Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
PNRA > SEC Filings for PNRA > Form 10-Q on 30-Apr-2014All Recent SEC Filings

Show all filings for PANERA BREAD CO

Form 10-Q for PANERA BREAD CO


30-Apr-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Matters discussed in this report and in our public disclosures, whether written or oral, relating to future events or our future performance, including any discussion, expressed or implied, of our anticipated growth, operating results, future earnings per share, plans, objectives, 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the words "believe", "positioned", "estimate", "project", "plan", "goal", "target", "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 the 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 set forth under "Risk Factors" and elsewhere in this report and in our other public filings with the United States Securities and Exchange Commission, or SEC, including our Form 10-K for the year ended December 31, 2013 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 report or other periodic reports represent our estimates as of the date made and should not be relied upon as representing our estimates as of any subsequent date. 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.

General

Panera Bread Company and its subsidiaries are referred to as the "Company," "Panera Bread," or in the first person notation of "we," "us," and "our" in the following discussion.

Our revenues are derived from Company-owned net bakery-cafe sales, fresh dough and other product sales to franchisees, and franchise royalties and fees. Fresh dough and other product sales to franchisees are primarily comprised of sales of fresh dough, produce, tuna, and cream cheese to certain of our franchisees. Franchise royalties and fees include royalty income and franchise fees. The cost of food and paper products, labor, occupancy, and other operating expenses relate primarily to Company-owned net bakery-cafe sales. The cost of fresh dough and other product sales to franchisees relates primarily to the sale of fresh dough, produce, tuna, and cream cheese to certain of our franchisees. General and administrative, depreciation and amortization, and pre-opening expenses relate to all areas of revenue generation.

We include in this report information on Company-owned, franchise-operated, and system-wide comparable net bakery-cafe sales percentages. Bakery-cafes in our comparable net bakery-cafe sales percentages include those bakery-cafes with an open date prior to the first day of our prior fiscal year, which we refer to as our base store bakery-cafes. Company-owned comparable net bakery-cafe sales percentages are based on net sales from Company-owned base store bakery-cafes. Franchise-operated comparable net bakery-cafe sales percentages are based on net sales from franchise-operated base store bakery-cafes, as reported by franchisees. System-wide comparable net bakery-cafe sales percentages are based on net sales at Company-owned and franchise-operated 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 only if we or our franchisee previously held or acquired a 100 percent ownership interest prior to the first day of our prior fiscal year. Comparable net bakery-cafe sales exclude closed locations.

We do 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. 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, to which our franchisees also contribute based on a percentage of their net sales, and provides information that is relevant for comparison within the industry.

We also include in this report information on Company-owned, franchise-operated, and system-wide average weekly net sales. Average weekly net sales are calculated by dividing total net sales in the period by operating weeks in the period. Accordingly, year-over-year results reflect sales for all locations, whereas comparable net bakery-cafe sales exclude closed locations and are based on sales only from our base store bakery-cafes. New stores typically experience an opening "honeymoon" period during which they generate higher average weekly net sales in the first 12 to 16 weeks after opening, after which customers "settle-in" to normal usage patterns. On average, average weekly net sales during the "settle-in" period are 5 percent to 10 percent less than during the "honeymoon" period. As a result, year-over-year results of average weekly net sales are generally lower than the results


in comparable net bakery-cafe sales. This results from the relationship of the number of bakery-cafes in the "honeymoon" period, the number of bakery-cafes in the "settle-in" period, and the number of bakery-cafes in the comparable bakery-cafe base.

Executive Summary of Results

For the thirteen weeks ended April 1, 2014, we earned $1.55 per diluted share with the following performance on key metrics: system-wide comparable net bakery-cafe sales on a calendar basis grew 0.1 percent (growth of 0.1 percent for both Company-owned and franchise-operated bakery-cafes); system-wide average weekly net sales decreased 0.1 percent to $46,925 ($47,142 for Company-owned bakery-cafes and $46,717 for franchise-operated bakery-cafes); 27 new bakery-cafes opened system-wide (16 Company-owned bakery-cafes and 11 franchise-operated bakery-cafes); and four bakery-cafes closed system-wide (two Company-owned bakery-cafes and two franchise-operated bakery-cafes).

For the thirteen weeks ended March 26, 2013, we earned $1.64 per diluted share with the following performance on key metrics: system-wide comparable net bakery-cafe sales grew 3.3 percent (growth of 3.3 percent for both Company-owned and franchise-operated bakery-cafes); system-wide average weekly net sales increased 3.1 percent to $46,968 ($47,144 for Company-owned bakery-cafes and $46,800 for franchise-operated bakery-cafes); 22 new bakery-cafes opened system-wide (10 Company-owned bakery-cafes and 12 franchise-operated bakery-cafes); and one Company-owned bakery-cafe closed.

The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Consolidated Statements of Comprehensive Income for the periods indicated. Percentages may not add due to rounding:

                                                                  For the 13 Weeks Ended
                                                                 April 1,        March 26,
                                                                   2014             2013
Revenues:
Bakery-cafe sales, net                                              88.5  %          88.6  %
Franchise royalties and fees                                         4.8              4.7
Fresh dough and other product sales to franchisees                   6.8              6.7
Total revenues                                                     100.0  %         100.0  %
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products                                     29.7  %          29.4  %
Labor                                                               30.3             29.9
Occupancy                                                            7.3              7.3
Other operating expenses                                            14.2             13.7
Total bakery-cafe expenses                                          81.5             80.2
Fresh dough and other product cost of sales to franchisees (2)      87.1             86.5
Depreciation and amortization                                        4.9              4.3
General and administrative expenses                                  5.8              5.0
Pre-opening expenses                                                 0.3              0.2
Total costs and expenses                                            88.9             86.4
Operating profit                                                    11.1             13.6
Interest expense                                                     0.1              0.1
Other (income) expense, net                                         (0.2 )           (0.4 )
Income before income taxes                                          11.2             14.0
Income taxes                                                         4.2              5.4
Net income                                                           7.0  %           8.6  %
Other comprehensive loss                                            (0.1 )           (0.1 )
Comprehensive income                                                 6.9  %           8.5  %

(1) As a percentage of net bakery-cafe sales.

(2) As a percentage of fresh dough and other product sales to franchisees.


The following table sets forth certain information relating to the number of Company-owned and franchise-operated bakery-cafes for the periods indicated:

                          For the 13 Weeks Ended
                          April 1,       March 26,
                            2014           2013
Number of bakery-cafes:
Company-owned:
Beginning of period           867             809
Bakery-cafes opened            16              10
Bakery-cafes closed            (2 )            (1 )
End of period                 881             818
Franchise-operated:
Beginning of period           910             843
Bakery-cafes opened            11              12
Bakery-cafes closed            (2 )             -
End of period                 919             855
System-wide:
Beginning of period         1,777           1,652
Bakery-cafes opened            27              22
Bakery-cafes closed            (4 )            (1 )
End of period               1,800           1,673

Comparable Net Bakery-cafe Sales

The following table sets forth certain information relating to comparable net
bakery-cafe sales growth for the periods indicated:

                         For the 13 Weeks Ended
                                           March 26,
                    April 1, 2014 (1)         2013
Company-owned                0.1 %              3.3 %
Franchise-operated           0.1 %              3.3 %
System-wide                  0.1 %              3.3 %

(1) Comparable net-bakery cafe sales growth for the thirteen weeks ended April 1, 2014 is presented on a calendar basis. We believe that comparable net bakery-cafe sales percentages presented on a calendar basis, which match the specific operating weeks in a fiscal period to the same specific operating weeks in another, are useful in understanding our sales results because such comparisons are generally not impacted by the shifting of seasonal holidays between fiscal periods or by additional weeks of sales in a particular fiscal period.


The following table sets forth the composition of Company-owned comparable net bakery-cafe sales growth for the periods indicated:

                                                        For the 13 Weeks Ended
                                                        April 1,      March 26,
                                                          2014           2013
Price                                                     1.7  %          2.3  %
Mix                                                       1.2  %          3.4  %
Average check                                             2.9  %          5.7  %

Transactions                                             (2.8 )%         (2.4 )%
Company-owned comparable net bakery-cafe sales growth     0.1  %          3.3  %

The year-over-year decline in transactions during the thirteen weeks ended April 1, 2014 was due to a variety of factors, including, but not limited to, severe weather, operational issues impacting the customer experience, a continued challenging consumer environment, and intensified competition. Price growth year-over-year during the thirteen weeks ended April 1, 2014 was modest generally due to our decision to take minimal price increases in anticipation of modest inflation. Mix growth year-over-year during the thirteen weeks ended April 1, 2014 was modest due, in part, to slower catering sales growth in fiscal 2014 and rolling over the introduction of pasta in fiscal 2013.

As noted, each of Company-owned, franchise-operated, and system-wide comparable net-bakery cafe sales growth presented on a calendar basis for the thirteen weeks ended April 1, 2014 was 0.1%. Presented on a fiscal basis, Company-owned, franchise-operated, and system-wide comparable net-bakery cafe sales growth for the thirteen weeks ended April 1, 2014 was 0.7%, 0.5%, and 0.6%, respectively.

Results of Operations

Revenues

The following table sets forth revenues for the periods indicated (dollars in
thousands, except for average weekly net sales information):

                                                  For the 13 Weeks Ended               Percentage
                                            April 1, 2014          March 26, 2013        Change
Bakery-cafe sales, net                  $        535,549         $        497,519          7.6  %
Franchise royalties and fees                      28,892                   26,577          8.7  %
Fresh dough and other product sales to
franchisees                                       40,896                   37,683          8.5  %
Total revenues                          $        605,337         $        561,779          7.8  %

System-wide average weekly net sales    $         46,925         $         46,968         (0.1 )%

The growth in total revenues for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to the opening of 138 new bakery-cafes system-wide since March 26, 2013.


Bakery-cafe sales, net

The following table sets forth net bakery-cafe sales for the periods indicated (dollars in thousands, except for average weekly net sales information):

                                              For the 13 Weeks Ended         Percentage
                                         April 1, 2014     March 26, 2013      Change
Bakery-cafe sales, net                  $     535,549     $      497,519        7.6  %
As a percentage of total revenues                88.5 %             88.6 %

Company-owned average weekly net sales  $      47,142     $       47,144          -  %
Company-owned number of operating weeks        11,360             10,553        7.6  %

The increase in net bakery-cafe sales for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to the opening of 69 new Company-owned bakery-cafes since March 26, 2013, partially offset by the closure of seven Company-owned bakery-cafes since March 26, 2013.

Franchise royalties and fees

The following table sets forth franchise royalties and fees for the periods indicated (dollars in thousands, except for average weekly net sales information):

                                                      For the 13 Weeks Ended             Percentage
                                                April 1, 2014        March 26, 2013        Change
Franchise royalties                          $         28,479       $        26,202          8.7  %
Franchise fees                                            413                   375         10.1  %
Total                                        $         28,892       $        26,577          8.7  %
As a percentage of total revenues                         4.8 %                 4.7 %

Franchise-operated average weekly net sales  $         46,717       $        46,800         (0.2 )%
Franchise-operated number of operating weeks           11,862                11,023          7.6  %

The increase in franchise royalty and fee revenues for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to the opening of 69 franchise-operated bakery-cafes since March 26, 2013, partially offset by the closure of four franchise-operated bakery-cafes since March 26, 2013.

As of April 1, 2014, there were 919 franchise-operated bakery-cafes open and we had received commitments to open 119 additional franchise-operated bakery-cafes. The timetables for opening these bakery-cafes are established in the respective Area Development Agreements, or ADAs, with franchisees, which provide for the majority of such bakery-cafes to open in the next four to five years. An ADA requires a franchisee to develop a specified number of bakery-cafes by specified dates. If a franchisee fails to develop bakery-cafes on the schedule set forth in the ADA, we have the right to terminate the ADA and develop Company-owned bakery-cafes or develop locations through new franchisees in that market. We may exercise one or more alternative remedies to address defaults by franchisees, including not only development defaults, but also defaults in complying with our operating and brand standards and other covenants included in the ADAs and franchise agreements. We may waive compliance with certain requirements included in our ADAs and franchise agreements if we determine such action is warranted under the particular circumstances.


Fresh dough and other product sales to franchisees

The following table sets forth fresh dough and other product sales to franchisees for the periods indicated (dollars in thousands):

                                                  For the 13 Weeks Ended             Percentage
                                            April 1, 2014        March 26, 2013        Change
Fresh dough and other product sales to
franchisees                              $         40,896       $        37,683          8.5 %
As a percentage of total revenues                     6.8 %                 6.7 %

The increase in fresh dough and other product sales to franchisees for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to the opening of 69 franchise-operated bakery-cafes since March 26, 2013, partially offset by the closure of four franchise-operated bakery-cafes since March 26, 2013.

Costs and Expenses

The cost of food and paper products includes the costs associated with our fresh dough and other product operations that sell fresh dough and other products to Company-owned bakery-cafes, as well as the cost of food and paper products supplied by third-party vendors and distributors. The costs associated with our fresh dough and other product operations that sell fresh dough and other products to the franchise-operated bakery-cafes are excluded from the cost of food and paper products and are shown separately as fresh dough and other product cost of sales to franchisees in the Consolidated Statements of Comprehensive Income.

The following table sets forth cost of food and paper products for the periods indicated (dollars in thousands):

                                                  For the 13 Weeks Ended            Percentage
                                            April 1, 2014       March 26, 2013        Change
Cost of food and paper products           $        158,894     $       146,417          8.5 %
As a percentage of bakery-cafe sales, net             29.7 %              29.4 %

The increase in the cost of food and paper products as a percentage of net bakery-cafe sales for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to increased food variance, primarily due to severe weather during early fiscal 2014, and modestly higher input costs. In addition, for the thirteen weeks ended April 1, 2014, there was an average of 78 bakery-cafes per fresh dough facility compared to an average of 72 for the thirteen weeks ended March 26, 2013.

The following table sets forth labor expense for the periods indicated (dollars in thousands):

                                                  For the 13 Weeks Ended            Percentage
                                            April 1, 2014       March 26, 2013        Change
Labor expense                             $        162,463     $       148,598          9.3 %
As a percentage of bakery-cafe sales, net             30.3 %              29.9 %

The increase in labor expense as a percentage of net bakery-cafe sales for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily a result of adding additional labor hours in the bakery-cafes and related training costs, both to support ongoing operational initiatives, partially offset by lower manager bonus expense.


The following table sets forth other operating expenses for the periods presented (dollars in thousands):

                                                   For the 13 Weeks Ended            Percentage
                                             April 1, 2014        March 26, 2013       Change
Other operating expenses                  $         75,817       $        67,945         11.6 %
As a percentage of bakery-cafe sales, net             14.2 %                13.7 %

The increase in other operating expenses as a percentage of net bakery-cafe sales for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily a result of increased marketing and utilities expenses, partially offset by lower multi-unit manager bonus expense.

The following table sets forth fresh dough and other product cost of sales to franchisees for the periods indicated (dollars in thousands):

                                                  For the 13 Weeks Ended             Percentage
                                            April 1, 2014        March 26, 2013        Change
Fresh dough and other product cost of
sales to franchisees                     $         35,634       $        32,598          9.3 %
As a percentage of fresh dough and other
product sales to franchisees                         87.1 %                86.5 %

The increase in fresh dough and other product costs of sales to franchisees as a percentage of fresh dough and other product sales to franchisees for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily the result of higher year-over-year sales of zero margin fresh produce to franchisees and modestly higher wheat costs.

The following table sets forth depreciation and amortization for the periods indicated (dollars in thousands):

                                        For the 13 Weeks Ended          Percentage
                                   April 1, 2014      March 26, 2013      Change
Depreciation and amortization     $     29,442       $       24,365         20.8 %
As a percentage of total revenues          4.9 %                4.3 %

The increase in depreciation and amortization as a percentage of total revenues for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily the result of increased depreciation on investments in bakery-cafes and support centers to support ongoing operational initiatives.

The following table sets forth general and administrative expenses for the periods indicated (dollars in thousands):

                                          For the 13 Weeks Ended          Percentage
                                     April 1, 2014      March 26, 2013      Change
General and administrative expenses $     35,007       $       28,307         23.7 %
As a percentage of total revenues            5.8 %                5.0 %

The increase in general and administrative expenses as a percentage of total revenues for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily due to an increase in headcount to support ongoing operational initiatives.

Other (income) expense, net

Other (income) expense, net was $1.2 million of income, or 0.2 percent of total revenues, for the thirteen weeks ended April 1, 2014 compared to $2.4 million of income, or 0.4 percent of total revenues, for the thirteen weeks ended March 26, 2013. Other (income) expense, net for the thirteen weeks ended April 1, 2014 was comprised of immaterial items. Other (income) expense, net for the thirteen weeks ended March 26, 2013 was primarily comprised of a $2.2 million benefit from favorable resolution of legal and tax matters.


Income Taxes

The following table sets forth income taxes for the periods indicated (dollars
in thousands):

                         For the 13 Weeks Ended          Percentage
                    April 1, 2014      March 26, 2013      Change
Income taxes       $     25,199       $       30,306        (16.9 )%
Effective tax rate         37.3 %               38.6 %

The decrease in the effective tax rate for the thirteen weeks ended April 1, 2014 compared to the same period in fiscal 2013 was primarily driven by discrete tax benefits related to state income taxes recognized in the thirteen weeks . . .

  Add PNRA to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for PNRA - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.