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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-Q
(MARK ONE)
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED APRIL 15, 2000
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-19253
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PANERA BREAD COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C>
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)
</TABLE>
(314) 918-7779
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 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 18, 1999, 10,706,757 shares and 1,530,524 shares of the
registrant's Class A and Class B Common Stock, respectively, $.0001 par value,
were outstanding.
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<PAGE>
PANERA BREAD COMPANY
INDEX
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PART I. FINANCIAL INFORMATION PAGE
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ITEM 1. FINANCIAL STATEMENTS........................................ 3
Consolidated Balance Sheets as of April 15, 2000 (unaudited)
and December 25, 1999....................................... 3
Consolidated Statements of Operations for the sixteen weeks
ended April 15, 2000 and April 17, 1999 (unaudited)......... 4
Consolidated Statements of Cash Flows for the sixteen weeks
ended April 15, 2000 and April 17, 1999 (unaudited)......... 5
Notes to Consolidated Financial Statements.................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 12
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION........................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
APRIL 15, 2000 DECEMBER 25, 1999
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(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,878 $ 1,936
Accounts receivable, less allowance of $197 in 2000 and
1999.................................................... 2,026 2,686
Inventories............................................... 1,907 1,880
Prepaid expenses.......................................... 649 484
Refundable income taxes................................... 98 98
Deferred income taxes..................................... 7,762 5,473
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Total current assets.................................. 14,320 12,557
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Property and equipment, net................................. 50,186 47,191
Other assets:
Notes receivable.......................................... 20 35
Intangible assets, net of accumulated amortization of
$6,236 in 2000 and $5,932 in 1999....................... 18,474 18,779
Deposits and other........................................ 5,506 4,048
Deferred income taxes..................................... 5,231 8,419
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Total other assets.................................... 29,231 31,281
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Total assets.......................................... $93,737 $91,029
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,143 $ 3,535
Accrued expenses.......................................... 11,148 12,237
Current portion of computer equipment financing........... 388 --
Outstanding amount on revolving credit facility........... 2,650 --
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Total current liabilities............................. 16,329 15,772
Deferred revenue............................................ 1,913 2,011
Long term portion of computer equipment financing........... 376 --
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Total liabilities..................................... 18,618 17,783
Stockholders' equity:
Common stock, $.0001 par value:
Class A shares authorized 50,000,000; issued and
outstanding 10,692,675 and 10,630,717 in 2000 and 1999,
respectively............................................ 1 1
Class B shares authorized 2,000,000; issued and
outstanding 1,530,524 and 1,535,821 in 2000 and 1999
respectively............................................ -- --
Additional paid-in capital.................................. 70,939 70,581
Retained earnings........................................... 4,179 2,664
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Total stockholders' equity............................ 75,119 73,246
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Total liabilities and stockholders' equity............ $93,737 $91,029
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
FOR THE SIXTEEN WEEKS ENDED
-------------------------------
APRIL 15, 2000 APRIL 17, 1999
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Revenues:
Restaurant sales.......................................... $33,951 $73,411
Franchise sales and other revenues........................ 2,877 2,267
Commissary sales to franchisees........................... 3,598 2,247
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Total revenue......................................... 40,426 77,925
Costs and expenses:
Restaurant expenses:
Cost of food and paper products......................... 11,300 24,361
Labor................................................... 10,012 21,978
Occupancy............................................... 2,553 8,801
Other operating expenses................................ 4,331 8,787
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28,196 63,927
Commissary cost of sales.................................... 3,209 1,640
Depreciation and amortization............................... 2,346 1,800
General and administrative expenses......................... 4,135 6,888
Non-recurring charge........................................ -- 5,545
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Total costs and expenses.............................. 37,886 79,800
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Operating profit (loss)..................................... 2,540 (1,875)
Interest expense, net....................................... 79 1,884
Other (income) expense, net................................. (22) 403
Minority interest........................................... -- (11)
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Income (loss) before income taxes........................... 2,483 (4,151)
Income tax provision........................................ 968 474
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Net income (loss)........................................... $ 1,515 $(4,625)
======= =======
Net income (loss) per common share--basic................... $ 0.12 $ (0.38)
Net income (loss) per common share--diluted................. $ 0.12 $ (0.38)
Weighted average shares of common and common equivalent
shares outstanding
Basic..................................................... 12,180 12,103
Diluted................................................... 12,298 12,103
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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<CAPTION>
FOR THE SIXTEEN WEEKS ENDED
-------------------------------
APRIL 15, 2000 APRIL 17, 1999
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Cash flows from operations:
Net income (loss)......................................... $ 1,515 $ (4,625)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 2,346 1,800
Provision for losses on accounts receivable............... -- 17
Minority interest......................................... -- (11)
Deferred income taxes..................................... 899 --
Non-recurring charge...................................... -- 5,545
Changes in operating assets and liabilities:
Accounts receivable....................................... 660 (5)
Inventories............................................... (27) 70
Prepaid expense........................................... (165) (1,850)
Refundable income taxes................................... -- 17
Accounts payable.......................................... (1,392) (1,745)
Accrued expenses.......................................... (1,089) 1,667
Deferred revenue.......................................... (98) --
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Net cash provided by operating activities............... 2,649 880
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Cash flows from investing activities:
Additions to property, plant and equipment................ (5,011) (5,196)
Change in cash included in net current liabilities held
for sale................................................ -- (224)
Payments received on notes receivable..................... 15 101
Decrease (increase) in intangible assets.................. -- (45)
(Increase) decrease in deposits and other................. (1,484) 2,850
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Net cash used in investing activities................... (6,480) (2,514)
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Cash flow from financing activities:
Exercise of employee stock options........................ 198 --
Proceeds from issuance of debt............................ 3,801 32,101
Principal payments on debt................................ (387) (31,499)
Proceeds from issuance of common stock.................... 161 343
Increase in deferred financing costs...................... -- (6)
Decrease in minority interest............................. -- (97)
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Net cash provided by financing activities............... 3,773 842
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Net decrease in cash and cash equivalents................... (58) (792)
Cash and cash equivalents at beginning of period............ 1,936 1,860
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Cash and cash equivalents at end of period.................. $ 1,878 $ 1,068
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements of Panera
Bread Company and its 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 25, 1999.
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.
See Form 10-K for the year ended December 25, 1999 for a discussion of the
Company's significant accounting policies and principles.
NOTE B--FRANCHISE AND DEVELOPMENT FEES
Franchise fees are the result of sales of area development rights and the
sale of individual franchise locations to third parties, both domestically and
internationally. Fees from the sale of area development rights are fully
recognized as revenue upon completion of all commitments related to the
agreements. Fees from the sale of individual franchise locations are fully
recognized as revenue upon the commencement of franchise operations.
NOTE C--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except for per share data):
<TABLE>
<CAPTION>
FOR THE SIXTEEN WEEKS ENDED
-------------------------------
APRIL 15, 2000 APRIL 17, 1999
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Net income (loss) used in net income (loss) per common
share--basic................................................ $ 1,515 $(4,625)
Net income (loss) used in net income (loss) per common
share--diluted.............................................. $ 1,515 $(4,625)
Weighted average number of shares outstanding--basic........ 12,180 12,103
Effect of dilutive securities:
Employee stock options.................................. 66 --
Stock warrants.......................................... 52 --
Weighted average number of shares outstanding--diluted...... 12,298 12,103
Per common share:
Basic:
Net income (loss)......................................... $ .12 $ (0.38)
Diluted:
Net income (loss)......................................... $ .12 $ (0.38)
</TABLE>
During the sixteen weeks ended April 17, 1999, options to purchase 1,176,000
shares of common stock at a weighted average exercise price of $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, because the
effect would have been antidilutive.
6
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NOTE C--EARNINGS PER SHARE (CONTINUED)
During the sixteen weeks ended April 17, 1999, options to purchase 248,450
shares of common stock at a weighted average exercise price of $6.06 per share,
and warrants to purchase 96,000 shares of common stock at an exercise price of
$5.62 per share were outstanding but not included in the computation of diluted
earnings per share for the sixteen weeks ended April 17, 1999, because the
effect would have been antidilutive.
NOTE D--RECENT ACCOUNTING PRONOUNCEMENTS
None which will have a material impact on the Company's financial
statements.
NOTE E--SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES
On May 16, 1999, the Company sold its Au Bon Pain Division to ABP
Corporation for $73 million in cash before a contractual purchase price
reduction of $1 million. The results of operations for the sixteen weeks ended
April 17, 1999, include the results of the divested Au Bon Pain Division.
Revenues and net operating profit (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. In conjunction with the sale,
the Company recorded a pre-tax loss of $5.5 million related to the transaction
in the first quarter of 1999. Operating income in the sixteen weeks ended
April 17, 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.
NOTE F--ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
APRIL 17, 2000 DECEMBER 25, 1999
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Accrued insurance........................................... $ 1,066 $ 881
Rent........................................................ 777 780
Payroll and related taxes................................... 2,499 2,594
Taxes other than income taxes............................... 3,910 4,383
Other....................................................... 2,896 3,599
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$11,148 $12,237
======= =======
</TABLE>
7
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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, 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:
<TABLE>
<CAPTION>
FOR THE SIXTEEN WEEKS ENDED
-------------------------------
APRIL 15, 2000 APRIL 17, 1999
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Revenues:
Restaurant sales.......................................... 84.0% 94.2%
Franchise sales and other revenues........................ 7.1 2.9
Commissary sales to franchisees........................... 8.9 2.9
----- -----
Total revenues........................................ 100.0% 100.0%
Costs and expenses:
Restaurant cost of sales (1)
Cost of food and paper products......................... 33.3 33.2
Labor................................................... 29.5 29.9
Occupancy............................................... 7.5 12.0
Other................................................... 12.8 12.0
----- -----
Total restaurant cost of sales........................ 83.0 87.1
Commissary cost of sales (2)................................ 89.2 73.0
Depreciation and amortization............................... 5.8 2.3
General and administrative expenses......................... 10.2 8.8
Non-recurring charges....................................... -- 7.1
Operating profit (loss)..................................... 6.3 (2.4)
Interest expenses, net...................................... 0.2 2.4
Other (income) expense, net................................. -- 0.5
Minority interest........................................... -- --
----- -----
Income (loss) before income taxes........................... 6.1 (5.3)
Income tax provision........................................ 2.4 0.6
Net income (loss)........................................... 3.7 (5.9)
</TABLE>
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(1) As a percentage of Company restaurant sales.
(2) As a percentage of commissary sales to franchisees.
GENERAL
The Company's revenues are derived from restaurant sales, commissary sales
to franchisees and franchise and other revenues. Commissary sales to franchisees
are the sales of commissary fresh dough products to our franchisees. Franchise
and other revenues include royalty income and franchise fees. The cost of food
and paper products, labor, occupancy, and other operating expenses relate
primarily to restaurant sales. The cost of commissary sales relates to the sale
of dough products to our franchisees. General and administrative and
depreciation expenses relate to all areas of revenue generation.
8
<PAGE>
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.
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 15, 2000, results of
operations include only the results of the Panera Bread/ Saint Louis Bread
Company business unit. Results of operations for the sixteen weeks ended
April 17, 1999 also include the results of the divested Au Bon Pain Division.
For the sixteen weeks ended April 17, 1999, the Company recorded a $5.5 million
loss related to the sale.
REVENUES
Total revenues for the first quarter declined to $40.4 million in 2000
compared to $77.9 million in 1999. The decline was due to the sale of the au Bon
Pain Division in May 1999. As a stand alone entity, Panera Bread's total
revenues increased 37% to $40.4 million in the first quarter of 2000 versus
$29.4 million in the first quarter of 1999.
Restaurant revenue for Panera Bread on a stand alone basis increased 29% to
$34.0 million in the first quarter of 2000 from its total of $26.3 million in
the first quarter of 1999. This increase is due to a number of factors,
including the opening of 11 new company owned bakery-cafes since the first
quarter of 1999 and an 8.9% increase in comparable restaurant sales for the
first quarter of 2000. During the first quarter of 2000, 3 new company-owned
bakery-cafes were opened. System-wide sales increased 83% to $88.7 million for
Panera Bread in the first quarter of 2000 compared to 1999.
Franchise sales and other revenues consist of franchise fees and royalties.
On a stand alone basis, Panera Bread's franchise sales and other revenue rose
88% in the first quarter of 2000 compared to the same period in 1999. This was
primarily driven by an increase in franchise royalties to $2.4 million in the
first quarter of 2000 compared to $1.0 million in the first quarter of 1999. The
increase in royalty revenue can be attributed to the addition of 56 franchised
bakery-cafes opened since the first quarter of 1999 and the higher sales volumes
being achieved in 2000. The average annualized sales volume for all franchised
bakery-cafes in the first quarter of 2000 was $1.6 million compared to
$1.4 million in the same time in 1999.
Commissary sales to franchisees increased to $3.6 million in the first
quarter of 2000 compared to $2.2 million in the first quarter of 1999. On a
stand alone basis, Panera Bread's commissary sales to franchisees increased 140%
to $3.6 million in the quarter from $1.5 million in the first quarter of 1999.
The increase was due to the increased number of franchised units open and higher
average sales volumes as discussed above.
During the first quarter of 2000, one additional Panera Bread franchise area
development agreement was signed, representing a commitment to develop 10
additional bakery-cafes. This agreement brings the total commitments to develop
additional franchised bakery-cafes to 525 as of April 15, 2000 in addition to
the franchised cafes already opened. The Company added 19 Panera Bread
bakery-cafes during the first quarter of 2000. Three of the locations were
company-owned bakery-cafes and 16 were franchise operated bakery-cafes. These
openings brought the total number of bakery-cafes open as of April 15, 2000 to
200, 84 company-owned (including two specialty bakery-cafes) and 116 franchised
bakery-cafes.
COSTS AND EXPENSES
The cost of food and paper products was $11.3 million, or 33.3% of
restaurant sales, in the first quarter of 2000 compared to $24.4 million, or
33.2% of restaurant sales in 1999. The cost of food and paper products does not
include food costs that are associated with the commissary operations that sell
fresh dough products to franchised bakery-cafes. The decrease in the dollar
amount of food and paper
9
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costs was due to the sale of the Au Bon Pain Division. On a stand alone basis,
Panera Bread's cost of food and paper products declined to 33.3% of restaurant
sales in the first quarter of 2000 compared to 34.0% of restaurant sales in the
first quarter of 1999. The decline was due to stable costs while sales volumes
increased over the prior year resulting in improved efficiencies and a lower
food cost percentage.
In the first quarter of 2000, commissary cost of sales was $3.2 million
compared to $1.6 million in the first quarter of 1999. On a stand alone basis,
Panera Bread's commissary cost of sales was $3.2 million in 2000 compared to
$1.6 million in 1999. The increase was primarily due to the larger sales volume
generated by the increased number of bakery-cafes. The Au Bon Pain Division's
commissaries operated at a profit due to their maturity, while Panera Bread's
commissaries operated at a slight loss in the first quarter of 2000.
The labor cost was $10.0 million, or 29.5% of restaurant sales, in the first
quarter of 2000 compared to $22.0 million, or 29.9% of restaurant sales in the
first quarter of 1999. The decrease in labor cost dollars was due to the sale of
the Au Bon Pain Division. On a stand alone basis Panera Bread's labor cost
percentage of 29.5% in the first quarter of 2000 was consistent with the labor
cost of 29.4% of restaurant sales, or $7.7 million, in the first quarter of
1999.
Occupancy costs were $2.6 million or 7.5% of restaurant sales, in the first
quarter of 2000 compared to $8.8 million, or 12.0% of restaurant sales, for the
same time period in 1999. The decrease in dollars and as a percentage of
restaurant sales was due to the sale of the Au Bon Pain Division, which had
historically run higher occupancy costs due to their locations in downtown areas
of larger cities. On a stand alone basis, Panera Bread's occupancy costs
decreased to 7.5% of restaurant sales in the first quarter of 2000 compared to
8.1% in the first quarter of 1999. The decrease was due to the fact that
occupancy costs are largely fixed and sales volumes have increased in 2000
compared to 1999.
Other restaurant operating expenses were $4.3 million, or 12.8% of
restaurant sales, in the first quarter of 2000 compared to $8.8 million or 12.0%
of restaurant sales in the first quarter of 1999. On a stand alone basis, Panera
Bread's other operating expenses of 12.8% of restaurant sales were slightly
higher than the 12.5% of restaurant sales in the first quarter of 1999. The
increase was primarily due to an operating realignment in 1999 to add an Area
Director level to manage the bakery-cafes in each market. By putting this new
supervisory level in each market, the Company believes it has achieved better
operating results.
Depreciation and amortization increased as a percentage of total revenue to
5.8% in the first quarter of 2000 compared to 2.3% of total revenue in the first
quarter of 1999. The increase was due to the fact that the first quarter of
1999's results included the revenues from the Au Bon Pain Division while
excluding any depreciation expenses as the Au Bon Pain Division was classified
as an asset held for sale. On a stand alone basis, Panera Bread's depreciation
was 5.8% of total revenue in the first quarter of 2000 compared to 6.1% of total
revenue in 1999. The decrease was driven by higher sales volumes and franchise
revenue in 2000.
General and administrative expenses increased to 10.2% of total revenues
compared to 8.8% of total revenues in the first quarter of 1999. The increase
was due to these costs being spread over a larger revenue base in 1999 compared
to 2000 when the results of Au Bon Pain were included. On a stand alone basis,
Panera Bread's general and administrative expenses were 10.2% of total revenues
in both the first quarter of 2000 and the first quarter of 1999.
Operating income for the first quarter of 2000 increased to $2.5 million
from a $(1.9) million loss in 1999. Operating income increased due to increased
revenues from Company-owned bakery-cafes, franchise royalties, and commissary
sales to franchisees, and due to the lack of non-recurring charges. For the
sixteen weeks ended April 17, 1999, the Company recorded a pretax loss of
$5.5 million related to the sale of the Au Bon Pain Division. Operating income
in the first quarter of 1999 was favorably impacted by
10
<PAGE>
$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.
Interest expense as a percentage of total revenue decreased to .2% in the
first quarter of 2000 versus 2.4% for the comparable period in 1999. This
reduction is due primarily to the repayment of the Company's outstanding debt
with the proceeds from the sale of the Au Bon Pain Division in May 1999.
Other (income) expense was $.02 million of income for the quarter ended
April 15, 2000. This compares to an expense of $.4 million for the first quarter
of 1999, which was comprised of a charge back from a vendor and miscellaneous
other expenses related to the Au Bon Pain Division.
INCOME TAXES
The provision for income taxes increased to $968,432 for the first quarter
of 2000 versus $474,000 for the comparable period in 1999. The tax provision for
the first quarter of 2000 reflects a combined federal, state, and local
effective tax rate of 39%.
NET INCOME/LOSS
For the sixteen weeks ended April 15, 2000, net income for the Company was
$1.5 million, or $.12 per share, compared to a net loss of $4.6 million, or $.38
per share, for the sixteen week period ended April 17, 1999. The increase in net
income was due to an increase in restaurant sales and franchise revenues for
Panera Bread bakery-cafes, and the absence of any charges related to the sale of
the Au Bon Pain Division in 1999. On a stand alone basis, Panera Bread's net
income increased 160% to $1.5 million in the first quarter of 2000 compared to
$.6 million, or $.05 per share, in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $1.9 million at April 15, 2000, compared with
$1.9 million at April 17, 1999. 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.
Funds provided by operating activities were $2.6 million for the first
quarter of 2000 compared to $.9 million of funds generated for the comparable
period in 1999. Funds provided by operations increased primarily as a result of
a decrease in accounts receivable.
Total capital expenditures for the sixteen weeks ended April 15, 2000, were
$5.0 million and were primarily related to the opening of 3 new company-owned
bakery-cafes and to maintaining or remodeling existing bakery-cafes. The
expenditures were mainly funded by cash from operating activities and the
Company's revolving line of credit. Total capital expenditures were
$5.2 million for the first quarter of 1999, which included $1.5 million in
capital expenditures for the divested Au Bon Pain Division.
As of April 15, 2000, the Company had a $10.0 million unsecured revolving
line of credit bearing interest at either the LIBOR rate plus 2.25% or the
commercial bank's prime rate plus .75%, at the Company's option. As of
April 15, 2000, $2.7 million was outstanding under the line of credit and an
additional $600,000 of the remaining availability was utilized by outstanding
standby letters of credit. As of April 15, 2000, the Company was in compliance
with all covenants associated with its borrowing.
In 2000, the Company currently anticipates spending a total of approximately
$16 to $17 million principally for the opening of approximately 12 to 13 new
company owned bakery-cafes, the opening of one to two additional commissaries,
and for maintaining and remodeling approximately 10 existing cafes. The Company
expects to fund these expenditures principally through internally generated cash
flow supplemented by borrowings on its line of credit.
11
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FORWARD-LOOKING STATEMENTS
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", "believes", "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 Company's operating results may be
negatively affected by many factors, including but not limited to the lack of
availability of sufficient capital to it and to the developers that are parties
to franchise development agreements with the Company, variations in the number
and timing of bakery-cafe openings, public acceptance of new bakery-cafes,
consumer preferences, competition, commodity costs, and other factors that may
affect retailers in general. The foregoing list of important factors is not
exclusive.
YEAR 2000 ISSUE
The Year 2000 issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change
occurred, certain date-sensitive systems had to recognize the year as 2000, not
as 1900. This inability to recognize and properly treat the year as 2000 could
have caused these systems to process critical financial and operational
information incorrectly. In prior years, the Company discussed its plans and
progress to be Year 2000 ready. The Company completed the installation,
implementation, and testing of its systems in late 1999, and made modifications
as deemed necessary. As a result of the planning and implementation efforts, the
Company experienced no significant disruptions in business critical information
technology and non-information technology systems, and the Company believes
these systems responded successfully to the Year 2000 date change. The Company
is not aware of any material problems resulting from Year 2000 issues regarding
its internal systems, the products and services of third parties, or the
businesses operated by its franchisees. The Company will continue to monitor
date-sensitive systems as certain key dates occur throughout the year to ensure
that any Year 2000 matters that may arise are addressed promptly.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company had no holdings of derivative financial or commodity instruments
at April 15, 2000. 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
therefore is subject to additional expense should there be an increase in prime
or LIBOR interest rates. Panera Bread has no foreign operations and accordingly,
no foreign exchange rate fluctuation risk. The Au Bon Pain Division did have
foreign operations; however, these were sold with the Au Bon Pain Division on
May 16, 1999.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On March 16, 2000, the Board of Directors appointed Domenic Colasacco as a
director to fill a vacancy on the Company's Board. Mr. Colasacco was appointed
to serve with the class of directors that is eligible for re-election at the
Company's annual meeting of stockholders scheduled for July 25, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<S> <C>
10.1+ Employment Letter between the Company and Thom Pannullo,
dated as of February 4, 2000.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit to this Form 10-Q pursuant to Item 6(a).
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the sixteen weeks
ended April 15, 2000.
13
<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.
<TABLE>
<S> <C> <C>
PANERA BREAD COMPANY
-----------------------------------------
(Registrant)
Dated: May 25, 2000 By: /s/ RONALD M. SHAICH
-----------------------------------------
Ronald M. Shaich
Chairman and Chief Executive Officer
Dated: May 25, 2000 By: /s/ WILLIAM W. MORETON
-----------------------------------------
William W. Moreton
Chief Financial Officer
</TABLE>
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<S> <C>
10.1+ Employment Letter between the Company and Thom Pannullo,
dated as of February 4, 2000.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
+ Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit to this Form 10-Q pursuant to Item 6(a).
15
<PAGE>
EXHIBIT 10.1
February 4, 2000
Thom Pannullo
458 Woldunn Circle
Lake Mary, FL 32746
Dear Tom:
Based on your experience, background presented and the belief that we can
together help Panera grow into a significant national brand, Panera Bread is
pleased to offer you the position of Vice President, Company Operations. We
would like this position to be effective on Monday, March 6, 2000.
Your salary for this position will be payable at the annual rate of $165,000. In
addition, it is our understanding that your compensation will include the
following:
- - Consideration for 20,000 stock options which vest to you over 5 years. The
price per share depends on the value per share on the date of the next Board
of Director's meeting.
- - You will be included in our 2000 Incentive Program. This program rewards you
for the completion and quality of individually agreed upon objectives as
well as the achievement of your business unit's financial goals and overall
Company profitability. Your incentive target is 30% of your base rate (we
refer to it as a "double" when you meet agreed upon expectations) with an
upside potential of 60% ("homerun"-significantly exceeding expectations).
The incentive can be paid out in full or portion thereof, including 0%
("strike"), according to financial performance and your individual
performance. Your incentive will be pro-rated for the portion of the year
that you are employed by the Company. The plan design can be changed without
notice.
- - Upon acceptance of this offer letter, we will provide you with a relocation
package, which includes reimbursement for expenses of $40,000. These
expenses may be direct billed to us. Anything less than the $40,000 will be
returned to you. In addition, we will reimburse reasonable temporary living
expenses, per your conversation with Ron Shaich. Karol McNutt will contact
you to arrange a discussion with Pinnacle Group Associates, our relocation
consultants. By accepting this offer, you agree that you will reimburse
Panera Bread a prorated portion of your relocation expenses should you
voluntarily resign your employment with Panera Bread within one year of your
start date.
- - A car allowance of $5000 paid in bi-weekly increments of $192.31.
As a full-time Panera Bread employee, you will be eligible to participate in all
Panera Bread benefit plans. The waiting periods and premiums related to these
benefits and specific information about plan content will be explained during
the orientation process. Our benefit package is subject to ongoing review and
modifications from time to time. You will receive an Employee Handbook at your
benefits orientation, which will explain our vacation and holiday schedule.
Panera Bread is a non-smoking work facility. If you have specific questions
about our benefits, please contact Courtney Higgins at extension 6318.
We believe we captured in this letter all the elements covered in your
conversations with Rick and Ron. If there is anything we missed, please let us
know.
<PAGE>
This offer is also contingent on your ability to provide employment eligibility
documentation as required by law. Please indicate your acceptance of this offer
by signing and returning one original of this letter no later than Monday,
February 14, 2000, after which time this offer will expire.
We believe that your background and experience will provide a solid foundation
for success with Panera Bread. We are extremely enthusiastic about our future
growth. If you have any questions about the enclosed information, please let me
know. Once again, Tom, we welcome you to Panera Bread and we look forward to
your participation, energy, and contributions.
Sincerely,
/S/ KAROL MCNUTT /S/ RONALD M. SHAICH
- ---------------------------------- -------------------------------
Karol McNutt Ron Shaich
Director Compensation and Benefits Chairman and CEO
I have read and accepted the provisions as outlined above.
2/7/00 /S/ THOM PANNULLO
- ---------------------------------- -------------------------------
Date Thom Pannullo
cc: Rick Postle
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE 10-Q FOR THE SIXTEEN WEEKS ENDED APRIL 15, 2000, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-15-2000
<CASH> 1,877,913
<SECURITIES> 0
<RECEIVABLES> 2,222,890
<ALLOWANCES> 196,623
<INVENTORY> 1,906,838
<CURRENT-ASSETS> 14,320,243
<PP&E> 70,446,767
<DEPRECIATION> 20,261,629
<TOTAL-ASSETS> 93,736,646
<CURRENT-LIABILITIES> 16,328,831
<BONDS> 0
0
0
<COMMON> 1,222
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 93,736,646
<SALES> 33,950,730
<TOTAL-REVENUES> 40,425,533
<CGS> 11,300,280
<TOTAL-COSTS> 37,885,183
<OTHER-EXPENSES> (22,069)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,261
<INCOME-PRETAX> 2,483,158
<INCOME-TAX> 968,432
<INCOME-CONTINUING> 1,514,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,514,726
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
