Panera Bread 2004 Annual Report Download - page 30

The Company had working capital of $2.5 million at December 25, 2004 and $21.5 million at December 27, 2003. The $19.0
million decrease and $2.8 million decrease in working capital for the fifty-two weeks ended December 25, 2004 and December 27,
2003, respectively, is net of the $26.4 million and $4.0 million, respectively, of the long-term portion of cash invested in government
securities previously described. The Company has experienced no liquidity difficulties and has historically been able to finance its
operations through internally generated cash flow, cash from the exercise of employee stock options, and, when necessary, borrowings
under its revolving line of credit.
Other Commitments
The Company currently anticipates total capital expenditures for fiscal year 2005 of approximately $95 million to $100 million
principally for the opening of 70 new Company-owned bakery-cafes, the costs incurred on early 2006 openings, the maintaining and
remodeling of existing bakery-cafes, and the remodeling and expansion of existing fresh dough facilities. The Company expects future
bakery-cafes will require, on average, an investment per bakery-cafe (excluding pre-opening expenses which are expensed as
incurred) of approximately $0.95 million, which is net of landlord allowance. The Company expects to fund these expenditures
principally through internally generated cash flow and cash from the exercise of employee stock options supplemented, where
necessary, by borrowings on its revolver.
In addition to our capital expenditure requirements, the Company has certain other contractual and committed cash obligations.
The Company’s contractual cash obligations consist of noncancelable operating leases for its bakery-cafes, fresh dough facilities and
trucks, and administrative offices. Lease terms for its trucks are generally for five to seven years. Lease terms for its bakery-cafes,
fresh dough facilities, and administrative offices are generally for ten years with renewal options at most locations and generally
require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs. Many
bakery-cafe leases provide for contingent rental (i.e., percentage rent) payments based on sales in excess of specified amounts. Certain
of the Company’s lease agreements provide for scheduled rent increases during the lease terms or for rental payments commencing at
a date other than the date of initial occupancy. See Note 2 to the Consolidated Financial Statements for further information on the
Company’s accounting for its leases. We expect cash expenditures under these lease obligations to be as follows:
Payments Due by Period as of December 25, 2004 (in thousands)
Total In 2005 2006-2007 2008-2009 After 2009
Operating Leases(1)............................................................................................. $ 227,727
$ 28,680 $ 56,293 $ 51,191 $ 91,563
__________
(1) See Note 10 to the Consolidated Financial Statements for further information.
Off-Balance Sheet Arrangement — The Company’s commercial commitments consist of subleases for certain of the operating
leases of ten franchise locations and guarantees for certain of the operating leases of 42 locations of the former Au Bon Pain Division,
or its franchisees. Theses leases have terms expiring on various dates from January 31, 2005 to January 1, 2019 and a potential amount
of future rental payments of approximately $33.6 million. These leases will continue to decrease over time as these operating leases
expire or are not renewed. As the guarantees were initiated prior to December 31, 2002, the Company has not recorded a liability for
these guarantees pursuant to the provisions of FASB Interpretation Number (FIN) 45, “Guarantor’s Accounting and Disclosure
Requirements For Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5,
57, and 107 and Rescission of FASB Interpretation No. 34.” Also, the Company has not had to make any payments related to these
leases. Au Bon Pain and the respective franchisees continue to have primary liability for these operating leases. Potential future
commitments consist of:
Amounts Committed as of December 25, 2004 (in thousands)
Total In 2005 2006-2007 2008-2009 After 2009
Subleases and Lease Guarantees(1) ............................................................................ $ 33,597
$ 7,405 $ 12,013 $ 7,215 $ 6,964
__________
(1) Represents aggregate minimum requirement — see Note 10 to the Consolidated Financial Statements for further information.
In November 2002, the Company signed an agreement with Dawn Food Products, Inc. (“Dawn”) to provide sweet goods for the
period 2003-2007. The agreement with Dawn is structured as a cost plus agreement. The transition from our previous provider of
sweet goods to Dawn was completed in the first quarter of fiscal 2003.
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