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SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

(Mark one)

or

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 [X]    No [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes [X]    No [  ]

     As of May 27, 2003, 27,753,415 shares and 1,868,531 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

Item 1. Financial Statements

PANERA BREAD COMPANY

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

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PANERA BREAD COMPANY

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

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PANERA BREAD COMPANY

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 consolidated financial statements included in the Company’s Form 10-K/A for the fiscal year ended December 28, 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, Panera Enterprises, Inc., Artisan Bread, LLC, which has a majority interest in Cap City Bread, LLC operating 23 bakery-cafes, and Asiago Bread, LLC, which has a majority interest in 8 LLC’s operating 9 bakery-cafes. All intercompany balances and transactions have been eliminated in consolidation.

     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-STOCK-BASED COMPENSATION

     In accordance with SFAS 123, “Accounting for Stock-Based Compensation,” the Company elected to follow the provisions of Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and provide the required pro forma disclosure in the footnotes to the financial statements as if the measurement provisions of SFAS 123 had been adopted. Accordingly, no compensation costs have been recognized in the Consolidated Statements of Operations for the stock option plans as the exercise price of stock options equals the market price of the underlying stock on the grant date. Had compensation costs for the Company’s stock option plans been determined under the fair value based method and recognition provisions of SFAS 123 at the grant date for awards since 1995, the Company’s net income for the sixteen weeks ended April 19, 2003 and April 20, 2002 would have been as follows (in thousands, except per share amounts):

               The effects of applying SFAS 123 in this pro-forma disclosure may not be representative of the effects on reported net income for the full fiscal year or for future periods. SFAS 123 does not apply to awards made prior to 1995.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C-ADOPTION OF SFAS 143

     Effective December 29, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 143 (SFAS 143), “Accounting for Asset Retirement Obligations.” SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement requires the Company to record an estimate for costs of retirement obligations that may be incurred at the end of lease terms of existing bakery-cafes or other facilities.

     Beginning December 29, 2002, the Company recognizes the future cost to comply with lease obligations at the end of a lease as it relates to tangible long-lived assets in accordance with the provisions of SFAS 143. A liability for the fair value of an asset retirement obligation along with a corresponding increase to the carrying value of the related long-lived asset is recorded at the time a lease agreement is executed. The Company amortizes the amount added to property and equipment and recognizes accretion expense in connection with the discounted liability over the life of the respective lease. The estimated liability is based on experience in closing bakery-cafes and the related external cost associated with these activities. Revisions to the liability could occur due to changes in estimated costs to close bakery-cafes or changes in estimated lease term.

     Upon adoption of SFAS 143, the Company recorded a discounted liability of approximately $0.8 million, increased net property and equipment by approximately $0.4 million, and recognized a one-time cumulative effect charge of approximately $0.2 million (net of deferred tax benefit of approximately $0.1 million). The liability is included in other long-term liabilities in the Consolidated Balance Sheets. The effects on earnings from continuing operations before cumulative effect of accounting change for the quarters ended April 19, 2003 and April 20, 2002, assuming the adoption of SFAS 143 as of December 30, 2001, were not material to net earnings or earnings per share. The pro forma liability at December 30, 2001 and April 20, 2002 would have been approximately $0.6 and $0.7 million, respectively.

NOTE D-ACCRUED EXPENSES

     Accrued expenses consist of the following (in thousands):

NOTE E-COMMITMENTS AND CONTINGENT LIABILITIES

     The Company is a prime tenant or guarantor for certain operating leases of four franchisee locations and 79 locations of the former Au Bon Pain Division, and its franchisees. The leases have terms expiring on various dates from June 30, 2003 to February 1, 2014, and the guarantee has a maximum potential amount of future payments of approximately $46.9 million. The obligation from leases or guarantees will continue to decrease over time as these operating leases expire or are not renewed. Currently, the Company has not recorded a liability for these leases or guarantees and has not had to make any payments related to the leases or guarantees. Au Bon Pain and the respective franchisees continue to have primary liability for these operating leases.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The Company, pursuant to an agreement with its former president as a joint venture partner and minority interest owner, is developing and managing up to 50 bakery-cafes in the Northern Virginia and Central Pennsylvania markets. After October 2006, the Company and the joint venture partner each have rights which could, if exercised, permit/require the Company to purchase the bakery-cafes at contractually determined values based on multiples of cash flows. Had the Company been required to repurchase the bakery-cafes in operation at April 19, 2003 at the contractually determined value based on the joint venture partner’s right to sell, a payment of $2.5 million would have been required.

     The Company uses a joint venture minority interest ownership structure to facilitate operation of its bakery-cafes in certain markets. As of April 19, 2003, there were 4 minority interest owners and 9 joint venture bakery-cafes. After 5 years from a bakery-cafe opening, the Company and each minority interest owner have rights, which could, if exercised, permit/require the Company to purchase the minority interest owner’s interest in their respective bakery-cafe or region at a stated multiple of cash flow. Had the Company been required to repurchase the bakery-cafes in operation at April 19, 2003 at the contractually determined value based on the minority interest owners’ right to sell, a payment of $0.2 million would have been required.

NOTE F-EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted earnings per share (in thousands, except for per share data) as adjusted for the stock dividend of one share of common stock for each share of common stock outstanding in June 2002: