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SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

(Mark one)

		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended July 13, 2002
or
		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		[For the transition period from           to           ]

Commission file number 0-19253

Panera Bread Company

(314) 633-7100
(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 No

     As of August 16, 2002, 26,937,667 shares and 2,080,809 shares of the registrant’s Class A and Class B Common Stock, respectively, $.0001 par value, were outstanding.

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PANERA BREAD COMPANY

INDEX

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PART I. FINANCIAL INFORMATION

PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share information)

The accompanying notes are an integral part of the consolidated financial statements.

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

The accompanying notes are an integral part of the consolidated financial statements.

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PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 accounting principles generally accepted in the United States. They should be read in conjunction with the financial statements of the Company for the fiscal year ended December 29, 2001, included in the Company’s Form 10-K filing for that year.

     For the twenty-eight weeks ended July 13, 2002, the consolidated financial statements consist of the accounts of Panera Bread Company, its wholly owned subsidiaries Panera, LLC (formerly Panera, Inc.) and Pumpernickel Inc., its 75% interest in its subsidiary Pain Francais, Inc. (currently in the process of voluntary dissolution with the State of New York), and its indirect subsidiaries, Pumpernickel Associates, LLC, and Panera Enterprises, Inc., and, through Artisan Bread, LLC, also an indirect subsidiary, an 86% investment in Cap City Bread, LLC, in which a minority interest is held by a joint venture partner.

     The accompanying unaudited consolidated financial statements 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. Interim results are not necessarily indicative of the results that may be expected for the entire year.

     Certain reclassifications have been made to conform previously reported data to the current presentation.

NOTE B-FRANCHISE ROYALTIES AND FEES AND REVENUE RECOGNITION

     Franchise fees are the result of sales of area development rights and the sale of individual franchise locations to third parties. The initial franchise fee is $35,000 per bakery-cafe to be developed under the Area Development Agreement (ADA). Of this fee, $5,000 is paid at the time of signing of the ADA and is recognized as revenue when it is received, as it is non-refundable and the Company has to perform no other service to earn this fee. The remaining $30,000 is paid at the time an individual franchise agreement is signed and is recognized as revenue upon the commencement of franchise operations of the bakery-cafe. Royalties are paid weekly based on a percentage of sales, ranging from 4.0% to 5.0%, as defined in the agreement. Royalties are recognized as revenue when they are earned.

NOTE C-DEFERRED REVENUE

     Deferred revenue includes unearned franchise fee revenue (which occurs when franchisees prepay opening fees for bakery-cafes that have not opened) and deferred revenue that resulted from a change in soft drink provider in 1999. As a result of this change, the Company received an upfront payment of approximately $2.5 million. These funds are available for both Company-owned and franchised bakery-cafes to cover costs of conversion and transition. The upfront payments are being allocated at a rate of $3,000 per applicable Company-owned and franchised bakery-cafe. The Company is then recognizing the $3,000 per Company-owned bakery-cafe over the five-year life of the soft drink contract.

NOTE D-INCOME TAXES

     The effective tax rate for the twelve and twenty-eight weeks ended July 13, 2002, and the twelve and twenty-eight weeks ended July 14, 2001, was 36.5% and 39%, respectively. The reduction in the effective tax rate for the twelve and twenty-eight weeks ended July 13, 2002, as compared to the twelve and twenty-eight weeks ended July 14, 2001, results from the Company’s restructuring of its legal entities to better manage its intellectual property which has resulted in a lower effective state income tax rate.

     For the twenty-eight weeks ended July 13, 2002 and July 14, 2001, the Company realized tax benefits of approximately $4.0 million related to the exercise of employee stock options. Such tax benefits serve to reduce the Company’s income tax liability and increase additional paid-in capital. As of July 13, 2002, the Company has net operating loss carryforwards of approximately $23.1 million, which can be carried forward up to 20 years to offset federal taxable income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E-ADOPTION OF SFAS 142

     The Company has adopted Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets” which establishes new accounting and reporting standards for purchase business combinations and goodwill. All goodwill was determined to have an indefinite useful life as management expects the businesses to which it relates to generate future cash flows indefinitely. Thus, the Company ceased amortizing the existing goodwill at the beginning of its fiscal year 2002. Similarly, the goodwill from the January 22, 2002 acquisition of the franchise operation in Jacksonville, Florida will not be amortized as management’s assessment of discounted cash flows supports non-amortization. A reconciliation of earnings and earnings per share following SFAS 142 adoption is as follows (per share amounts may not add due to rounding):