<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
- - - - - - - - - - - - - -
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended April 17, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-19253
-----------
PANERA BREAD COMPANY
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2723701
------------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7930 BIG BEND BLVD, WEBSTER GROVES, MO 63119
---------------------------------------- --------
(Address of principal executive offices) (Zip code)
(314) 918-7779
--------------------------------------------------
(Registrant's telephone number, including area code)
Au Bon Pain Co., Inc.
19 Fid Kennedy Avenue, Boston, Ma 02210
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 and 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- --------
As of May 24, 1999, 10,584,065 shares and 1,557,658 shares of the
registrant's Class A and Class B Common Stock, respectively, $.0001 par value,
were outstanding.
<PAGE>
PANERA BREAD COMPANY
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS.................... 2
Consolidated Balance Sheets as of
April 17, 1999 and December 26, 1998.... 2
Consolidated Statements of Operations
for the sixteen weeks ended April 17,
1999 and April 18, 1998................. 3
Consolidated Statements of Cash Flows
for the sixteen weeks ended April 17,
1999 and April 18, 1998................. 4
Notes to Consolidated Financial
Statements.............................. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................. 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSUES
ABOUT MARKET RISK....................... 17
PART II. OTHER INFORMATION
- -------- -------------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS........................ 17
ITEM 5. OTHER INFORMATION....................... 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........ 27
</TABLE>
1
<PAGE>
Item 1. Financial Statements
PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 17, December 26,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 1,068,397 $ 1,860,445
Accounts receivable, net..................... 1,732,901 1,301,185
Inventories.................................. 1,628,507 1,662,573
Prepaid expenses............................. 486,745 1,780,922
Refundable income taxes...................... 98,483 115,297
Deferred income taxes........................ 1,500,000 1,500,000
------------ ------------
Total current assets..................... 6,515,033 8,220,422
------------ ------------
Property and equipment, less
accumulated depreciation and amortization.... 40,941,358 38,855,569
------------ ------------
Other assets:
Assets held for sale, net, non-current
(Note D)................................... 68,084,693 69,394,736
Notes receivable............................. -- 20,000
Intangible assets, net of accumulated
amortization............................... 19,462,870 19,786,858
Deferred financing costs..................... 575,009 768,232
Deposits and other........................... 4,348,294 4,138,219
Deferred income taxes........................ 12,434,099 12,434,099
------------ ------------
Total other assets....................... 104,904,965 106,542,144
------------ ------------
Total assets............................. $152,361,356 $153,618,135
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 3,542,400 $ 4,020,239
Liabilities held for sale, net (Note D)...... 3,503,322 6,469,618
Accrued expenses............................. 11,993,509 5,927,720
Current maturities of long term debt......... 64,642,220 40,800
------------ ------------
Total current liabilities................ 83,681,451 16,458,377
Long term debt, less current maturities........ -- 34,089,587
Convertible Subordinated Notes................. -- 30,000,000
------------ ------------
Total liabilities........................ 83,681,451 80,547,964
------------ ------------
Minority interest.............................. (364,487) (256,761)
Stockholders' equity:
Common stock, $.0001 par value:
Class A, shares authorized 50,000,000;
issued and outstanding 10,543,073 and
10,269,628 in 1999 and 1998, respectively... 1,057 1,047
Class B, shares authorized 2,000,000;
issued and outstanding 1,557,658 and
1,605,741 in 1999 and 1998, respectively.... 156 156
Additional paid-in capital.................... 70,374,704 70,031,945
Retained earnings............................. (1,331,525) 3,293,784
------------ ------------
Total stockholders' equity.............. 69,044,392 73,326,932
------------ ------------
Total liabilities and stockholders'
equity................................ $152,361,356 $153,618,135
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For The Sixteen Weeks Ended
-----------------------------
April 17, April 18,
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Restaurant sales....................... $73,411,116 $69,719,739
Franchise sales and other revenues..... 4,513,739 5,243,544
----------- -----------
77,924,855 74,963,283
Costs and expenses:
Cost of food and paper products........ 26,000,706 28,066,774
Restaurant operating expenses:
Labor............................ 21,978,028 19,437,842
Occupancy (Note E)............... 8,800,390 8,278,953
Other (Note E)................... 8,787,365 8,035,516
----------- -----------
39,565,783 35,752,311
Depreciation and amortization.......... 1,800,361 5,267,800
General and administrative expenses.... 6,888,261 5,474,491
Non-recurring charge (Note D).......... 5,545,000 1,210,000
----------- -----------
79,800,111 75,771,376
----------- -----------
Operating loss............................... (1,875,256) (808,093)
Interest expense, net........................ 1,883,750 2,126,741
Other expense, net........................... 403,596 137,565
Loss on sale of assets (Note F).............. -- 734,823
Minority interest............................ (11,293) 17,422
------------ -----------
Loss before Provision (benefit)
from income taxes.......................... (4,151,309) (3,824,644)
Income tax expense (benefit)................. 474,000 (863,000)
------------ -----------
Net loss..................................... $(4,625,309) $(2,961,644)
------------ -----------
------------ -----------
Net loss per common share - basic............ $ (0.38) $ (0.25)
------------ -----------
------------ -----------
Net loss per common share - diluted.......... $ (0.38) $ (0.25)
------------ -----------
------------ -----------
Weighted average number of common and common
equivalent shares outstanding - basic...... 12,102,821 11,839,546
------------ -----------
------------ -----------
Weighted average number of common and common
equivalent shares outstanding - diluted.... 12,102,821 11,839,546
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For The Sixteen Weeks Ended
--------------------------------
April 17, April 18,
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from operations:
Net loss..................................... $(4,625,309) $(2,961,644)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization............... 1,800,361 5,267,800
Amortization of deferred financing costs.... 199,342 242,408
Provision for losses on accounts receivable. 16,820 17,935
Minority interest........................... (11,293) 17,422
Loss on disposal of assets.................. -- 734,823
Non-recurring charge........................ 5,545,000 1,210,000
Changes in operating assets and liabilities:
Accounts receivable.......................... (4,761) 1,157,805
Inventories.................................. 69,803 723,344
Prepaid expenses............................. (1,850,209) (926,077)
Accounts payable............................. (1,744,973) (35,409)
Refundable income taxes...................... 16,814 --
Accrued expenses............................. 1,667,018 (2,302,454)
----------- -----------
Net cash provided by operating activities.. 1,078,613 3,145,953
----------- -----------
Cash flows from investing activities:
Additions to property and equipment.......... (5,196,005) (4,351,295)
Proceeds from sale of assets................. -- 12,693,917
Change in cash included in net current
Liabilities held for sale.................. (224,213) --
Payments received on notes receivable........ 100,540 78,767
Increase in intangible assets................ (44,750) (59,197)
Decrease (increase) in deposits and other.... 2,651,159 (2,240,253)
----------- -----------
Net cash provided by (used in) investing
Investing activities...................... (2,713,269) 6,121,939
----------- -----------
Cash flows from financing activities:
Exercise of employee stock options........... -- 388,208
Proceeds from long term debt issuance........ 32,101,195 29,536,195
Principal payments on long term debt......... (31,498,800) (38,888,100)
Proceeds from issuance of common stock....... 342,765 134,343
Deferred financing costs..................... (6,119) (421,110)
Decrease in minority interest................ (96,433) (84,036)
----------- -----------
Net cash provided by (used in)financing
Financing activities..................... 842,608 (9,334,500)
----------- -----------
Net decrease in cash and cash equivalents...... (792,048) (66,608)
----------- -----------
Cash and cash equivalents, at beginning of
period....................................... 1,860,445 853,025
----------- -----------
Cash and cash equivalents, at end of period.... $ 1,068,397 $ 786,417
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
Notes to Consolidated Financial Statements
Note A - Basis of Presentation
The accompanying unaudited, consolidated financial statements of Panera
Bread Company and Subsidiaries (the "Company") have been prepared in accordance
with instructions to Form 10-Q and, therefore, do not include all information
and footnotes normally included in financial statements prepared in conformity
with generally accepted accounting principles. They should be read in
conjunction with the financial statements of the Company for the fiscal year
ended December 26, 1998.
The accompanying financial statements are unaudited and include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial position
and results of operations for the interim periods, and are not necessarily
indicative of the results that may be expected for the entire year.
Note B - Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
For The Sixteen Weeks Ended
-------------------------------
April 17, April 18,
1999 1998
<S> <C> <C>
Net loss used in net loss per
common share - basic.............. $(4,625,309) $(2,961,644)
Net loss used in net loss per
common share - diluted............. $(4,625,309) $(2,961,644)
Weighted average number of shares
outstanding - basic................ 12,102,821 11,839,546
Effect of dilutive securities:
Employee stock options......... -- --
Stock warrants................. -- --
----------- -----------
Weighted average number of shares
outstanding - diluted.............. 12,102,821 11,839,546
Net loss per common share - basic.... $ (0.38) $ (0.25)
Net loss per common share - diluted.. $ (0.38) $ (0.25)
</TABLE>
During the first quarter of 1998 and 1999, options to purchase
1,176,000 shares of common stock at $25.50 per share were outstanding in
conjunction with the issuance of $30 million of convertible subordinated
notes. These shares were not included in the computation of diluted earnings
per share for the sixteen weeks ended April 17, 1999 and the sixteen weeks
ended April 18, 1998 because the addition of interest expense, after the
effect of income taxes, of $855,000 to net income (loss) would have been
antidilutive.
5
<PAGE>
During the first quarter of 1998 and the first quarter of 1999,
options to purchase 422,080 and 248,450 shares of common stock at an average
price of $8.06 and $6.06 per share, respectively, and warrants to purchase
96,000 shares of common stock at $5.62 per share were outstanding but were
not included in the computation of diluted earnings per share for the sixteen
weeks ended April 17, 1999 or the sixteen weeks ended April 18, 1998, because
the effect would have been antidilutive.
Note C - Recent Accounting Pronouncements
None
Note D - Sale of Au Bon Pain Division and Non-recurring charges
The Company, together with its wholly-owned subsidiary ABP Holdings,
Inc. ("ABPH") entered into a Stock Purchase Agreement dated August 12, 1998
and amended on October 28, 1998 with ABP Corporation (the "Buyer"), an
affiliate of Bruckmann, Rosser, Sherrill & Co., L.P., relative to the
transfer of substantially all of the assets and liabilities of the Au Bon
Pain Division business (the "Au Bon Pain Division") and sale of all of the
outstanding capital stock of ABPH to the Buyer, whereby the Buyer would
become the owner of the Au Bon Pain Division (the "Sale"). The Sale was
effective May 16, 1999 for $73 million in cash before contractual purchase
price adjustments estimated to be $1 million. The Company, which now consists
of the Panera Bread/Saint Louis Bread Co. Business Unit only, has been
renamed Panera Bread Company. The proceeds from the sale are being used to
pay off all outstanding debt and provide cash for growth. In conjunction with
the sale, the Company recorded a non-cash, after-tax loss in the first
quarter of approximately $5.5 million.
Operating income in the first quarter of 1999 was favorably impacted by
$3.8 million due to the suspension of depreciation and amortization associated
with the Au Bon Pain Division assets held for sale after August 12, 1998.
The Company intends to repay all of its outstanding debt with the
proceeds from the Sale. As a result of the completion of the Sale, all
outstanding debt as of April 17, 1999 has been included in current
liabilities. The Company expects to record an extraordinary charge of
approximately $0.6 million associated with the early retirement of
outstanding debt in the second quarter of 1999.
6
<PAGE>
The assets and liabilities of the Au Bon Pain Division are depicted in
the balance sheet as of April 17, 1999 and December 26, 1998 as assets held for
re-sale, non-current, net, and as current liabilities, net, and include the
following.
<TABLE>
<CAPTION>
April 17, 1999 December 26, 1998
-------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,528,885 $ 1,304,672
Accounts Receivable 5,140,314 5,584,089
Inventories 4,975,107 5,010,844
Other current assets 846,425 (97,731)
------------ -----------
Total current assets 12,490,731 11,801,874
Current liabilities:
Accounts payable 5,852,878 7,120,012
Accrued expenses 10,097,475 11,151,480
Current Portion -
Long term debt 43,700 --
------------- -----------
Total liabilities 15,994,053 18,271,492
Net current liabilities $ 3,503,322 $ 6,469,618
------------- -----------
------------- -----------
Non-current assets:
Property and equipment
Leasehold improvements $ 71,690,246 $71,679,045
Machinery and equipment 54,416,223 53,920,124
Furniture and fixtures 13,649,858 13,716,387
Other 4,079,123 3,505,945
Accumulated depreciation and
Amortization (82,680,694) (83,280,735)
------------ ------------
Property and equipment, net 61,154,756 59,540,766
Other assets:
Goodwill (Franchise) 64,603 --
Notes receivable 4,016,645 4,097,185
Deposits and other 2,895,551 5,756,785
----------- -----------
Total other assets 6,976,799 9,853,970
Non-current liabilities:
Long term debt 46,862 --
----------- -----------
Net non-current assets $68,084,693 $69,394,736
------------- -----------
------------- -----------
</TABLE>
Revenues and net operating income (before the suspension of
depreciation and amortization) in the Au Bon Pain Division held for sale as
of April 17, 1999 were $48.6 million and $1.3 million, respectively.
Note E - Restatement of prior periods
Results of operations for the sixteen weeks ended April 18, 1998
have been restated with respect to certain restaurant operating expenses,
principally rent, between interim periods. These expenses will now be
recognized on a weekly basis during interim reporting periods. Previously
three months of these expenses were recorded in each of the Company's
quarterly external reporting periods. Since the first quarterly reporting
period consists of sixteen weeks, this change resulted in the recognition of
an additional $1,533,000 of restaurant operating expense for the period ended
April 18, 1998. The second, third and fourth quarters of 1998 will also be
restated to reflect a reduction of restaurant operating expense of $605,000,
$665,000 and $263,000, respectively. Results for the full fiscal 1998 year
7
<PAGE>
remain unchanged. Depicted in the table below are
the reported and restated quarterly results.
<TABLE>
<CAPTION>
Quarter Ending
--------------------------------------- Ficsal Year
04/18/98 07/11/98 10/03/98 12/26/98 1998
----
<S> <C> <C> <C> <C> <C>
AS REPORTED
Net Income $(1,950) $(779) $(18,198) $433 $(20,494)
Basic earnings per share (0.16) (0.07) (1.52) 0.03 (1.72)
Diluted earnings per share (0.16) (0.07) (1.52) 0.03 (1.72)
RESTATED
Net Income $(2,962) $(380) $(17,759) $607 $(20,494)
Basic earnings per share (0.25) (0.03) (1.49) 0.05 (1.72)
Diluted earnings per share (0.25) (0.03) (1.49) 0.05 (1.72)
</TABLE>
Note F - Loss on sale of assets
On March 23, 1998 the Company sold the Mexico, MO production facility
and its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash, and recognized a pre-tax loss of $734,023.
8
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total
revenues of certain items included in the Company's consolidated statements of
operations for the periods indicated:
<TABLE>
<CAPTION>
For The Sixteen Weeks Ended
------------------------------------
April 17, April 18,
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Restaurant sales.................... 94.2% 93.0%
Franchise sales and other revenues.. 5.8 7.0
------ -----
100.0% 100.0%
Costs and expenses:
Cost of food and paper products..... 33.3% 37.4%
Restaurant operating expenses....... 50.8 47.8
Depreciation and amortization....... 2.3 7.0
General and administrative.......... 8.8 7.3
Non-recurring charge................ 7.1 1.6
----- -----
102.3 101.1
-----
Operating margin...................... (2.3) (1.1)
Interest expense, net................. 2.5 2.8
Other expense, net.................... 0.5 0.2
Loss on sale of assets................ -- 1.0
Minority interest..................... -- 0.0
----- -----
Income (loss) before provision for
income taxes........................ (5.3) (5.1)
Provision (benefit) for income taxes.. 0.6 (1.1)
----- ------
Net income (loss)..................... (5.9)% (4.0)%
----- ------
----- ------
</TABLE>
General
The Company's revenues are derived from restaurant sales and franchise
sales and other revenues. Franchise sales and other revenues include sales of
frozen dough products to franchisees and others, royalty income and franchise
fees. Certain expenses (cost of food and paper products, restaurant operating
expenses, and depreciation and amortization) relate primarily to restaurant
sales, while general and administrative expenses relate to all areas of revenue
generation.
The Company's fiscal year ends on the last Saturday in December. The
Company's fiscal year normally consists of 13 four-week periods, with the first,
second and third quarters ending 16 weeks, 28 weeks and 40 weeks, respectively,
into the fiscal year.
9
<PAGE>
Results of Operations
Effective May 16, 1999, the Company completed its transaction to sell
the Au Bon Pain Division. For the sixteen weeks ended April 17, 1999 the Company
has recorded a loss on sale of $5.5 million related to the transaction.
Results of operations in the first quarter of 1999 include the results of the
subsequently divested Au Bon Pain business unit.
Total revenues in the first quarter of 1999 totaled $77.9 million,
versus $75.0 million in the comparable quarter of 1998. Revenues in the
Panera Bread business unit increased 27% to $29.4 million in the first
quarter of 1999. Restaurant sales in the Panera Bread business unit increased
20% to $26.3 million in the first quarter of 1999 from $21.9 million in the
first quarter of 1998, principally due to the opening of 13 new
Company-operated bakery cafes since the first quarter of 1998. Panera Bread's
comparable restaurant sales in the first quarter of 1999 were essentially
flat at 0.1% versus the comparable quarter of 1998, which was 6.5%. Franchise
sales and other revenues for the Panera Bread business unit increased 174% to
$3.0 million in the first quarter of 1999 from $1.1 million in the first
quarter of 1998, primarily driven by increased franchise royalties, which
grew 185% to 1.0 million in the first quarter of 1999, increased franchise
fees and an increase in product sales to franchisees.
Total operating income for the Company in the first quarter of 1999
versus the comparable quarter of the previous year (excluding the
non-recurring charges taken in both the 1998 and 1999 quarters) increased to
$3.7 million in 1999 from $0.4 million in 1998, including $3.8 million in
reduced depreciation and amortization expense associated with the Au Bon Pain
business unit assets held for sale. Operating income in the Panera Bread
Division in the first quarter of 1999 was $0.7 million, on a "stand-alone"
pro-forma basis which includes an additional allocation for overhead services
provided by Au Bon Pain Co., Inc.
During the first quarter of 1999, 1 Panera Bread franchise area
development agreement was signed, representing commitments for the development
of 15 bakery cafes and increasing the number of franchise commitments to a total
of 546 remaining bakery cafes to be developed. In the first quarter of 1999, 20
Panera Bread bakery cafes were opened, including 4 company-owned cafes and 16
franchise-operated cafes.
Net Income
A one-time $5,545,000 after-tax charge related to the previously
announced sale of the Au Bon Pain Division contributed to a net loss in the
first quarter of 1999 of $4,625,000 versus a net loss of $2,962,000 in the
comparable 1998 period. Interest expense was down at $1,884,000 compared to
$2,127,000 in the first quarter of 1998,
10
<PAGE>
with other expense of $404,000 at April 17, 1999 compared to $138,000 at April
16, 1998.
Liquidity and Capital Resources
Subsequent to the end of the first quarter of 1999, the Company
divested itself of the Au Bon Pain business unit. The Company is in the process
of repaying all of its outstanding debt with the proceeds from the Sale (see
Note D). In connection with the early retirement of debt, in the second quarter
of 1999 the Company will record an extraordinary non-cash charge of
approximately $579,000.
The Company's principal requirements for cash are capital expenditures
for constructing and equipping new bakery cafes and maintaining or remodeling
existing bakery cafes and working capital. To date, the Company has met its
requirements for capital with cash from operations, proceeds from the sale of
equity and debt securities and bank borrowings.
Cash and cash equivalents were $1,068,000 at April 17, 1999 after a
reduction of $1,529,000 for the assets held for sale, versus $786,000 at April
18, 1998. Funds provided by operating activities were primarily the result of an
increase in accrued expenses and a decrease in deposits offset by a decrease in
accounts payable. In the first quarter of 1998 cash was generated by a sale of
assets.
Total capital expenditures for the sixteen weeks ended April 17, 1999
of $5.2 million were related primarily to the opening of 4 new Company-operated
Panera Bread bakery cafes, and to maintaining or remodeling existing bakery
cafes. Total capital expenditures in the quarter included $1.5 million
associated with the recently divested Au Bon Pain business unit. The
expenditures were mainly funded by net cash from operating activities and the
use of the Company's revolving line of credit. Total capital expenditures for
the sixteen weeks ended April 18, 1998 were $4.4 million.
On March 23, 1998 the Company sold its Mexico, MO production facility
and its wholesale frozen dough business to Bunge Foods Corporation ("Bunge") for
approximately $13 million in cash. The net proceeds of the sale were used to
repay the $7.9 million outstanding for the Industrial Revenue Bond and to reduce
amounts outstanding under the revolving credit line. There were no gains or
losses associated with the early retirement of the Industrial Revenue Bond or
the partial repayment of the revolving credit line.
As of April 17, 1999 the Company had a $22.0 million unsecured
revolving line of credit, bearing interest at either the commercial bank's prime
rate plus .25% or LIBOR plus 2.75%, at the Company's option. As of April 17,
1999, $17.9 million was outstanding under the line of credit and an additional
$1.1 million of the remaining availability was utilized by outstanding letters
of credit issued by the bank on behalf of the Company. Concurrently with the
sale of
11
<PAGE>
the Au Bon Pain business unit effective May 16,1999, the Company amended its
existing credit facility to reduce the unsecured revolving line of credit to
$10.0 million, reflecting reduced needs for debt financing. Amounts
outstanding under the amended facility bear interest at either LIBOR plus
2.25% or the commercial bank's prime rate plus .75%, at the Company's option.
Excluding the expenditures related to the divested Au Bon Pain business
unit, the Company currently anticipates spending approximately $14 million in
1999, principally for the opening of new Panera Bread Company bakery cafes and
maintaining or remodeling existing cafes. The Company expects to fund these
expenditures principally through internally generated cash flow and cash
remaining from the sale of the Au Bon Pain business unit after repayment of all
outstanding debt.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
Matters discussed in this report which relate to events or developments
that are expected to occur in the future, including any discussion of growth or
anticipated operating results are forward-looking statements within the meaning
of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. (identified by the words "estimate," "project,"
"anticipates," "expects," "intends," "future," and similar expressions). These
are statements which express management's belief, expectations or intentions
regarding the Company's future performance. Moreover, a number of factors could
cause the Company's actual results to differ materially from those set forth in
the forward-looking statements due to known and unknown risks and uncertainties.
The following are some of the factors: The ability of the Company to
aggressively expand its business going forward is subject to the availability of
sufficient capital to it and the developers party to franchise development
agreements with the Company. Additionally, the Company's operating results may
be affected by many factors, including but not limited to variations in the
number and timing of bakery cafe openings and public acceptance of new bakery
cafes, competition, commodity costs and other factors that may affect retailers
in general. The foregoing list of important factors in not exclusive.
Year 2000 Issue
The "Year 2000 Issue" is the result of manufactured equipment and
computer programs using two digits rather than four to define the applicable
year. If the Company's equipment and computer programs with date-sensitive
functions are not Year 2000 compliant, they may recognize a date using "00" as
the Year 1900 rather than the Year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, but not limited
to, a temporary inability to process transactions, generate invoices or engage
in similar normal business practices.
12
<PAGE>
During 1997, the Company formed an ongoing internal review team to
address the Year 2000 Issue that encompasses operating and administrative
areas of the Company. Internal information technology professionals are
working to identify and resolve all significant Year 2000 issues in a timely
and effective manner. The Company's executive management monitors the status
of the Year 2000 remediation plans, including an assessment of issues and
development of said remediation plans, where necessary, as they relate to
internally used software, computer hardware and use of computer applications.
The Company has completed a comprehensive inventory of all systems in the
cafes, commissaries and corporate offices and has notified critical vendors
of the Company's requirements pertaining to the Year 2000 Issue.
The Company has completed its assessment of the Year 2000 impact for
both information technology ("IT") and Non-IT systems. In regard to IT
systems, the Company has identified the following as the main areas of Year
2000 focus: payroll systems, financial systems, network/integration systems,
register and store management systems and commissary systems.
Network/integration systems are corporate office electronic systems and tools
which link various information subsystems and databases, encompassing e-mail
and all major financial systems, such as general ledger database systems, and
all major operational systems, such as store operating performance database
systems. Register systems are the point-of-sale systems used within each
retail bakery cafe. These are electronically linked with the personal
computer-based store back office management systems also located within each
retail bakery cafe, providing tools for the cafe management. Commissary
systems allow commissaries to accept electronic orders from cafe's and
deliver the ordered product back to the cafes.
The cost of addressing the year 2000 issues are included in the
overall costs of establishing an independent computer network for Panera
Bread. The total cost of establishing the new system is estimated to be
approximately $1.7 million of which approximately $350,000 is specifically
related to the year 2000 issue.
In addition to the above IT systems, the Company has identified the
following as the primary Non-IT systems subject to the Year 2000 Issue: ovens,
alarms, proofers, HVAC-freezers, and safes. The Company is currently in contact
with vendors and/or landlords in order to assess the potential impact. Based on
initial review the Company believes the potential impact of the Year 2000 Issue
pertaining to Non-IT systems to be minor. Upon full assessment of the impact of
the Year 2000 Issue, the Company will address, in order of criticality, the
potential issues, and will develop remediation and contingency plans.
While the Company believes it is taking all appropriate steps to assure
Year 2000 compliance, it is dependent on key business partner and/or vendor
compliance to some extent. The Year 2000 Issue is pervasive and complex as
virtually every computer operation will be affected in some way. If, due to
unforeseen circumstances, the implementation is not completed on a timely basis,
or key business partners and/or vendors fail to resolve all significant
13
<PAGE>
Year 2000 issues in a timely and effective manner, the Year 2000 Issue could
have a material adverse impact on the Company. In addition to the estimated
costs outlined above, the Company has estimated the costs for adopting all
"worst case" contingency plans to be an additional $320,000.
The following chart depicts the phases, status, timetable, estimated
cost of completion, contingency plans and risks, and estimated cost of
implementing contingency plans pertaining to Year 2000 issues associated with
IT systems. The most reasonably likely worst case scenarios are outlined
under the columns "Contingency Plan/Risks" and "Estimated Contingency Cost".
All information pertaining directly to the Au Bon Pain Division has been
removed from this chart, leaving a Panera Bread Company only, year 2000
summary.
14
<PAGE>
PANERA BREAD
YEAR 2000 SUMMARY FOR IT SYSTEMS
<TABLE>
<CAPTION>
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
AREA/SYSTEM PHASES STATUS TIMETABLE ESTIMATED CONTINGENCY PLAN/RISKS ESTIMATED
COST CONTINGENCY
COST
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
New Financial -Purchase of Integrated Complete 4/99 $800,000 Additional consulting $100,000
Systems - GL, AP, AR, Assets, HR, effort needed.
Cash, Property Application certified
Management and to be Y2K.
Purchasing
In Process 6/99
-Implementation Planning Dependent upon ABP
making minor
-Conversion & Scheduled 7/99 modifications to
Interface Programming Secvices Production processes to
allow capture of data
8/99 through 11/99
-Testing/Parallel After conversion
9/99
-Production After Parallel
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
Payroll- -Contract Negotiations Complete 5/99 $100,000
Outsource
-Conversion of Panera In Process 8/99 $20,000
active employees
-Production In conjunction 9/99 $5,000
with new financial
system
-Copy ABP & Panera No plans to 10/99 May have to provide a $20,000
inactive personnel from convert, but way to maintain
ABP system for direct will create addresses
input to W2 processing 1999 W2s
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
Network Systems & -Network Infrastructure Complete 4/99 $350,000 No contingency needed
Computer Facility Design as all hardware &
software is new & Y2K
-Network In Process 6/99 compliant
Implementation out
for bid
In Process 6/99
-Computer Room
constructed
Bids received 6/99
-Network Bid Assigned
Bid assigned 6/99
-Network Install
-Voice Mail Replacement In Process 7/99
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
Register Systems -Micros 2400 registers Complete 3/99 $0 No contingency needed
and software tested as application
for compliancy certified by Micros &
tested to be compliant
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
AREA/SYSTEM PHASES STATUS TIMETABLE ESTIMATED CONTINGENCY PLAN/RISKS ESTIMATED
COST CONTINGENCY
COST
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Register Systems Processes being In process 8/99 $50,000 Contingency not
Central Support modified for ease of required - application
support for is compliant, if
multimarket pricing & modifications are not
new product rollout complete is more manual
effort.
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
Bakery Back -Inventory of Complete 5/99 $300,000 -Development Costs $150,000
Office Systems Applications & Hardware exceed estimates or not
completed on schedule.
-Design New BOH Would need to hire
register applications In Process 6/99 rollout experts to
compress rollout time
-Development -
7/99
-Lab Test
8/99
-Pilot
9/99
- Rollout
10/99
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
Commissary Systems New Application & In Process 6/99 $40,000 Implementation $50,000
hardware to replace DOS postponed requiring
based solution with addition rollout help
customization.
Testing In Process 7/99
Pilot After Testing 8/99
Rollout - in phase with Upon Production 10/99
BOH for integration of Application
- ------------------- ------------------------- ----------------- ------------- ------------- ------------------------- --------------
</TABLE>
16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
The Company's unsecured revolving line of credit bears an interest
rate using the commercial bank's prime rate or LIBOR as the basis, and is
therefore subject to additional expense should there be an increase in
interest rates.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held a Special Meeting of Stockholders on March 4, 1999 to
consider and vote upon the following matter (the "Proposal"):
To consider the approval of: (1) the terms and conditions of
the Stock Purchase Agreement, as amended and supplemented, by and among the
Company, ABP Holdings, Inc., a Delaware corporation and wholly owned subsidiary
of the Company and ABP Corporation, a Delaware Corporation and an affiliate of
Bruckmann, Rosser, Sherrill and Co., L.P.; and (2) the amendment to the
Company's Certificate of Incorporation to change the name of the Company to
Panera Bread Company.
With respect to the Proposal, 11,251,364 votes were cast for the
Proposal, 39,163 votes were cast against the Proposal, and there were 18,256
abstentions on the Proposal. Accordingly, the Proposal was approved.
Item 5. Other Information
Pursuant to the terms of the Stock Purchase Agreement dated August
12, 1998 between Panera Bread Company (f/k/a/ Au bon Pain Co., Inc.) the
"Company", ABP Holdings, Inc., a Delaware corporation and wholly owned
subsidiary of the Company ("ABPH"), and ABP Corporation, a Delaware
corporation controlled by Bruckmann, Rosser, Sherrill & Co., Inc., a private
equity investment firm based in New York (the "Buyer"), as amended by
Amendment dated October 28, 1998 (the "Agreement"), effective May 16, 1999
the Company (a) transferred to ABPH and its wholly owned subsidiary ABP
Equipment Company substantially all of the operating assets, store leases,
contracts and liabilities associated with the Company's bakery cafe food
service and franchise business concept generally known as Au Bon Pain (the
"Au Bon Pain Division"), (b) caused the merger of ABP Equipment Company with
and into ABPH, with ABPH being the surviving corporation and (c) sold all of
the capital stock of ABPH to the Buyer, whereby the Buyer became the owner of
the Au Bon Pain Division (the "Sale"). The Company received cash payment
equal to $73,000,000 subject to certain price adjustments estimated to be
$1,000,000 in connection with the Sale. The description of the Agreement
contained herein is qualified in its entirety by reference to (a) the
Agreement and certain letter agreements with respect to the Sale, attached as
Exhibits 2, 10.1 and 10.2, respectively, to the Company's Form 8-K filed
August 21, 1998 and incorporated herein by reference and (b) the October 28,
1998 Amendment, attached as Exhibit 2 to the Company's Form 8-K filed
November 6, 1998 and incorporated by reference herein.
17
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 26, 1998
SIXTEEN WEEKS ENDED APRIL 17, 1999
The Company, together with its wholly-owned subsidiary ABP Holdings,
Inc. ("ABPH") entered into a Stock Purchase Agreement dated August 12, 1998 and
amended on October 28, 1998 with ABP Corporation (the "Buyer"), an affiliate of
Bruckmann, Rosser, Sherrill & Co., L.P., relative to the transfer of
substantially all of the assets and liabilities of the Au Bon Pain Division
business (the "Au Bon Pain Division") and sale of all of the outstanding capital
stock of ABPH to the Buyer, whereby the Buyer would become the owner of the Au
Bon Pain Division (the "Sale"). The Sale was completed on May 16, 1999 for $73
million in cash before contractual purchase price adjustments estimated to be $1
million. The Company, which now consists of the Panera Bread/Saint Louis Bread
Co. Business Unit only, has been renamed Panera Bread Company.
The unaudited pro forma balance sheet presents the pro forma financial
position of the Company and is derived from the balance sheet of the Company as
of April 17, 1999. The unaudited pro forma consolidated statements of operations
are derived from the consolidated statements of operations of the Company for
the fiscal year ended December 26, 1998 and for the 16 weeks ended April 17,
1999 and exclude a one-time charge for the sale of the Company's Mexico,
Missouri manufacturing facility and charges recorded on the sale of the ABP
Division and should be read in conjunction with the Company's audited historical
financial statements and notes thereto as of December 26, 1998 and its unaudited
historical financial statements and notes thereto as of April 17, 1999 as filed
with the Securities and Exchange Commission in its Form 10-K and in this Form
10-Q, respectively.
In the opinion of the Company's management, all adjustments necessary
to present fairly such unaudited pro forma financial statements have been made
based on the terms and structure of the sale of the ABP Division and the sale of
the Mexico, Missouri manufacturing facility.
The unaudited pro forma consolidated financial statements are presented
for illustrative purposes only and are not necessarily indicative of the actual
results that would have occurred had the transaction taken place at the earliest
period presented, nor do they purport to indicate the results of future
operations or financial position of the company.
Matters discussed in this unaudited consolidated financial information,
including any discussion of or impact, expressed or implied, on the Company's
anticipated operating results and future earnings per share contain
forward-looking statements that involve risks and uncertainties. The Company's
results may differ significantly from the results indicated by such
forward-looking statements.
18
<PAGE>
PANERA BREAD COMPANY
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET (a)
(IN THOUSANDS)
APRIL 17, 1999
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,069 $ 2,198 (b) $ 3,267
Accounts receivable 1,733 -- 1,733
Inventories 1,628 -- 1,628
Prepaid expenses 487 -- 487
Refundable income taxes 98 -- 98
Deferred income taxes 1,500 -- 1,500
-------- -------- --------
Total current assets 6,515 2,198 8,713
Property and equipment, less accumulated
depreciation and amortization 40,941 -- 40,941
Other assets:
Assets held for sale, net, non-current 68,085 (68,085) --
Intangible assets, net of accumulated
amortization 19,463 -- 19,463
Deferred financing costs 575 (575)(c) -
Deposits and other 4,349 -- 4,349
Deferred income taxes 12,434 -- 12,434
-------- -------- --------
Total other assets 104,906 (68,660) 36,246
-------- -------- --------
Total assets $152,362 $(66,462) $ 85,900
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,542 $ -- $ 3,542
Liabilities held for sale, net 3,503 (3,503) --
Accrued expenses 11,995 1,318 (d) 13,313
Current maturities of long term debt 64,642 (64,642)(e) --
-------- --------- --------
Total current liabilities 83,682 (66,827) 16,855
Long term debt, less current maturities -- -- --
Convertible Subordinated Notes -- -- --
-------- -------- --------
Total liabilities 83,682 (66,827) 16,855
Minority interest (365) 365 (c) --
Stockholders' equity:
Preferred stock, $.0001 par value:
Class B, shares authorized 2,000,000;
issued and outstanding none in 1998
and 1997, respectively -- -- --
Common stock, $.0001 par value:
Class A, shares authorized 50,000,000;
issued and outstanding 10,410,421 and
10,144,840 in 1998 and 1997, respectively 1 -- 1
Class B, shares authorized 2,000,000; issued
and outstanding 1,557,658 and 1,572,907 in
1998 and 1997, respectively -- -- --
Additional paid-in capital 70,375 -- 70,375
Retained earnings (1,331) -- (1,331)
-------- -------- -------
Total stockholders' equity 69,045 -- 69,045
-------- -------- -------
Total liabilities and stockholders'
equity $153,362 $(66,462) $85,900
-------- -------- -------
-------- -------- -------
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) See the introductory paragraphs under "Unaudited Pro Forma Financial
Information": The unaudited pro forma balance sheet includes the
balance sheet of the Company as of April 17, 1999 and was prepared as
if the transaction had occurred at the end of the respective date.
(b) To record the net cash proceeds from the sale of the Au Bon Pain
Division. The pro-forma cash and cash equivalents as of April 17, 1999
is based on the net proceeds of the sale transaction and the debt
outstanding at April 17, 1999. The Company has repaid its outstanding
debt (other than the Convertible Subordinated Notes) with the proceeds
from the Sale and intends to repay the Convertible Subordinated Notes
within approximately 30 days of the Sale, which was effective May 16,
1999.
(c) To eliminate deferred financing costs pertaining to the debt
extinquished and to eliminate minority interest related to the Au Bon
Pain Division..
(d) To eliminate Au Bon Pain Division Assets and Liabilities and to accrue
for expenses related to the sale of the Au Bon Pain Division.
(e) To record the retirement of debt from proceeds on the sale of the Au
Bon Pain Division. The Company has repaid its outstanding debt (other
than the Convertible Subordinated Notes) with the proceeds from the
Sale and intends to repay the Convertible Subordinated Notes within
approximately 30 days of the Sale, which was effective May 16, 1999.
20
<PAGE>
PANERA BREAD COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
SIXTEEN WEEKS ENDED APRIL 17, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical (1) Adjustments (1) April 17, 1999
-------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Restaurant sales $ 73,411 $(47,096)(a) $ 26,315
Franchise sales & other revenues 4,514 (1,466)(b) 3,048
-------- -------- --------
77,925 (48,562) 29,363
Costs & expenses:
Cost of food & paper products 26,001 (15,480)(c) 10,521
Restaurant operating expenses:
Labor 21,978 (14,246)(d) 7,732
Occupancy 8,800 (6,677)(d) 2,123
Other 8,788 (5,495)(d) 3,293
-------- -------- --------
39,566 (26,418) 13,148
Depreciation & amortization 1,800 -- 1,800
General & administrative 6,888 (3,879)(f) 3,009
Non-recurring charges 5,545 (5,545)(g) --
-------- -------- --------
79,800 (51,322) 28,478
Operating income (1,875) 2,760 885
Interest (income) expense, net 1,884 (1,884)(h) --
Other (income) expense, net 403 (403)(i) --
Minority interest (11) 11 (j) --
-------- -------- --------
Net income (loss) before provision
(benefit) for income taxes (4,151) 5,036 885
Provision (benefit) for income taxes 474 (224)(k) 250
-------- ------- --------
Net income (loss) $ (4,625) $ 5,260 $ 635
-------- ------- --------
-------- ------- --------
Net income (loss)per common share - basic $ (0.38) $ -- $ 0.05
-------- ------- --------
-------- ------- --------
Net income (loss)per common share - diluted $ (0.38) $ -- $ 0.05
-------- ------- --------
-------- ------- --------
Weighted average number of shares
outstanding - basic 12,103 -- 12,103
-------- ------- --------
-------- ------- --------
Weighted average number of shares
outstanding - diluted 12,103 -- 12,119
-------- ------- --------
-------- ------- --------
EBITDA $ 5,171 $ (2,486) $ 2,685
-------- ------- --------
-------- ------- --------
</TABLE>
(1) Results of operations for the sixteen weeks ended April 17, 1999 include a
one time non-cash, non-recurring charge of $5.5 million related to the Sale of
the Au Bon Pain Division.
21
<PAGE>
PANERA BREAD COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER 26, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical (1) Adjustments (2) December 26, 1998 (2)
-------------- --------------- ---------------------
<S> <C> <C> <C>
Revenues:
Restaurant sales $ 237,102 $ (159,637) (a) $ 77,465
Franchise sales & other -- -- --
revenues 12,558 (7,089) (b) 5,469
----------- ------------ --------------
249,660 (166,726) 82,934
Costs & expenses:
Cost of food & paper
products 87,240 (58,095) (c) 29,145
Restaurant operating
expenses:
Labor 67,218 (45,790) (d) 21,428
Occupancy 28,016 (22,317) (d) 5,699
Other 27,826 (18,768) (d) 9,058
----------- ------------ --------------
123,060 (86,875) 36,185
Depreciation & amortization 12,667 (7,670) (e) 4,997
General & administrative 18,769 (10,115) (f) 8,654
Non-recurring charges 26,236 (26,236) (g) --
----------- ------------ --------------
267,972 (188,991) 78,981
Operating income (loss) (18,312) 22,265 3,953
Interest (income) expense, net 6,396 (6,396) (h) --
Other (income) expense, net 1,445 (1,445) (i) --
Minority interest (127) 127 (j) --
------------ --------------- --------------
Net income (loss) before
provision (benefit) for
income taxes (26,026) 29,979 3,953
Provision (benefit) for
income taxes (5,532) 6,775 (k) 1,243
------------ ----------- --------------
Net income (loss) $ (20,494) $ 23,204 $ 2,710
------------ ----------- --------------
------------ ----------- --------------
Net income (loss)
per common share - basic $ (1.72) $ -- $ 0.23
------------ ----------- --------------
------------ ----------- --------------
Net income (loss)
per common share - diluted $ (1.72) $ -- $ 0.22
------------ ----------- --------------
------------ ----------- --------------
Weighted average number of
shares outstanding - basic 11,943 -- 11,943
------------ ----------- --------------
------------ ----------- --------------
Weighted average number of
shares outstanding - diluted 11,943 -- 12,240
------------ ----------- --------------
------------ ----------- --------------
EBITDA (l) $ 21,053 $ (12,103) $ 8,950
------------ ----------- --------------
------------ ----------- --------------
</TABLE>
(1) During fiscal year 1998, results of operations include non-recurring pre-tax
charges $27.0. These charges were principally related to the closing of certain
under-performing Au Bon Pain Division restaurants and to account for the
impairment of long-lived assets to be disposed of. In addition, during the
fiscal year ended 1998, results of operations include a non-cash pre-tax loss of
$734,000 related to the sale of the Company's
22
<PAGE>
production facility in Mexico, MO, and a $24.2 million charge recorded in
connection with the Sale, principally to reflect a write-down under Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for the Long-Lived Assets to be Disposed of" ("SFAS 121").
(2) The pro forma Consolidated Statement of Operations does not present pro
forma results of operations based on the manufacturing supply agreement with
Bunge Foods Corp. prior to the execution of the agreement on March 23, 1998.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year Ended 16 Weeks Ended
12/26/98 4/17/99
-------- -------
<S> <C> <C>
(a) To eliminate Au Bon Pain Division
restaurant sales $ (159,637) $ (47,096)
(b) To eliminate wholesale and Au Bon Pan
Division manufacturing sales, and to
Eliminate Au Bon Pain Division franchise
royalties, store opening fees, area
development fees and other revenues
Au Bon Pain Division royalties, store
Opening fees, area development fees
and other revenues (4,207) (1,069)
Wholesale and Au Bon Pain
Division manufacturing sales (2,882) (397)
---------- ---------
(7,089) (1,466)
(c) To eliminate cost of goods sold related
to the Au Bon Division and wholesale sales (58,095) (15,480)
(d) To eliminate Au Bon Pain Division restaurant
operating expenses
Labor (45,790) (14,246)
Occupancy (22,317) (6,677)
Other (18,768) (5,495)
----------- ---------
(86,875) (26,418)
(e) To eliminate depreciation and amortization
Associated with the Au Bon Pain Division
and wholesale (7,670) --
(f) To eliminate Au Bon Pain Division general and
administrative expenses
leaving pro forma Saint Louis Bread Co. Division corporate
Overhead expenses on a stand alone basis (10,115) (3,879)
(g) To eliminate the non-recurring charges (26,236) (5,545)
(h) To eliminate interest expense associated
with debt existing prior to the transaction (6,396) (1,884)
(i) To eliminate Au Bon Pain Division other (income)
expense, and to eliminate the loss on the
sale of the Mexico, Missouri facility in 1998
Au Bon Pain Division other expense, net (711) (403)
Loss on sale of Mexico, Missouri facility (734) --
--------- --------
(1,445) (403)
</TABLE>
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year Ended 16 Weeks Ended
12/26/98 4/17/99
-------- -------
<S> <C> <C>
(j) To eliminate minority interest
associated with the Au Bon Pain
Division $ 127 $ 11
(k) To eliminate federal and state income
tax associated with the Au Bon Pain
Division and the loss on the sale of
the Mexico, Missouri manufacturing
facility in 1998. 6,775 (224)
</TABLE>
(l) Calculation for EBITDA consists of net income plus interest, income
taxes, depreciation and amortization, non-cash non-recurring charges
and expense associated with the Company-owned life insurance. The
Company recognizes that there are alternative methods of measuring
cash flow from operations.
25
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule.
(b) Panera Bread Company did not file any reports on Form 8-K during the quarter
ended April 17, 1999.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PANERA BREAD COMPANY
--------------------------------
(Registrant)
Dated: , 1999 By: /s/ RONALD M. SHAICH
---------------------------------
Ronald M. Shaich
Chairman and
Chief Executive Officer
Dated: , 1999 By: /s/ WILLIAM W. MORETON
---------------------------------
William W. Moreton
Chief Financial Officer
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> APR-17-1999
<CASH> 1,068,397
<SECURITIES> 0
<RECEIVABLES> 1,952,657
<ALLOWANCES> 219,756
<INVENTORY> 1,628,507
<CURRENT-ASSETS> 6,515,033
<PP&E> 54,521,063
<DEPRECIATION> 13,579,705
<TOTAL-ASSETS> 152,361,656
<CURRENT-LIABILITIES> 83,681,451
<BONDS> 0
0
0
<COMMON> 1,213
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 152,361,656
<SALES> 73,411,116
<TOTAL-REVENUES> 77,924,855
<CGS> 26,000,706
<TOTAL-COSTS> 79,800,111
<OTHER-EXPENSES> 392,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,883,750
<INCOME-PRETAX> (4,151,309)
<INCOME-TAX> 474,000
<INCOME-CONTINUING> (4,625,309)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,625,309)
<EPS-BASIC> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
