe sales up 3.8%
  • YTD 2013 System-wide new bakery-cafe AWS of $50,338, above YTD 2012 record pace of $47,581
  • FY 2013 new bakery-cafe openings expected to be at or above the high-end of target range of 115 to 125
  • FY 2013 EPS target range revised to $6.75 to $6.85, up 15% to 16% versus FY 2012

Panera Bread Company (NASDAQ: PNRA) today reported net income of $51 million, or $1.74 per diluted share, for the fiscal second quarter ended June 25, 2013. The second quarter fiscal 2013 results compare to net income of $44 million, or $1.50 per diluted share, for the fiscal second quarter ended June 26, 2012, and represent a 16% year-over-year increase in diluted earnings per share.

For the twenty-six weeks ended June 25, 2013, net income was $99 million, or $3.38 per diluted share. These results compare to net income of $85 million, or $2.90 per diluted share, for the twenty-six weeks ended June 26, 2012, and represent a 17% year-over-year increase in diluted earnings per share.

The Company's second quarter fiscal 2013 consolidated statements of comprehensive income and margin analyses are attached to this release as Schedule I. The following table sets forth, for the periods indicated, certain items included in the Company's consolidated statements of comprehensive income (in thousands, except per share data and percentages):

         
    For the 13 Weeks Ended    
    June 25, 2013   June 26, 2012   Percentage Change
             
Total revenue   $589,011   $530,591   11%
Net income   $51,042   $44,137   16%
Diluted earnings per share   $1.74   $1.50   16%
Shares used in diluted EPS   29,287   29,466    
             
    For the 26 Weeks Ended    
    June 25, 2013   June 26, 2012   Percentage Change
             
Total revenue   $1,150,790   $1,029,170   12%
Net income   $99,159   $85,321   16%
Diluted earnings per share   $3.38   $2.90   17%
Shares used in diluted EPS   29,308   29,464    
             

Second Quarter Fiscal 2013 Results and Business Review

Comparable Net Bakery-Cafe Sales Growth

In the second quarter fiscal 2013, Company-owned comparable net bakery-cafe sales increased 3.8%, franchise-operated comparable net bakery-cafe sales increased 3.5%, and system-wide comparable net bakery-cafe sales increased 3.7% compared to the comparable period in fiscal 2012. Two year Company-owned comparable net bakery-cafes sales increased 10.9%, two year franchise-operated comparable net bakery-cafe sales increased 8.3%, and two year system-wide comparable net bakery-cafe sales increased 9.6%.

The Company-owned comparable net bakery-cafe sales increase of 3.8% in the second quarter fiscal 2013 was comprised of year-over-year average check growth of 4.3% and transaction decline of 0.5%. Average check growth was comprised of retail price increases of approximately 1.7% and positive mix impact of approximately 2.6%. A schedule of comparable net bakery-cafe sales information is attached to this release as Schedule III.

Operating Margin

In the second quarter fiscal 2013, the Company generated operating margin improvement of approximately 60 basis points compared to the second quarter fiscal 2012. This increase was driven primarily by lower general and administrative expenses as a percentage of total revenues and improved margins on fresh dough and other product sales to franchisees, which offset the decline in bakery-cafe margin.

New Bakery-Cafe Development and AWS

During the second quarter fiscal 2013, the Company opened 18 new bakery-cafes and its franchisees opened 19 new bakery-cafes. As a result, there were 1,708 bakery-cafes open system-wide as of June 25, 2013.

                   
    Company-owned     Franchise-operated     Total System  
Bakery-cafes as of March 26, 2013   818     855     1,673  
Bakery-cafes opened   18     19     37  
Bakery-cafes closed   (2 )   --     (2 )
Bakery-cafes acquired   1     (1 )   --  
Bakery-cafes as of June 25, 2013   835     873     1,708  
                   

Average weekly sales ("AWS") for Company-owned new bakery-cafes through the second quarter fiscal 2013 were $50,983 compared to $48,484 in the same period of fiscal 2012. AWS for franchise-operated new bakery-cafes through the second quarter fiscal 2013 were $49,855 compared to $47,109 in the same period of fiscal 2012. A schedule of the second quarter fiscal 2013 AWS is attached to this release as Schedule II.

Use of Capital

The Company did not repurchase any shares during the second quarter fiscal 2013 under its existing $600 million repurchase authorization and has approximately $560 million available under this program as of the date of this release.

Third and Fourth Quarter Fiscal 2013 Outlook

Diluted EPS Targets

The Company's third quarter fiscal 2013 diluted earnings per share target range is $1.32 to $1.36, which would represent an increase of 6% to 10% in the third quarter fiscal 2013 versus the comparable period in fiscal 2012. This diluted earnings per share target does not assume any additional share repurchases under the Company's repurchase authorization.

The Company's fourth quarter fiscal 2013 diluted earnings per share target range is $2.05 to $2.11, which would represent an increase of 17% to 21% in the fourth quarter fiscal 2013 versus the comparable period in fiscal 2012. This diluted earnings per share target includes approximately 700 basis points of favorable impact for the 53rd week in fiscal 2013, but does not assume any additional share repurchases under the Company's repurchase authorization.

The third and fourth quarter fiscal 2013 diluted earnings per share targets include the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth

The range for the Company's third quarter fiscal 2013 Company-owned comparable net bakery-cafe sales growth is targeted at 2.0% to 4.0% versus the comparable period in fiscal 2012. The Company announced today Company-owned comparable net bakery-cafe sales in the first 27 days of the third quarter fiscal 2013 were up approximately 2.1%.

The range for the Company's fourth quarter fiscal 2013 Company-owned comparable net bakery-cafe sales growth is targeted at 3.0% to 5.0% versus the comparable period in fiscal 2012.

Operating Margin Targets

In each of the third and fourth quarters fiscal 2013, the Company anticipates its operating margin will be flat to down 50 basis points on a year-over-year basis. These targets reflect both previously disclosed incremental investments to provide greater access for customers and to improve the Company's core enterprise systems, as well as incremental investments to improve our operational capabilities that we now intend to make.

Full Year Fiscal 2013 Outlook

Diluted EPS Target

The Company is revising its target for fiscal 2013 earnings per diluted share to $6.75 to $6.85. This lower diluted earnings per share target reflects lower than previously expected growth in Company-owned comparable net bakery-cafe sales. This diluted earnings per share target includes approximately 200 basis points of favorable impact for the 53rd week in fiscal 2013, but does not assume any additional share repurchases under the Company's repurchase authorization.

This full year fiscal 2013 diluted earnings per share target is based on the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth

The Company is revising its target for Company-owned comparable net bakery-cafe sales growth for fiscal 2013 to 3.0% to 5.0% from its previous target of 4.0% to 5.0%.

Operating Margin Target

For fiscal 2013, the Company now expects operating margin to remain approximately flat when compared to fiscal 2012. This revised target reflects the anticipated initiatives discussed in the third and fourth quarter fiscal 2013 operating margin outlook.

New Bakery-Cafe Development and AWS

The Company now expects to be at or above the high-end of its previous range of 115 to 125 system-wide new bakery-cafe openings in fiscal 2013. The average weekly net sales performance for new Company-owned bakery-cafes is expected to be at the high-end of the previously provided targeted range of $40,000 to $42,000 for fiscal 2013.

Concluding Comment

Ron Shaich, Chairman and Co-CEO, commented, "In the second quarter of 2013, we delivered within the range of our diluted EPS guidance. Our two-year comparable same store sales growth for the quarter was strong at 10.9% and our new unit sales remain on track for another record year, reaffirming how strongly our brand resonates with consumers. However, our one-year comparable same store sales growth of 3.8% was below our expectations."

Shaich continued, "We now believe that to consistently operate at the very high sales volumes we are generating and to prepare for additional sales from our initiatives to expand access to Panera and utilize national marketing, we must improve our peak hour throughput. While results in the next few quarters may be choppy as we invest in both sales-building initiatives and operational capabilities, we believe that our efforts will ultimately enable us to deliver an enhanced customer experience, grow sales and expand earnings."

Notes:

The Company will host a conference call that will be broadcast on the Internet at 8:30 A.M. Eastern Time on Wednesday, July 24, 2013 to discuss the second quarter fiscal 2013 results, preliminary comparable net bakery-cafe sales results for the first 27 days of the third quarter fiscal 2013, and earnings targets and business outlook for the third and fourth quarters and full year fiscal 2013. To access the call or view a copy of this release, go to http://www.panerabread.com/investor. Access to the call will be made available for 14 days, and the release will be archived for one year.

The Company includes in this release information on Company-owned, franchise-operated, and system-wide comparable net bakery-cafe sales percentages. Company-owned comparable net bakery-cafe sales percentages are based on net sales from Company-owned bakery-cafes included in base store bakery-cafes. Franchise-operated comparable net bakery-cafe sales percentages are based on net sales from franchised bakery-cafes, as reported by franchisees, that are included in base store bakery-cafes. Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe concepts are included in the Company's comparable net bakery-cafe sales percentages after it has acquired a 100 percent ownership interest and if such acquisition occurred prior to the first day of the Company's prior fiscal year. Comparable net bakery-cafe sales exclude closed locations. 

The Company does not record franchise-operated net bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated net bakery-cafe sales, as reported by franchisees. The Company uses franchise-operated and net system-wide sales information internally in connection with store development decisions, planning, and budgeting analyses. The Company believes franchise-operated and net system-wide sales information is useful in assessing consumer acceptance of it's brand; facilitates an understanding of its financial performance and the overall direction and trends of sales and operating income; helps the Company appreciate the effectiveness of its advertising and marketing initiatives which its franchisees also contribute based on a percentage of their net sales; and provides information that is relevant for comparison within the industry.

About Panera Bread Company

Panera Bread Company owns and franchises 1,708 bakery-cafes as of June 25, 2013 under the Panera Bread®, Saint Louis Bread Co.®, and Paradise Bakery & Café® names. Our bakery-cafes are principally located in suburban, strip mall and regional mall locations. We feature high quality, reasonably priced food in a warm, inviting, and comfortable environment. With our identity rooted in handcrafted, fresh-baked, artisan bread, we are committed to providing great tasting, quality food that people can trust. Nearly all of our bakery-cafes have a menu highlighted by antibiotic-free chicken, whole grain bread, and select organic and all-natural ingredients, with zero grams of artificial trans fat per serving, which provide flavorful, wholesome offerings. Our 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 United States and in Ontario, Canada, our customers enjoy our warm and welcoming environment featuring comfortable gathering areas, relaxing decor, and free internet access. Our bakery-cafes routinely donate bread and baked goods to community organizations in need. Additional information is available on our website, http://www.panerabread.com

Matters discussed in this news release and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, express or implied, on our anticipated growth, operating results, plans, objectives, future earnings per share, and the impact of our investments in sales-building initiatives and operational capabilities on future sales and earnings, 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," "plan," "goal," "assumption," "continue," "intend," "expect," "future," "anticipate," and other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact.  These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements.  Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those discussed from time to time in our reports filed with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended December 25, 2012 and our quarterly reports on Form 10-Q.  All forward-looking statements and the internal projections and beliefs upon which we base our expectations included in this release are made only as of the date of this release and may change.  While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 
 
Schedule I
 
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(In thousands, except per share amounts)
 
    For the 13 Weeks Ended
    June 25, 2013     June 26, 2012
Revenues:              
  Bakery-cafe sales, net   $ 521,038     $ 468,645
  Franchise royalties and fees     27,453       24,757
  Fresh dough and other product sales to franchisees     40,520       37,189
    Total revenues     589,011       530,591
Costs and expenses:              
  Bakery-cafe expenses:              
    Cost of food and paper products   $ 156,171     $ 136,498
    Labor     149,869       136,947
    Occupancy     35,701       32,253
    Other operating expenses     72,145       64,183
      Total bakery-cafe expenses     413,886       369,881
  Fresh dough and other product cost of sales to franchisees     34,599       33,046
  Depreciation and amortization     25,267       22,141
  General and administrative expenses     29,743       30,844
  Pre-opening expenses     2,081       2,476
    Total costs and expenses     505,576       458,388
Operating profit     83,435       72,203
Interest expense     178       202
Other (income) expense, net     (796 )     288
Income before income taxes     84,053       71,713
Income taxes     33,011       27,576
    Net income   $ 51,042     $ 44,137
               
Earnings per common share:              
  Basic   $ 1.75     $ 1.51
  Diluted   $ 1.74     $ 1.50
Weighted average shares of common and common equivalent shares outstanding:              
  Basic     29,092       29,201
  Diluted     29,287       29,466
               
Other comprehensive (loss) income, net of tax:              
  Foreign currency translation adjustment   $ (362 )   $ 56
    Other comprehensive (loss) income     (362 )     56
Comprehensive income   $ 50,680     $ 44,193
               
               
               
Schedule I (continued)
 
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(In thousands, except per share amounts)
 
    For the 26 Weeks Ended
    June 25, 2013     June 26, 2012
Revenues:              
  Bakery-cafe sales, net   $ 1,018,557     $ 907,860
  Franchise royalties and fees     54,030       49,579
  Fresh dough and other product sales to franchisees     78,203       71,731
    Total revenues     1,150,790       1,029,170
Costs and expenses:              
  Bakery-cafe expenses:              
    Cost of food and paper products   $ 302,588     $ 265,526
    Labor     298,467       270,774
    Occupancy     71,854       63,361
    Other operating expenses     140,090       121,699
      Total bakery-cafe expenses     812,999       721,360
  Fresh dough and other product cost of sales to franchisees     67,197       63,191
  Depreciation and amortization     49,632       43,462
  General and administrative expenses     58,050       57,511
  Pre-opening expenses     3,172       4,087
    Total costs and expenses     991,050       889,611
Operating profit     159,740       139,559
Interest expense     480       412
Other (income) expense, net     (3,216 )     726
Income before income taxes     162,476       138,421
Income taxes     63,317       53,100
      Net income   $ 99,159     $ 85,321
               
Earnings per common share:              
  Basic   $ 3.41     $ 2.92
  Diluted   $ 3.38     $ 2.90
Weighted average shares of common and common equivalent shares outstanding:              
  Basic     29,121       29,192
  Diluted     29,308       29,464
               
Other comprehensive (loss) income, net of tax:              
  Foreign currency translation adjustment   $ (728 )   $ 28
    Other comprehensive (loss) income     (728 )     28
Comprehensive income   $ 98,431     $ 85,349
               
               
               
Schedule I (continued)
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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 comprehensive income for the period indicated. Percentages may not add due to rounding:

    For the 13 Weeks Ended  
    June 25, 2013     June 26, 2012  
Revenues:            
  Bakery-cafe sales, net   88.5 %   88.3 %
  Franchise royalties and fees   4.7     4.7  
  Fresh dough and other product sales to franchisees   6.9     7.0  
      Total revenues   100.0 %   100.0 %
Costs and expenses:            
  Bakery-cafe expenses (1):            
    Cost of food and paper products   30.0 %   29.1 %
    Labor   28.8     29.2  
    Occupancy   6.9     6.9  
    Other operating expenses   13.8     13.7  
      Total bakery-cafe expenses   79.4     78.9  
  Fresh dough and other product cost of sales to franchisees (2)   85.4     88.9  
  Depreciation and amortization   4.3     4.2  
  General and administrative expenses   5.0     5.8  
  Pre-opening expenses   0.4     0.5  
    Total costs and expenses   85.8     86.4  
Operating profit   14.2     13.6  
Interest expense   --     --  
Other (income) expense, net   (0.1 )   0.1  
Income before income taxes   14.3     13.5  
Income taxes   5.6     5.2  
    Net income   8.7 %   8.3 %
             
Other comprehensive loss   (0.1 )   --  
    Comprehensive income   8.6 %   8.3 %
                 
(1) As a percentage of net bakery-cafe sales.
   
(2) As a percentage of fresh dough and other product sales to franchisees.
   
   
   
Schedule I (continued)
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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 comprehensive income for the period indicated. Percentages may not add due to rounding:

    For the 26 Weeks Ended  
    June 25, 2013     June 26, 2012  
Revenues:            
  Bakery-cafe sales, net   88.5 %   88.2 %
  Franchise royalties and fees   4.7     4.8  
  Fresh dough and other product sales to franchisees   6.8     7.0  
      Total revenues   100.0 %   100.0 %
Costs and expenses:            
  Bakery-cafe expenses (1):            
    Cost of food and paper products   29.7 %   29.2 %
    Labor   29.3     29.8  
    Occupancy   7.1     7.0  
    Other operating expenses   13.8     13.4  
      Total bakery-cafe expenses   79.8     79.5  
  Fresh dough and other product cost of sales to franchisees (2)   85.9     88.1  
  Depreciation and amortization   4.3     4.2  
  General and administrative expenses   5.0     5.6  
  Pre-opening expenses   0.3     0.4  
    Total costs and expenses   86.1     86.4  
Operating profit   13.9     13.6  
Interest expense   --     --  
Other (income) expense, net   (0.3 )   0.1  
Income before income taxes   14.1     13.4  
Income taxes   5.5     5.2  
    Net income   8.6 %   8.3 %
             
Other comprehensive loss   (0.1 )   --  
    Comprehensive income   8.5 %   8.3 %
                 
(1) As a percentage of net bakery-cafe sales.
   
(2) As a percentage of fresh dough and other product sales to franchisees.
   
   
   
Schedule II
PANERA BREAD COMPANY
Supplemental Sales and Bakery-Cafe Information
 
    System-Wide Average Weekly Sales ("AWS")
    2013[a]   2012   2011   2010   2009
AWS   $ 47,596   $ 46,676   $ 44,313   $ 42,852   $ 39,926
                               

[a] Represents year-to-date system-wide AWS at the end of the second quarter fiscal 2013.

    2013 Company-Owned AWS By Year Opened   Year-Over-Year Change in Company-Owned AWS  
    2013 Opens [b]   2012 Opens [b]   2011 Opens & Prior   2013 Acquisitions [d]   2012 Acquisitions [d]   Total   2012 Opens [c]     2011 Opens & Prior     AWS Total  
Bakery-Cafes     28     59     731     1     16     835                  
Q1 13   $ 61,912   $ 44,114   $ 47,068     --   $ 58,049   $ 47,144   -14.1 %   3.7 %   3.8 %
Q2 13   $ 48,230   $ 44,458   $ 48,848   $ 41,923   $ 58,419   $ 48,700   -6.2 %   4.2 %   3.4 %
2013 YTD   $ 50,983   $ 44,286   $ 47,957   $ 41,923   $ 58,234   $ 47,927   -8.7 %   3.9 %   3.6 %
                                                       

[b] 2013 and 2012 Company-owned AWS excludes acquisition data.

[c] Change in Company-owned AWS in 2013 from 2012 compares 59 bakery-cafes in 2013 against 24 bakery-cafes at the end of the second quarter fiscal 2012.

[d] Represents one Panera bakery-cafe in 2013 and 16 Panera bakery-cafes in 2012.

           
           
           
    2013 Franchise-Operated AWS By Year Opened   Year-Over-Year Change in
Franchise-Operated AWS
 
    2013 Opens [e]   2012 Opens [e]   2011 Opens & Prior   Total   2012 Opens [f]     2011 Opens & Prior     AWS Total  
Bakery-Cafes     31     64     778     873                  
Q1 13   $ 51,543   $ 42,923   $ 47,084   $ 46,800   -10.5 %   3.0 %   2.4 %
Q2 13   $ 49,405   $ 44,125   $ 47,999   $ 47,750   -5.8 %   3.7 %   3.2 %
2013 YTD   $ 49,855   $ 43,519   $ 47,541   $ 47,279   -7.6 %   3.4 %   2.8 %
                                           

[e] 2013 and 2012 Franchise-operated AWS excludes acquisition data.

[f] Change in Franchise-operated AWS in 2013 from 2012 compares 64 bakery-cafes in 2013 against 31 bakery-cafes at the end of the second quarter fiscal 2012.

     
     
     
    Bakery-Cafe Openings (excluding acquisitions)
    Company   Franchise   Total       Company   Franchise   Total
Q1 13   10   12   22   Q1 12   7   15   22
Q2 13   18   19   37   Q2 12   17   16   33
Q3 13               Q3 12   17   19   36
Q4 13               Q4 12   18   14   32
2013 YTD   28   31   59   2012 YTD   59   64   123
                             
                             
                             
Schedule III
PANERA BREAD COMPANY
Comparable Net Bakery-Cafe Sales Information
 
    For the 4 Weeks Ended   For the 5 Weeks Ended   For the 4 Weeks Ended   For the 13 Weeks Ended   For the 26 Weeks Ended
    April 23, 2013   May 28, 2013   June 25, 2013   June 25, 2013   June 25, 2013
Company-owned   4.7%   4.1%   2.6%   3.8%   3.6%
Franchise-operated   5.1%   4.1%   1.2%   3.5%   3.4%
System-wide   4.9%   4.1%   1.9%   3.7%   3.5%
                     

Company-owned comparable net bakery-cafe sales growth percentages are based on net sales from Company-owned bakery-cafes included in base store bakery-cafes. Franchise-operated comparable net bakery-cafe sales percentages are based on net sales from franchised bakery-cafes, as reported by franchisees, that are included in base store bakery-cafes. Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe concepts are included in our comparable net bakery-cafe sales percentages after we have acquired a 100 percent ownership interest and if such acquisition date occurred prior to the first day of our prior fiscal year. Comparable net bakery-cafe sales exclude closed locations.

Contact:

Michele Harrison
Vice President, Investor Relations
(314-984-4966)

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