Panera Bread Reports Second Quarter EPS of $0.52

HIGHLIGHTS - Diluted EPS growth up 33% over the prior year in second quarter
2008 - Comparable Company-owned bakery-cafe sales increased 6.5% in Q2 -
Company-owned new unit average weekly sales of $35,776 in Q2 - Second half
2008 diluted EPS target increased to $1.24 to $1.30 (from $1.14 to $1.26)
reflecting a 33% to 40% increase over second half 2007

ST. LOUIS, July 22 /PRNewswire-FirstCall/ -- Panera Bread Company
(Nasdaq: PNRA) today reported net income of $16 million, or $0.52 per diluted
share, for the second quarter ended June 24, 2008, which includes a $0.02 per
diluted share impact of an unfavorable tax adjustment and a $0.01 per diluted
share impact from the further write-down of the Company's investment in the
Columbia Strategic Cash Portfolio. These results compare to net income of $13
million, or $0.39 per diluted share, for the second quarter ended June 26,
2007.
For the twenty-six weeks ended June 24, 2008, net income was $28 million,
or $0.93 per diluted share, which includes the aggregate $0.03 per diluted
share impact from the second quarter unfavorable tax adjustment and investment
write-down, as well as the impact of a $0.06 per diluted share charge in the
first quarter 2008 resulting from the Company's decision to raise its sales
hurdles for new bakery-cafe development. These results compare to net income
of $28 million, or $0.86 per diluted share, for the twenty-six weeks ended
June 26, 2007.
The Company's second quarter and year-to-date fiscal 2008 consolidated
statements of operations and margin analysis are attached as Schedule I. The
following tables set forth, for the periods indicated, certain items included
in the Company's consolidated statements of operations (in thousands, except
per share data and percentages):

For the 13 Weeks Ended Percentage
June 24, 2008 June 26, 2007 Change

Total revenue $320,868 $252,959 27%
Net income $15,706 $12,635 24%
Diluted earnings per share $0.52 $0.39 33%
Shares used in diluted EPS 30,338 32,250

For the 26 Weeks Ended Percentage
June 24, 2008 June 26, 2007 Change

Total revenue $625,847 $492,634 27%
Net income $28,146 $27,679 2%
Diluted earnings per share $0.93 $0.86 8%
Shares used in diluted EPS 30,240 32,225

Second Quarter 2008 Results & Business Review
The Company has continued to drive improvements in both its bakery-cafe
and operating margins despite significant inflation in wheat, oil, and other
commodity costs. The Company's second quarter operating margin is up 100 basis
points year-over-year driven by improvement in its bakery-cafe margin of 170
basis points and additional sales leverage against depreciation and
amortization, general and administrative expenses and pre-opening expenses.
This 100 basis point improvement in operating margin occurred while the
Company was absorbing approximately $6.25 million in wheat cost increases, net
of pricing, versus the prior year (which negatively impacted bakery-cafe cost
of sales and fresh dough cost of sales to franchisees). The Company was able
to achieve these improvements through its category management and operating
cost reduction initiatives.
Despite facing a difficult consumer environment, the Company has also been
successful in the second quarter in maintaining positive transaction growth
while driving margin improvement. Transaction growth, along with margin
improvement, helped to drive strong sales and net income growth in the
Company's core retail business in the second quarter of 2008. Comparable
Company-owned bakery-cafe sales increased 6.5% in the second quarter and
comparable bakery-cafe sales in franchise-operated bakery-cafes increased 4.8%
in the second quarter. These second quarter 2008 comparable sales results were
positively impacted by approximately 0.3% to 0.4% as a result of the shift of
the Easter holiday to the first quarter of 2008 compared to the second quarter
of 2007. The second quarter of 2008 also included approximately 5.5% of
year-over-year price increases when compared to the second quarter of 2007.
The result is that transaction/mix growth in Company-owned bakery-cafes was
approximately 0.6% to 0.7% favorable in the second quarter of 2008 (net of the
impact of Easter).
Finally, average weekly sales ("AWS") for Company-owned new units in the
second quarter of 2008 was $35,776 compared to $32,131 in the same period of
2007. AWS for Company-owned new units year-to-date through the second quarter
of 2008 was $36,640 compared to $31,940 in the same period of 2007. Along with
improved margins, improvement in new unit AWS is a key driver of improved
return on invested capital. A schedule of the Company's second quarter 2008
AWS, and a schedule of comparable bakery-cafe sales by period, are attached as
Schedule II and III, respectively.
During the second quarter of 2008, the Company opened 19 new bakery-cafes
system-wide (6 Company-owned and 13 franchise-operated) and closed one
Company-owned bakery-cafe. As of June 24, 2008, there were 1,270 bakery-cafes
open system-wide. The breakdown of bakery-cafes between Company-owned and
franchise-operated is as follows:

Company-owned Franchise-operated Total System

Bakery-cafes as of
March 25, 2008 543 709 1,252
Bakery-cafes opened 6 13 19
Bakery-cafes closed (1) - (1)
Bakery-cafes as of
June 24, 2008 548 722 1,270

Third and Fourth Quarter 2008 and 2009 Business Outlook
The Company today raised its second half 2008 earnings target from $1.14
to $1.26 per diluted share to $1.24 to $1.30 per diluted share. This second
half target is based on a third quarter 2008 target of $0.42 to $0.44 per
diluted share and a fourth quarter 2008 target of $0.82 to $0.86 per diluted
share. If the Company meets this target, EPS will be up 33% to 40% for the
second half of 2008 versus 2007.
Third Quarter Targets
As part of its second half targets, the Company is today setting its
earnings per diluted share target for the third quarter of 2008 at $0.42 to
$0.44 per diluted share. If the Company meets this target, it will represent
an increase of 14% to 19% from $0.37 per diluted share in the third quarter of
2007.
Relative to margins, the third quarter 2008 target assumes that wheat
costs will be $15.00 per bushel (inclusive of wheat futures and basis)
compared to $5.80 per bushel in the prior year period, resulting in over $3
million of expense to be absorbed in bakery-cafe cost of sales. The fresh
dough cost of sales to franchisees margin will be further negatively impacted
by inflation in other costs, including the rise in the cost of gasoline. On
the other hand, the Company expects that this will be offset by a continued
100 basis point improvement to labor margins as a result of the decision to
remove Crispani from the menu.
Relative to transactions, the third quarter 2008 target assumes
year-over-year retail price increases of 6.5% with Company-owned comparable
bakery-cafe sales growth of 4.0% to 5.0%. This implies 1.5% to 2.5% negative
transaction/mix impact compared with the third quarter of 2007. The Company
believes its transaction-building initiatives, including its new grilled
breakfast sandwiches, media trials and operational focus, will be effective to
partially counter-balance, but not overcome, the significant consumer
headwinds all retailers are experiencing.
Please note that through the first 27 days of the third quarter of fiscal
2008, comparable bakery-cafe sales for Company-owned bakery-cafes have grown
approximately 3.6% and comparable bakery-cafe sales for franchise-operated
bakery-cafes have grown approximately 4.0%.
Finally, the Company is assuming new unit average weekly sales of $36,000
to $38,000 for the third quarter of 2008.
Fourth Quarter Targets
The Company today is setting its earnings per diluted share target for the
fourth quarter of 2008 at $0.82 to $0.86 per diluted share as compared to
$0.56 per diluted share in the fourth quarter of 2007. The target for the
fourth quarter of 2008 reflects an increase of 46% to 54% from the fourth
quarter of 2007. In the fourth quarter, wheat is projected to average $12.00
per bushel (inclusive of wheat futures and basis) compared to $5.80 per bushel
in the prior year period, resulting in approximately $2.5 million in expense
to bakery-cafe cost of sales year-over-year. However, in the fourth quarter,
the Company expects to have increased dough transfer prices sufficient to
match the inflation in the cost of wheat. In addition, the Company expects to
continue to benefit from the margin improvement initiatives discussed above,
including the 100 basis points improvement in labor for the removal of
Crispani.
The Company also expects year-over-year retail price increases of 6.0% in
the fourth quarter of 2008, transaction/mix growth of (1.5)% to (2.5)% and
comparable Company-owned bakery-cafe sales growth of 3.5% to 4.5%.
Finally, the Company is assuming new unit average weekly sales will be in
the range of $36,000 to $38,000 for the fourth quarter of 2008.
Full Year 2008 Targets
Based upon the third and fourth quarter 2008 targets, the Company is now
targeting its diluted earnings per share for fiscal 2008 to be $2.17 to $2.23
per diluted share. These targeted results include the more than $17 million
(approximately $0.34 per diluted share) year-over-year negative impact from
wheat cost inflation on the Company in fiscal 2008. If this full year target
is met, it represents a 21% to 25% increase over fiscal 2007 earnings per
diluted share. The Company continues to target 100 new unit openings in 2008,
approximately 40 Company-owned and 60 franchise-operated.
Perspective on 2009
The Company has not yet issued financial targets for fiscal 2009. However,
current analyst consensus estimates project growth rates ranging from
approximately 17% to 21% for fiscal 2009 earnings per diluted share (based
upon the Company's previously revised fiscal 2008 earnings guidance). The
Company currently believes that estimates reflecting a growth rate for fiscal
2009 of greater than 20% are not prudent at this time given anticipated
commodity cost inflation of 5% to 6%, the projected state of the economy in
2009, and the potential for even greater commodity costs and economic
disruptions.
Concluding Comment
Ron Shaich, chairman and chief executive officer, commented, "Our plan for
growing margins while maintaining transaction growth and improving return on
invested capital (ROIC) is working. We could not be more pleased with our
second quarter results and our prospects for the future. To deliver 33%
earnings growth in the second quarter, despite the weak consumer environment
and the hyperinflation we are experiencing in wheat and gasoline, is quite
gratifying. To be able to raise our second half 2008 targets to reflect a 33%
to 40% increase over the prior year is a reflection of the strength of our
concept, the power of our plan and the confidence we have in our Support
Center team, our operators and our franchisees."
Notes:
The Company will discuss second quarter 2008 results, preliminary
comparable bakery-cafe sales results for the first twenty-seven days of the
fiscal 2008 third quarter and third and fourth quarter and fiscal 2009
business outlook in a conference call that will be broadcast on the Internet
at 8:30 A.M. Eastern Daylight Time on Wednesday, July 23, 2008. To access the
call or view a copy of this release, go to
http://www.panerabread.com/investor. Access to the call and the release will
be archived for one year.
Included above are franchise-operated and system-wide bakery-cafe sales
information. System-wide sales is a non-GAAP financial measure which includes
sales at all Company-owned bakery-cafes and franchise-operated bakery-cafes,
as reported by franchisees. Management uses system-wide sales information
internally in connection with store development decisions, planning, and
budgeting analyses. Management believes system-wide sales information is
useful in assessing consumer acceptance of the Company's brand and facilitates
an understanding of financial performance as the Company's franchisees pay
royalties and contribute to advertising pools based on a percentage of their
sales.
Panera Bread Company owns and franchises 1,200 bakery-cafes under the
Panera Bread(R) and Saint Louis Bread Co.(R) names as of June 24, 2008. With
its identity rooted in handcrafted, fresh-baked, artisan bread, Panera Bread
is committed to providing great tasting, quality food that people can trust.
Highlighted by antibiotic free chicken, whole grain bread, select organic and
all-natural ingredients and a menu with zero grams added trans fat, Panera's
bakery-cafe selection offers flavorful, wholesome offerings. The menu includes
a wide variety of year-round favorites, complemented by new items introduced
seasonally with the goal of creating new standards in everyday food choices.
In neighborhoods across the country, guests are enjoying Panera's warm and
welcoming environment featuring comfortable gathering areas, relaxing decor,
and free internet access provided through a managed WiFi network. At the close
of each day, Panera Bread bakery-cafes donate bread and baked goods to
community organizations in need. Additional information is available on the
Company's website, http://www.panerabread.com. Panera also holds a 51%
interest in Paradise Bakery & Cafe, Inc., owner and franchisor of 70
bakery-cafes as of June 24, 2008.
Matters discussed in this news release, including any discussion or
impact, express or implied, on the Company's anticipated growth, operating
results, and future earnings per share, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These statements are often
identified by the words "believe", "positioned", "estimate", "project",
"target", "continue", "intend", "expect", "future", "anticipates", and similar
expressions. All forward-looking statements included in this release are made
only as of the date of this release, and we do not undertake any obligation to
publicly update or correct any forward-looking statements to reflect events or
circumstances that occur or which we hereafter become aware, after that date.
Forward-looking information expresses management's present belief,
expectations, or intentions regarding the Company's future performance. The
Company's actual results could differ materially from those set forth in the
forward-looking statements due to known and unknown risks and uncertainties
and could be negatively impacted by a number of factors. These factors
include, but are not limited to, the following: inability to execute our
growth strategy, including, among other things, variations in the number,
timing, and successful nature of Company-owned and franchise-operated
bakery-cafe openings and continued successful operation of bakery-cafes;
failure to comply with government regulations; loss of a member of senior
management; inability to recruit qualified personnel; failure or inability to
protect our brand, trademarks, or other proprietary rights; competition;
rising insurance costs; disruption in our supply chain or increases in
ingredient, product, or other supply costs; disruptions or supply issues in
our fresh dough facilities; health concerns about the consumption of certain
products; complaints and litigation; risks associated with the acquisition of
franchise-operated bakery-cafes; other factors, some of which may be beyond
our control, effecting our operating results; and other factors that may
effect restaurant owners or retailers in general. These and other risks are
discussed from time to time in the Company's SEC reports, including its Form
10-K for the year ended December 25, 2007 and its quarterly reports on Form
10-Q.

Schedule I

PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)

For the 13 Weeks Ended
June 24, 2008 June 26, 2007

Revenues:
Bakery-cafe sales $274,396 $209,626
Franchise royalties and fees 18,103 17,010
Fresh dough sales to franchisees 28,369 26,323
Total revenue 320,868 252,959
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products 83,011 64,128
Labor 85,456 67,389
Occupancy 22,176 16,356
Other operating expenses 36,833 29,560
Total bakery-cafe expenses 227,476 177,433
Fresh dough cost of sales to franchisees 27,471 23,592
Depreciation and amortization 16,235 14,063
General and administrative expenses 21,638 17,377
Pre-opening expenses 879 1,642
Total costs and expenses 293,699 234,107
Operating profit 27,169 18,852
Interest expense 144 39
Other (income) expense, net 492 4
Income before minority interest and income taxes 26,533 18,809
Income allocable to minority interest 516 79
Income before income taxes 26,017 18,730
Income taxes 10,311 6,095
Net income $15,706 $12,635

Per share data:
Net income per share
Basic $0.52 $0.40
Diluted $0.52 $0.39

Weighted average shares of common and
common equivalent shares outstanding:
Basic 29,970 31,683
Diluted 30,338 32,250

Beginning in the first quarter of 2008, the Company changed the
classification of certain amounts between fresh dough cost of sales to
franchisees and cost of food and paper products. The Company has reclassified
prior periods in order to conform to the current presentation.

Schedule I (continued)

PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)

For the 26 Weeks Ended
June 24, 2008 June 26, 2007

Revenues:
Bakery-cafe sales $534,842 $406,744
Franchise royalties and fees 35,539 33,269
Fresh dough sales to franchisees 55,466 52,621
Total revenue 625,847 492,634
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products 162,339 122,145
Labor 170,204 129,860
Occupancy 43,584 31,893
Other operating expenses 70,164 55,320
Total bakery-cafe expenses 446,291 339,218
Fresh dough cost of sales to franchisees 53,401 46,412
Depreciation and amortization 32,374 27,398
General and administrative expenses 43,457 34,514
Pre-opening expenses 2,006 2,779
Total costs and expenses 577,529 450,321
Operating profit 48,318 42,313
Interest expense 1,173 171
Other (income) expense, net 347 (586)
Income before minority interest and income taxes 46,798 42,728
Income allocable to minority interest 877 192
Income before income taxes 45,921 42,536
Income taxes 17,775 14,857
Net income $28,146 $27,679

Per share data:
Net income per share
Basic 0.94 0.88
Diluted 0.93 0.86

Weighted average shares of common and
common equivalent shares outstanding:
Basic 29,930 31,616
Diluted 30,240 32,225

Beginning in the first quarter of 2008, the Company changed the
classification of certain amounts between fresh dough cost of sales to
franchisees and cost of food and paper products. The Company has reclassified
prior periods in order to conform to the current presentation.

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
June 24, 2008 June 26, 2007

Revenues:
Bakery-cafe sales 85.5% 82.9%
Franchise royalties and fees 5.6 6.7
Fresh dough sales to franchisees 8.8 10.4
Total revenue 100.0% 100.0%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 30.3% 30.6%
Labor 31.1 32.1
Occupancy 8.1 7.8
Other operating expenses 13.4 14.1
Total bakery-cafe expenses 82.9 84.6
Fresh dough cost of sales to franchisees (2) 96.8 89.6
Depreciation and amortization 5.1 5.6
General and administrative expenses 6.7 6.9
Pre-opening expenses 0.3 0.6
Total costs and expenses 91.5 92.5
Operating profit 8.5 7.5
Interest expense - -
Other (income) expense, net 0.2 -
Income before minority interest and income taxes 8.3 7.4
Income allocable to minority interest 0.2 -
Income before income taxes 8.1 7.4
Income taxes 3.2 2.4
Net income 4.9% 5.0%

(1) As a percentage of Company bakery-cafe sales.
(2) As a percentage of fresh dough sales to franchisees.

Beginning in the first quarter of 2008, the Company changed the
classification of certain amounts between fresh dough cost of sales to
franchisees and cost of food and paper products. The Company has reclassified
prior periods in order to conform to the current presentation.

Schedule I (continued)

PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
MARGIN ANALYSIS
(unaudited)

The following table sets forth the percentage relationship to total
revenues, except where otherwise indicated, of certain items included in the
Company's consolidated statements of operations for the period indicated.
Percentages may not add due to rounding:
For the 26 Weeks Ended
June 24, 2008 June 26, 2007

Revenues:
Bakery-cafe sales 85.5% 82.6%
Franchise royalties and fees 5.7 6.7
Fresh dough sales to franchisees 8.9 10.7
Total revenue 100.0% 100.0%
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 30.4% 30.0%
Labor 31.8 31.9
Occupancy 8.1 7.8
Other operating expenses 13.1 13.6
Total bakery-cafe expenses 83.4 83.4
Fresh dough cost of sales to franchisees (2) 96.3 88.2
Depreciation and amortization 5.2 5.6
General and administrative expenses 6.9 7.0
Pre-opening expenses 0.3 0.6
Total costs and expenses 92.3 91.4
Operating profit 7.7 8.6
Interest expense 0.2 -
Other (income) expense, net 0.1 (0.1)
Income before minority interest and income taxes 7.4 8.6
Income allocable to minority interest 0.1 -
Income before income taxes 7.3 8.6
Income taxes 2.8 3.0
Net income 4.5% 5.6%

(1) As a percentage of Company bakery-cafe sales.
(2) As a percentage of fresh dough sales to franchisees.

Beginning in the first quarter of 2008, the Company changed the
classification of certain amounts between fresh dough cost of sales to
franchisees and cost of food and paper products. The Company has reclassified
prior periods in order to conform to the current presentation.

Schedule II - Supplemental Sales and Bakery-Cafe Information

Historical System-Wide AWS

2007 2006 2005 2004 2003 2002
AWS $38,668 $39,150 $38,318 $36,008 $35,617 $35,388

2008 Company-Owned AWS By Year Opened
2005
2008 2007 2006 Opens
Opens Opens Opens & Prior Total
Bakery-Cafes 20 89 77 362 548
Q1 08 $39,083 $34,278 $35,594 $38,479 $37,379
Q2 08 $35,776 $34,967 $37,111 $40,137 $38,734
Q3 08
Q4 08
2008 YTD $36,640 $34,624 $36,352 $39,305 $38,062

2008 Franchise-Operated AWS By Year Opened
2005
2008 2007 2006 Opens
Opens Opens Opens & Prior Total
Bakery-Cafes 26 81 83 532 722
Q1 08 $34,693 $34,891 $34,019 $40,895 $39,330
Q2 08 $35,690 $35,869 $35,389 $42,153 $40,464
Q3 08
Q4 08
2008 YTD $35,457 $35,380 $34,704 $41,523 $39,903

Year-Over-Year Change in Company-Owned AWS and Comp Sales
2005 Comp
2008 2007 2006 Opens AWS Sales
Opens Opens(a) Opens & Prior Total Total
Q1 08 N/A 9.2% 6.1% 2.1% 1.5% 3.3%
Q2 08 N/A 8.8% 10.0% 5.4% 4.5% 6.5%
Q3 08 N/A
Q4 08 N/A
2008 YTD N/A 8.4% 8.1% 3.8% 3.0% 5.0%

(a) Change in Company-owned AWS in 2008 from 2007 compares 89
bakery-cafes in 2008 against 14 and 31 bakery-cafes at the end of the
first and second quarters of 2007, respectively.

Year-Over-Year Change in Franchise-Operated AWS and Comp Sales
2005 Comp
2008 2007 2006 Opens AWS Sales
Opens Opens(b) Opens & Prior Total Total
Q1 08 N/A -16.7% 3.0% 1.6% 0.0% 1.7%
Q2 08 N/A -3.7 9.5% 4.9% 3.6% 4.8%
Q3 08 N/A
Q4 08 N/A
2008 YTD N/A -7.6 6.2% 3.3% 1.8% 3.3%

(b) Change in Franchise-operated AWS in 2008 from 2007 compares 81
bakery-cafes in 2008 against 17 and 39 bakery-cafes at the end of the
first and second quarters of 2007, respectively.

Bakery-Cafe Openings
Company Franchise Total Company Franchise Total
Q1 08 14 13 27 Q1 07 14 17 31
Q2 08 6 13 19 Q2 07 17 22 39
Q3 08 Q3 07 19 16 35
Q4 08 Q4 07 39 25 64
2008 YTD 20 26 46 2007 YTD 89 80 169

Note: Bakery-cafe sales, operating weeks, AWS and bakery-cafe openings
metrics include activity for Paradise Bakery & Cafe prospectively from the
acquisition date of February 1, 2007. The 2007 bakery-cafe openings do not
include one Paradise franchise-operated bakery-cafe which opened in January
2007.
AWS - average weekly sales for the time periods indicated.
Comp Sales - comparable bakery-cafe sales increases for the time period
indicated, which exclude closed locations and are based on sales for
bakery-cafes that have been in operation and owned for at least 18 months.

PANERA BREAD COMPANY
Schedule III - Comparable Bakery-Cafe Sales Information

For the 4 For the 5 For the 4 For the 13 For the 26
weeks ended weeks ended weeks ended weeks ended weeks ended
April 22, May 27, June 24, June 24, June 24,
2008 2008 2008 2008 2008
Company-
owned 7.7% 6.9% 4.8% 6.5% 5.0%
Franchise-
operated 5.2% 5.1% 4.1% 4.8% 3.3%

SOURCE Panera Bread Company

Michele Harrison, Vice President, Investor Relations of Panera Bread Company,
+1-314-256-4282