This summary is based on the first quarter, fiscal 2007 earnings call conducted by Panera Bread Co. (PNRA: chart) on April 25, 2007.

Management

- President: Neal Yanofsky
- Chairman and CEO: Ronald Shaich
- Senior Vice President, CFO: Jeffrey Kip

Key Investors Issues

- Net income remained flat at $15 million or 47 cents per diluted share.
- Revenue increased 24% to $239 million.
- System-wide average weekly sales declined by 2.9% to $38,359.

First Quarter Highlights:

Net income was flat at $15 million or 47 cents per share due to margin deleverage, incremental Crispani and pressure on food costs.

- Pressure on food costs was driven by both a modest mix shift away from products self-manufactured on the FDF system and pressure from commodities such as gasoline and certain other commodities.
- Revenue increased 24% to $240 million, while net bakery-cafe sales increased 27% to $197 million from $155 million in 2006 driven by sales from units opened and in part by recent acquisitions.
- Franchise royalties and fees increased 12% to $16 million driven by new franchise operated bakery cafes opened.
- Fresh dough sales to franchisees increased 8% to $26 million $24 million in 2006 driven by new franchisee operated bakery-cafes opened tempered by the modest shift in bakery-cafe menu mix away from the FDF manufactured products.

Key Metrics & Business Review:

- Comparable bakery-cafe sales decreased 0.6% for Company-owned bakery-cafes and increased 0.2% for franchise-operated bakery-cafes.
- System-wide average weekly sales declined by 2.9% to $38,359 ($36,839 Company-owned and $39,313 franchise-operated), while system-wide operating weeks totaled 13,871 (5,351 Company-owned and 8,520 franchise-operated).
- As a result of these differential growth rates in the three businesses, there was a shift in total revenue mix as bakery-cafe sales as a percentage of total revenues increased to 82.2% compared to 79.9% in 2006 while franchise royalties and fees declined to 6.8% from 7.5% over same periods.
- The shift in the mix of revenues has resulted from the increased number of new company-owned bakery-cafes as a percentage of all new bakery-cafes opened and the 17 franchise operated bakery-cafes the company acquired.

Margin analysis:

- Restaurant margins were lower by 240 basis points as cost of food and paper products increased by 40 basis points year-over-year driven primarily by the modest shift in mix of bakery related products self manufactured in the fresh dough facilities and moderate commodity pressures from items such as gasoline, wheat and produce.
- Labor as a percentage of restaurant sales rose 120 basis points coupled with a 90 basis point impact from flat comparable store sales offset by 70 basis points of favorability from better management of that expense line in the quarter.
- As a percent of fresh dough sales to franchisees'' improved 590 basis points over the prior year as a result of a 205 basis points of expense related to butter hedging contracts as the company has contracted for butter for the year through standard forward pricing contracts.
- The FDF system has continued to enjoy greater operating efficiencies as average bakery-cafés serve per FDF rose to 54, offsetting unfavorable input costs.

Other income decreased 30 basis points to 0.2% of total revenue due to lower interest income on lower cash and investment balances.

- Other income was also affected by $150,000 of charges stemming from the Paradise acquisition.
- The company had $41 million in cash and investments in government securities and no debt and generated $23 million of cash from operations and employee stock option exercises and had capital expenditures of $28 million.

Other Developments:

- A total of 31 new bakery-cafes were opened system-wide, 14 of those were company-owned and 17 of those were franchise operated and closed one company-owned bakery-cafe. This compares with 22 system-wide openings in Q1 2006.
- In addition it acquired 4 bakery-cafes from a franchise as well as 51% of the outstanding stock of Paradise Bakery and Cafe which includes 22 company-owned and 22 franchise-operated bakery cafes.

Second Quarter Outlook:

- EPS target is between 47 cents to 51 cents, an increase of 7% to 16% from 2006 results.
- System-wide comparable bakery-cafe sales growth of 3.5% to 4.5% and system-wide average weekly sales of $38,500 to $39,500.
- Bakery-cafe openings are forecasted to be 32 (15 Company-owned and 17 franchise-operated, including Paradise bakery-cafes), resulting in expected system-wide operating weeks of 14,425 to 14,550.

Key questions and answers from the first quarter earnings call conducted by Panera Bread Co. on April 25, 2007.

John Glass: Will the salestrends shift away from the products manufactured at the FDF?