Panera Bread Reports Q2 EPS of $0.65 (Including $0.04 in Charges), Up 25% Over Q2 2008ST.
LOUIS, MO--(Marketwire) - Panera Bread Company (NASDAQ: PNRA)
HIGHLIGHTS
-- Q2 2009 net income up 28% over Q2 2008
-- Q2 2009 operating margin up 140 bps over Q2 2008
-- Q2 2009 system-wide comparable bakery-cafe sales flat, net of the Easter
impact
-- Company-owned comparable bakery-cafe sales up 2.8% for the first 27 days
of Q3 2009
-- Q3 2009 EPS target set at $0.55 to $0.59 (up 22% to 31% versus Q3 2008)
-- FY 2009 EPS target tightened to $2.60 to $2.68 (up 17% to 21% versus FY
2008 with one less week)
Panera Bread Company (NASDAQ: PNRA) today reported net income of $20 million, or $0.65 per diluted share, for the second quarter ended June 30, 2009, which included a $0.02 per diluted share charge for the write-off of smallwares related to the rollout of new china and a $0.02 per diluted share charge for reserves associated with a state sales tax audit. These results compare to net income of $16 million, or $0.52 per diluted share, for the second quarter ended June 24, 2008, and represents a 28% year-over-year increase in net income.
For the twenty-six weeks ended June 30, 2009, net income was $37 million, or $1.21 per diluted share. These results compare to net income of $28 million, or $0.93 per diluted share, for the twenty-six weeks ended June 24, 2008, and represents a 33% year-over-year increase in net income.
The Company's second quarter and year-to-date fiscal 2009 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
-----------------------
June 30, June 24, Percentage
2009 2008 Change
----------- ----------- ----------
Total revenue $ 330,794 $ 320,868 3%
Net income $ 20,029 $ 15,706 28%
Diluted earnings per share $ 0.65 $ 0.52 25%
Shares used in diluted EPS 30,959 30,338
For the 26 Weeks Ended
-----------------------
June 30, June 24, Percentage
2009 2008 Change
----------- ----------- ----------
Total revenue $ 651,503 $ 625,847 4%
Net income $ 37,461 $ 28,146 33%
Diluted earnings per share $ 1.21 $ 0.93 30%
Shares used in diluted EPS 30,849 30,240
Second Quarter Fiscal 2009 Business Review
Comparable Bakery-Cafe Sales Growth
In the second quarter of fiscal 2009, system-wide comparable bakery-cafe sales decreased (0.4)% versus the comparable period in fiscal 2008 (Company-owned comparable bakery-cafe sales decreased (0.7)% and franchise-operated comparable bakery-cafes decreased (0.2)%). These second quarter comparable sales results were impacted negatively by approximately 0.5% from the shift of the Easter holiday from the first quarter of fiscal 2008 to the second quarter of fiscal 2009. Thus, excluding the impact of the Easter shift, the Company and its franchisees experienced essentially flat comparable bakery-cafe sales growth for the second quarter of fiscal 2009.
The Company-owned comparable bakery-cafe sales decline of (0.7)% in the second quarter of fiscal 2009 included the following year-over-year components: transaction decline of (1.4)% and average check growth of 0.7%. Average check growth in turn was comprised of retail price increases of 3.0% and negative mix impact of (2.3)%. Transaction growth was primarily the result of new product introductions, offsetting negative mix impact, which was primarily the result of continued weakness in year-over-year sales in the Company's high average-check catering business and strong transaction growth in the lower average check breakfast business.
Operating Margin Improvement
In the second quarter of fiscal 2009, the Company generated operating margin improvement of approximately 140 basis points compared to the second quarter of fiscal 2008. This was primarily a result of the year-over-year benefits in wheat costs and the Company's category management initiatives.
New Unit AWS and Development
In the second quarter of fiscal 2009, average weekly sales ("AWS") for Company-owned new units decreased to $35,580 compared to $35,776 in the second quarter of fiscal 2008. AWS for Company-owned new units year-to-date through the second quarter of fiscal 2009 was $37,314 compared to $36,640 in the same period of fiscal 2008. A schedule of the Company's second quarter fiscal 2009 AWS is attached as Schedule II.
During the second quarter of fiscal 2009, the Company and its franchisees opened 14 new bakery-cafes system-wide, resulting in 1,345 bakery-cafes open system-wide as of June 30, 2009. The breakdown of Company-owned and franchise-operated bakery-cafes are as follows:
Company- Franchise- Total
owned operated System
----------- ----------- -----------
Bakery-cafes as of March 31, 2009 564 771 1,335
Bakery-cafes opened 4 10 14
Bakery-cafes closed (2) (2) (4)
----------- ----------- -----------
Bakery-cafes as of June 30, 2009 566 779 1,345
=========== =========== ===========
Third Quarter 2009 Outlook
Establishing Third Quarter 2009 Targets
Diluted EPS Target
For the third quarter of fiscal 2009, the Company is targeting earnings per diluted share of $0.55 to $0.59 versus $0.45 per diluted share in the third quarter of fiscal 2008. If the Company meets this target, diluted earnings per share will grow 22% to 31% in the third quarter of fiscal 2009 versus the third quarter of fiscal 2008. This third quarter of fiscal 2009 diluted earnings per share target includes the following key assumptions:
Comparable Bakery-Cafe Sales Growth
The third quarter of fiscal 2009 target assumes Company-owned comparable bakery-cafe sales growth of 2.5% to 3.5%, consisting of transaction growth of 1.5% to 2.5% and average check growth of approximately 1.0% (which in turn consists of an approximately 2.25% year-over-year price increase and negative mix impact of approximately (1.25)%).
The Company is announcing today that through the first 27 days of the third quarter of fiscal 2009 (beginning July 1, 2009 and ending July 27, 2009), comparable bakery-cafe sales of Company-owned bakery-cafes have grown approximately 2.8% and comparable bakery-cafe sales of franchise-operated bakery-cafes have grown approximately 1.8%.
Operating Margin Improvement
In the third quarter of fiscal 2009, the Company is targeting 50 to 100 basis points of improvement in operating margin.
New Unit AWS and Development
The Company is targeting approximately 15 to 20 system-wide new unit openings in the third quarter of fiscal 2009 with AWS for new Company-owned units assumed to be consistent with the Company's full year target of $36,000 to $38,000.
Full Year 2009 Targets
Tightening Full Year Fiscal 2009 Targets
The Company is today tightening its earnings per diluted share target for full year fiscal 2009 to $2.60 to $2.68 per diluted share. The sequentially improving Company-owned comparable bakery-cafe sales growth has provided management with the confidence to raise the bottom end of its previously disclosed full year fiscal 2009 diluted earnings per share target from $2.55 to $2.60 per diluted share while modestly raising the midpoint of its previously communicated full year diluted earnings per share target to $2.64. This compares favorably to earnings per diluted share of $2.22 in full year fiscal 2008. If the Company meets its revised full year target, it would generate diluted earnings per share growth of 17% to 21% in full year fiscal 2009. Please note fourth quarter fiscal 2009 diluted earnings per share growth targets will be impacted by the fact that fourth quarter fiscal 2008 results consist of 14 weeks as compared to 13 weeks in the fourth quarter of fiscal 2009.
The full year fiscal 2009 diluted earnings per share target includes the following updated key assumption: the full year fiscal 2009 target for Company-owned comparable bakery-cafe sales has been updated to a range of 1.25% to 2.0% growth to reflect the continued trend of stronger than expected transactions while absorbing year-over-year softness in the catering business.
Concluding Comment
Chairman and Chief Executive Officer Ron Shaich commented: "We are very pleased to have delivered another quarter of solid performance. We have been highly focused on building competitive advantage and growing transactions in the face of this recession. Thus we are quite gratified to see our initiatives generating sequentially better Company-owned comparable bakery-cafe sales growth each period for the last four periods. In fact, we believe that the strong comparable bakery-cafe sales growth we have produced in Company-owned cafes since the rollout of our recent salad celebration in early June is an indication of the success of our efforts. Indeed, the momentum we are experiencing in Company-owned comparable bakery-cafe sales growth has given us the confidence to continue investing in an improved guest experience despite the recession and, as well, greater confidence in our ability to deliver Q3 results up 22% to 31% and our full year 2009 targets."
Notes
The Company will discuss second quarter fiscal 2009 results, preliminary comparable bakery-cafe sales results for the first twenty-seven days of the fiscal 2009 third quarter, and third quarter and full year fiscal 2009 targets and business outlook in a conference call that will be broadcast on the Internet at 8:30 A.M. Eastern Time on Wednesday, July 29, 2009. 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 after the call, and the release will be archived for one year.
Comparable bakery-cafe sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with Generally Accepted Accounting Principles, or GAAP, and may not be equivalent to comparable bakery-cafe sales as defined or used by other companies. We do not record franchise-operated bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated bakery-cafe sales, as reported by franchisees. We use franchise-operated and system-wide sales information internally in connection with store development decisions, planning, and budgeting analyses. We believe franchise-operated and system-wide sales information is useful in assessing consumer acceptance of our brand; facilitates an understanding of our financial performance and the overall direction and trends of sales and operating income; helps us appreciate the effectiveness of our advertising and marketing initiatives which our franchisees also contribute based on a percentage of their sales; and provides information that is relevant for comparison within the industry.
Panera Bread Company owns and franchises 1,276 bakery-cafes under the Panera Bread® and Saint Louis Bread Co.® names as of June 30, 2009. 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 with zero grams added 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 United States and in Canada, 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, http://www.panerabread.com. Panera also owns and franchises 69 bakery-cafes under the Paradise Bakery & Café® name as of June 30, 2009.
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; changes in consumer spending habits as a result of an extended economic downturn; 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 acquisitions; other factors, some of which may be beyond our control, effecting our operating results; and other factors that may effect 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 30, 2008 and its quarterly reports on Form 10-Q.
PANERA BREAD COMPANY Schedule I
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
For the 13 Weeks Ended
-----------------------------
June 30, 2009 June 24, 2008
-------------- --------------
Revenues:
Bakery-cafe sales $ 281,644 $ 274,396
Franchise royalties and fees 19,157 18,103
Fresh dough sales to franchisees 29,993 28,369
-------------- --------------
Total revenues 330,794 320,868
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products 84,059 83,011
Labor 90,669 85,456
Occupancy 24,086 22,176
Other operating expenses 38,677 36,833
-------------- --------------
Total bakery-cafe expenses 237,491 227,476
Fresh dough cost of sales to franchisees 24,992 27,471
Depreciation and amortization 16,579 16,235
General and administrative expenses 18,445 21,638
Pre-opening expenses 405 879
-------------- --------------
Total costs and expenses 297,912 293,699
-------------- --------------
Operating profit 32,882 27,169
Interest expense 209 144
Other (income) expense, net 160 492
-------------- --------------
Income before income taxes 32,513 26,533
Income taxes 12,278 10,311
-------------- --------------
Net income 20,235 16,222
Less: net income attributable to
noncontrolling interest 206 516
-------------- --------------
Net income attributable to Panera Bread
Company $ 20,029 $ 15,706
============== ==============
Earnings per common share attributable to
Panera Bread Company:
Basic $ 0.65 $ 0.52
============== ==============
Diluted $ 0.65 $ 0.52
============== ==============
Weighted average shares of common and common
equivalent shares outstanding:
Basic 30,595 29,970
============== ==============
Diluted 30,959 30,338
============== ==============
PANERA BREAD COMPANY Schedule I (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
For the 26 Weeks Ended
-----------------------------
June 30, 2009 June 24, 2008
------------- --------------
Revenues:
Bakery-cafe sales $ 554,526 $ 534,842
Franchise royalties and fees 37,784 35,539
Fresh dough sales to franchisees 59,193 55,466
------------- --------------
Total revenues 651,503 625,847
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products 165,050 162,339
Labor 180,210 170,204
Occupancy 47,358 43,584
Other operating expenses 74,857 70,164
------------- --------------
Total bakery-cafe expenses 467,475 446,291
Fresh dough cost of sales to franchisees 49,771 53,401
Depreciation and amortization 32,998 32,374
General and administrative expenses 38,846 43,457
Pre-opening expenses 745 2,006
------------- --------------
Total costs and expenses 589,835 577,529
------------- --------------
Operating profit 61,668 48,318
Interest expense 375 1,173
Other (income) expense, net (158) 347
------------- --------------
Income before income taxes 61,451 46,798
Income taxes 23,189 17,775
------------- --------------
Net income 38,262 29,023
Less: net income attributable to
noncontrolling interest 801 877
------------- --------------
Net income attributable to Panera Bread
Company $ 37,461 $ 28,146
============= ==============
Earnings per common share attributable to
Panera Bread Company:
Basic $ 1.23 $ 0.94
============= ==============
Diluted $ 1.21 $ 0.93
============= ==============
Weighted average shares of common and common
equivalent shares outstanding:
Basic 30,491 29,930
============= ==============
Diluted 30,849 30,240
============= ==============
PANERA BREAD COMPANY Schedule I (continued)
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 30, 2009 June 24, 2008
------------- -------------
Revenues:
Bakery-cafe sales 85.1% 85.5%
Franchise royalties and fees 5.8 5.6
Fresh dough sales to franchisees 9.1 8.8
------------- -------------
Total revenues 100.0% 100.0%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 29.8% 30.3%
Labor 32.2 31.1
Occupancy 8.6 8.1
Other operating expenses 13.7 13.4
------------- -------------
Total bakery-cafe expenses 84.3 82.9
Fresh dough cost of sales to franchisees
(2) 83.3 96.8
Depreciation and amortization 5.0 5.1
General and administrative expenses 5.6 6.7
Pre-opening expenses 0.1 0.3
------------- -------------
Total costs and expenses 90.1 91.5
------------- -------------
Operating profit 9.9 8.5
Interest expense 0.1 -
Other (income) expense, net - 0.2
------------- -------------
Income before income taxes 9.8 8.3
Income taxes 3.7 3.2
------------- -------------
Net income 6.1 5.1
Less: net income attributable to
noncontrolling interest 0.1 0.2
------------- -------------
Net income attributable to Panera Bread
Company 6.0% 4.9%
============= =============
(1) As a percentage of Company-owned bakery-cafe sales.
(2) As a percentage of fresh dough sales to franchisees.
Schedule I (continued)
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 30, 2009 June 24, 2008
------------- -------------
Revenues:
Bakery-cafe sales 85.1% 85.5%
Franchise royalties and fees 5.8 5.7
Fresh dough sales to franchisees 9.1 8.9
------------- -------------
Total revenues 100.0% 100.0%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 29.8% 30.4%
Labor 32.5 31.8
Occupancy 8.5 8.1
Other operating expenses 13.5 13.1
------------- -------------
Total bakery-cafe expenses 84.3 83.4
Fresh dough cost of sales to franchisees
(2) 84.1 96.3
Depreciation and amortization 5.1 5.2
General and administrative expenses 6.0 6.9
Pre-opening expenses 0.1 0.3
------------- -------------
Total costs and expenses 90.5 92.3
------------- -------------
Operating profit 9.5 7.7
Interest expense 0.1 0.2
Other (income) expense, net - 0.1
------------- -------------
Income before income taxes 9.4 7.4
Income taxes 3.6 2.8
------------- -------------
Net income 5.8 4.6
Less: net income attributable to
noncontrolling interest 0.1 0.1
------------- -------------
Net income attributable to Panera Bread
Company 5.7% 4.5%
============= =============
(1) As a percentage of Company-owned bakery-cafe sales.
(2) As a percentage of fresh dough sales to franchisees.
PANERA BREAD COMPANY
Schedule II - Supplemental Sales and Bakery-Cafe Information
Historical System-Wide AWS
---------------------------------------------------------------
2008 2007 2006 2005
--------------- --------------- --------------- ---------------
AWS $ 39,239 $ 38,668 $ 39,150 $ 38,318
2009 Company-Owned AWS By Year Opened
---------------------------------------------------------------
2007 Opens
2009 Opens 2008 Opens & Prior Total
--------------- --------------- --------------- ---------------
Bakery-Cafes 8 35 523 566
Q1 09 $ 41,922 $ 36,294 $ 37,437 $ 37,380
Q2 09 $ 35,580 $ 36,485 $ 38,652 $ 38,492
Q3 09
Q4 09
2009 YTD $ 37,314 $ 36,390 $ 38,043 $ 37,936
2009 Franchise-Operated AWS By Year Opened
---------------------------------------------------------------
2007 Opens
2009 Opens 2008 Opens & Prior Total
--------------- --------------- --------------- ---------------
Bakery-Cafes 20 67 692 779
Q1 09 $ 35,001 $ 33,726 $ 39,746 $ 39,190
Q2 09 $ 36,703 $ 33,890 $ 40,512 $ 39,859
Q3 09
Q4 09
2009 YTD $ 36,335 $ 33,808 $ 40,129 $ 39,527
Year-Over-Year Change in Company-Owned AWS and Comp Sales
----------------------------------------------------------------
2008 Opens 2007 Opens Comp Sales
2009 Opens (a) & Prior AWS Total Total
------------ ----------- ----------- ----------- -----------
Q1 09 N/A -7.1% 0.3% 0.1% 0.3%
Q2 09 N/A 2.0% -0.4% -0.6% -0.7%
Q3 09 N/A
Q4 09 N/A
2009 YTD N/A -0.7% -0.1% -0.3% -0.2%
(a) Change in Company-owned AWS in 2009 from 2008 compares 35 bakery-cafes
in 2009 against 20 bakery-cafes at the end of the second quarter of 2008.
Year-Over-Year Change in Franchise-Operated AWS and Comp Sales
----------------------------------------------------------------
2008 Opens 2007 Opens Comp Sales
2009 Opens (b) & Prior AWS Total Total
------------ ----------- ----------- ----------- -----------
Q1 09 N/A -2.8% 0.9% -0.4% 1.0%
Q2 09 N/A -5.0% -0.2% -1.5% -0.2%
Q3 09 N/A
Q4 09 N/A
2009 YTD N/A -4.6% 0.3% -0.9% 0.4%
(b) Change in Franchise-operated AWS in 2009 from 2008 compares 67
bakery-cafes in 2009 against 26 bakery-cafes at the end of the second
quarter of 2008.
Bakery-Cafe Openings
----------------------------------------------------------------
Company Franchise Total Company Franchise Total
-------- --------- -------- -------- --------- --------
Q1 09 4 10 14 Q1 08 14 13 27
Q2 09 4 10 14 Q2 08 6 13 19
Q3 09 Q3 08 7 17 24
Q4 09 Q4 08 8 24 32
2009 YTD 8 20 28 2008 YTD 35 67 102
AWS - average weekly sales for the time periods indicated.
Comp Sales - comparable bakery-cafe sales increases for the time period
indicated, which exclude closed locations and are based on sales for
bakery-cafes that have been in operation and owned for at least 18 months.
Comparable bakery-cafe sales also exclude the impact from Paradise
bakery-cafes.
PANERA BREAD COMPANY
Schedule III - Comparable Bakery-Cafe Sales Information
For the 4 For the 5 For the 4 For the 13 For the 26
weeks weeks weeks weeks weeks
ended ended ended ended ended
April June June June June
28, 2009 2, 2009 30, 2009 30, 2009 30, 2009
---------- --------- ---------- ---------- ----------
Company-owned -1.9% -1.6% 1.6% -0.7% -0.2%
Franchise-
operated -1.6% -0.6% 1.6% -0.2% 0.4%
System-wide -1.7% -1.0% 1.6% -0.4% 0.1%
We include in this release information on Company-owned, franchise-operated
and system-wide comparable bakery-cafe sales percentages. Company-owned
comparable bakery-cafe sales percentages are based on sales from
bakery-cafes that have been in operation and Company-owned for at least 18
months. Franchise-operated comparable bakery-cafe sales percentages are
based on sales from franchised bakery-cafes, as reported by franchisees,
that have been in operation and franchise-operated for at least 18 months.
Comparable system-wide bakery-cafe sales percentages are based on sales at
both Company-owned and franchise-operated bakery-cafes. Comparable
bakery-cafe sales exclude closed locations and Paradise bakery-cafes.
###
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