Panera Bread Company Reports Q1 2011 Diluted EPS of $1.09, Up 33% Over Q1 2010
Two year system-wide comparable net bakery-cafe sales increased 12.8%, two year Company-owned comparable net bakery-cafe sales increased 13.3%, and two year franchise-operated comparable net bakery-cafe sales increased 12.6%
Panera Bread Company (NASDAQ: PNRA) reported net income of $33 million, or $1.09 per diluted share, for the first quarter ended March 29, 2011. The first quarter of fiscal 2011 results compare to net income of $26 million, or $0.82 per diluted share, for the first quarter ended March 30, 2010, and represent a 33% year-over-year increase in diluted earnings per share.
The Company's first quarter of fiscal 2011 consolidated statements of operations and margin analyses are attached as Schedule I. The following tables set forth, for the periods indicated, certain items included in the Company's consolidated statements of operations (in thousands, except per share data and percentages):
For the 13 Weeks Ended
- Percentage
March 29, 2011 March 30, 2010 Change
-- -- -
Total revenue $ 422,100 $ 364,210 16%
Net income $ 32,774 $ 25,845 27%
Diluted earnings per share $ 1.09 $ 0.82 33%
Shares used in diluted EPS 30,160 31,521
First Quarter Fiscal 2011 Results and Business Review
Comparable Net Bakery-Cafe Sales Growth
In the first quarter of fiscal 2011, system-wide comparable net bakery-cafe sales increased 3.3% compared to the same period in fiscal 2010. Company-owned comparable net bakery-cafe sales increased 3.3%, and franchise-operated comparable net bakery-cafe sales increased 3.4% versus the comparable period in fiscal 2010. .
The Company-owned comparable net bakery-cafe sales increase of 3.3% in the first quarter of fiscal 2011 was comprised of year-over-year transaction growth of 1.7% and average check growth of 1.6%. The Company estimates that the impact of severe winter weather in the first quarter reduced both its transaction growth and comparable net bakery-cafe sales growth by approximately 150 basis points. A schedule of comparable net bakery-cafe sales information is attached as Schedule III.
New Unit Development and AWS
During the first quarter of fiscal 2011, the Company opened 8 new bakery-cafes and its franchisees opened 11 new bakery-cafes. As a result, there were 1,467 bakery-cafes open system-wide as of March 29, 2011. Additionally, during the first quarter of fiscal 2011, the Company sold substantially all the assets of two bakery-cafes to an existing franchisee.
Company-owned Franchise-operated Total System
Bakery-cafes as of
December 28, 2010 662 791 1,453
Bakery-cafes opened 8 11 19
Bakery-cafes closed (3) (2) (5)
Bakery-cafes acquired (2) 2 -
Bakery-cafes as of
March 29, 2011 665 802 1,467
================ ================ ================
Average weekly net sales ("AWS") for Company-owned new units for the first quarter of fiscal 2011 was $49,551 compared to $56,113 in the same period of fiscal 2010. AWS for franchise-operated new units for the first quarter of fiscal 2011 was $45,532 compared to $44,220 in the same period of fiscal 2010. A schedule of the first quarter of fiscal 2011 AWS is attached as Schedule II.
Operating Margin
In the first quarter of fiscal 2011, the Company generated operating margin improvement of approximately 100 basis points compared to the first quarter of fiscal 2010. This operating margin improvement was primarily driven by sales leverage from comparable net bakery-cafe sales increases, structural improvements in labor expense, and favorability based on timing in benefits expense, the latter of which is expected to reverse later in this fiscal year.
Use of Capital
In April 2011, the Company completed the purchase of substantially all the assets and certain liabilities of 25 bakery-cafes owned by its Milwaukee franchisee. The Company's results for the first quarter of fiscal 2011 were not impacted by the purchase as the acquisition was completed following the close of the quarter. The Company expects the acquisition to be $0.01 to $0.02 accretive in fiscal 2011 after integration costs and $0.04 to $0.06 accretive in fiscal 2012 ($0.03 to $0.04 incremental accretion versus fiscal 2011).
Second Quarter of Fiscal 2011 Outlook
Second Quarter of Fiscal 2011 Targets
Diluted EPS Target
For the second quarter of fiscal 2011, the Company is targeting earnings per diluted share of $1.15 to $1.17 versus $0.85 per diluted share in the second quarter of fiscal 2010. If the Company meets this target, diluted earnings per share will grow 35% to 38% in the second quarter of fiscal 2011 versus the comparable period in fiscal 2010.
This second quarter of fiscal 2011 diluted earnings per share target includes the following key assumptions:
Comparable Net Bakery-Cafe Sales Growth
The range for the Company's second quarter of fiscal 2011 Company-owned comparable bakery-cafe sales growth is targeted at 5.0% to 6.0% over the comparable period in fiscal 2010. The two year Company-owned comparable bakery-cafe sales target is 14.6% to 15.6%, in line with the Company's first quarter two year comparable bakery-cafe sales growth after adding back the estimated impact of weather in the quarter. The second quarter of fiscal 2011 Company-owned target assumes transaction growth between 2.5% and 3.5% and average check growth of approximately 2.5%. The Company is projecting a year-over-year price increase of approximately 2.5%.
New Unit Development and AWS
The Company is targeting approximately 27 to 29 system-wide new unit openings in the second quarter of fiscal 2011 with average weekly net sales for Company-owned new units consistent with its full year target of $37,000 to $39,000.
Operating Margin Improvement
In the second quarter of fiscal 2011, the Company is targeting 0 to 50 basis points of improvement in operating margin.
Updated Full Year Fiscal 2011 Outlook
Raising Full Year Fiscal 2011 Targets
Diluted EPS Target
The Company is raising its targeted earnings per diluted share to $4.47 to $4.51. If the Company meets its target, it would generate diluted earnings per share growth of 23% to 25% in fiscal 2011. This increased earnings per diluted share target is based on the acquisition of the Milwaukee market and a modestly improved outlook on operating performance.
This full year fiscal 2011 diluted earnings per share target is based on the following key assumptions:
Comparable Net Bakery-Cafe Sales Growth
The Company is narrowing its fiscal 2011 target for Company-owned comparable bakery-cafe sales growth to 5.0% to 6.0% from 4.0% to 6.0%. This target assumes transaction growth of 2.5% to 3.5% and average check growth of approximately 2.5%. The increased average check growth target is primarily a result of an incremental 1.0% price increase the Company intends to take to offset increased inflation in the latter part of 2011. The incremental price increase and increased inflation are expected to offset each other at the operating margin line and have no impact on the Company's earnings per diluted share target.
New Unit Development and AWS
The Company continues to expect approximately 95 to 105 new unit system-wide openings in fiscal 2011. The average weekly net sales target for new Company-owned units remains at $37,000 to $39,000 in fiscal 2011.
Operating Margin Improvement
For fiscal 2011, the Company is expecting operating margin expansion of 0 to 50 basis points versus the prior year.
Concluding Comment
Bill Moreton, CEO, commented, "We are pleased to deliver 33% earnings growth in the first quarter, marking the eleventh out of the last twelve quarters of 20% plus growth. We believe the consistency of our results has been driven by the investments that we have made in the quality of our food, our people and the overall customer experience. We are now targeting 23% to 25% EPS growth for the full year 2011. At the same time we expect to deliver these results, we are making significant investments designed to set ourselves up to deliver 15% to 20% earnings growth for the next several years."
SCHEDULE I
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
For the 13 Weeks Ended
March 29, 2011 March 30, 2010
-- --
Revenues:
Bakery-cafe sales, net $ 365,579 $ 312,500
Franchise royalties and fees 22,582 20,863
Fresh dough and other product sales to
franchisees 33,939 30,847
-- --
Total revenue 422,100 364,210
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products $ 106,209 $ 90,311
Labor 114,050 100,682
Occupancy 26,773 24,389
Other operating expenses 47,327 39,535
-- --
Total bakery-cafe expenses 294,359 254,917
Fresh dough and other product cost of
sales to franchisees 28,024 24,835
Depreciation and amortization 19,094 17,009
General and administrative expenses 26,671 25,012
Pre-opening expenses 978 276
-- --
Total costs and expenses 369,126 322,049
-- --
Operating profit 52,974 42,161
Interest expense 225 168
Other (income) expense, net (804) 307
-- --
Income before income taxes 53,553 41,686
Income taxes 20,779 15,841
-- --
Net income $ 32,774 $ 25,845
============== ==============
Earnings per common share:
Basic $ 1.10 $ 0.83
============== ==============
Diluted $ 1.09 $ 0.82
============== ==============
Weighted average shares of common and common
equivalent shares outstanding:
Basic 29,845 31,170
============== ==============
Diluted 30,160 31,521
============== ==============
Schedule I (continued)
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
MARGIN ANALYSIS
(unaudited)
The following table sets forth the percentage relationship to total
revenues, except where otherwise indicated, of certain items included in
the Company's consolidated statements of operations for the period
indicated. Percentages may not add due to rounding:
For the 13 Weeks Ended
March 29, 2011 March 30, 2010
-- --
Revenues:
Bakery-cafe sales, net 86.6% 85.8%
Franchise royalties and fees 5.3 5.7
Fresh dough and other product sales to
franchisees 8.0 8.5
-- --
Total revenue 100.0% 100.0%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 29.1% 28.9%
Labor 31.2 32.2
Occupancy 7.3 7.8
Other operating expenses 12.9 12.7
-- --
Total bakery-cafe expenses 80.5 81.6
Fresh dough and other product cost of
sales to franchisees (2) 82.6 80.5
Depreciation and amortization 4.5 4.7
General and administrative expenses 6.3 6.9
Pre-opening expenses 0.2 0.1
-- --
Total costs and expenses 87.4 88.4
-- --
Operating profit 12.6 11.6
Interest expense 0.1 -
Other (income) expense, net (0.2) 0.1
-- --
Income before income taxes 12.7 11.4
Income taxes 4.9 4.3
-- --
Net income 7.8% 7.1%
============== ==============
(1) As a percentage of Company net bakery-cafe sales.
(2) As a percentage of fresh dough and other product sales to franchisees.
PANERA BREAD COMPANY
Schedule II - Supplemental Sales and Bakery-Cafe Information
System-Wide AWS
2011 [a] 2010 2009 2008 2007 2006
AWS $ 43,096 $ 42,852 $ 39,926 $ 39,239 $ 38,668 $ 39,150
[a] Represents System-Wide AWS at the end of the fiscal first quarter
of 2011.
2011 Company-Owned AWS By Year Opened
-
2011 2010 2009
Opens Opens Opens & 2011 2010
[b] [b] Prior Acquisitions Acquisitions Total
Bakery-Cafes 8 42 575 - 40 665
Q1 11 $ 49,551 $ 39,075 $ 42,497 - $ 46,244 $ 42,532
Year-Over-Year Change in
Company-Owned AWS
-
2010 2009
Opens Opens & AWS
[c] Prior Total
--- --- ---
Bakery-Cafes
Q1 11 -30.4% 3.7% 3.6%
[b] 2011 Company-owned AWS excludes 2011 and 2010 acquisition data.
[c] Change in Company-owned AWS in 2011 from 2010 compares 42 bakery-cafes
in 2011 against 3 bakery-cafes at the end of the fiscal first quarter
of 2010.
2011 Franchise-Operated AWS By Year Opened
-
2011 2010 2009 2011
Opens Opens Opens & Acquisitions 2010
[d] [d] Prior [f] Acquisitions Total
Bakery-Cafes 11 34 752 2 3 802
Q1 11 $ 45,532 $ 38,246 $ 43,862 $ 20,157 $ 35,525 $ 43,568
Year-Over-Year Change in
Franchise-Operated AWS
-
2010 2009
Opens Opens & AWS
[e] Prior Total
--- --- ---
Bakery-Cafes
Q1 11 -13.5% 2.9% 2.2%
[d] 2011 Franchise-operated AWS excludes 2011 and 2010 acquisition data.
[e] Change in Franchise-operated AWS in 2011 from 2010 compares 34
bakery-cafes in 2011 against 5 bakery-cafes at the end of the fiscal
first quarter of 2010.
[f] Represents two Paradise bakery-cafes.
Bakery-Cafe Openings (excluding acquisitions)
--
Company Franchise Total Company Franchise Total
--- - - --- - -
Q1 11 8 11 19 Q1 10 3 5 8
Q2 11 Q2 10 8 5 13
Q3 11 Q3 10 10 12 22
Q4 11 Q4 10 21 12 33
--- - - --- - -
2011 YTD 8 11 19 2010 YTD 42 34 76
AWS - average weekly net sales for the time periods indicated.
PANERA BREAD COMPANY
Schedule III - Comparable Net Bakery-Cafe Sales Information
For the 4 For the 5 For the 4 For the 13
weeks ended weeks ended weeks ended weeks ended
January 25, March 1, March 29, March 29,
2011 2011 2011 2011
--- --- --- ---
Company-owned 3.4% 3.8% 2.5% 3.3%
Franchise-operated 2.8% 4.5% 2.6% 3.4%
System-wide 3.0% 4.2% 2.5% 3.3%
Logos, product and company names mentioned are the property of their respective owners.
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