Panera Bread 2006 Annual Report Download - page 29

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Labor expense was $205.0 million, or 30.8% of bakery-cafe sales, for the fiscal year ended December 26, 2006
compared to $151.5 million, or 30.3% of bakery-cafe sales, for the fiscal year ended December 27, 2005. The labor
expense as a percentage of bakery-cafe sales increased between 2006 and 2005 primarily as a result of higher
bakery-cafe labor costs incurred in support of our evening daypart initiative, partially offset by leveraging these
costs over higher sales volumes.
Occupancy cost was $48.6 million, or 7.3% of bakery-cafe sales, for the fiscal year ended December 26, 2006
compared to $35.6 million, or 7.1% of bakery-cafe sales, for the fiscal year ended December 27, 2005. The increase
in occupancy cost as a percentage of bakery-cafe sales between 2006 and 2005 was primarily due to higher
occupancy costs in certain geographical regions outpacing sales growth related to new bakery-cafe openings.
Other operating expenses were $92.2 million, or 13.8% of bakery-cafe sales, the fiscal year ended Decem-
ber 26, 2006 compared to $70.0 million, or 14.0% of bakery-cafe sales, for the fiscal year ended December 27,
2005. The decrease in other operating expenses as a percentage of bakery-cafe sales in 2006 compared to 2005 was
primarily due to the leveraging of other operating costs over higher sales volumes, partially offset by increased local
marketing expenses incurred in support of our evening daypart initiative.
For the fiscal year ended December 26, 2006, fresh dough facility cost of sales to franchisees was $85.6 million,
or 84.5% of fresh dough facility sales to franchisees, compared to $75.0 million, or 86.7% of fresh dough facility
sales to franchisees, for the fiscal year ended December 27, 2005. The decrease in the fresh dough facility cost of
sales rate in fiscal year 2006 was primarily due to lower ingredient costs and improved leveraging of fresh dough
manufacturing costs. Butter costs in 2006 averaged $1.58 per pound compared to $1.64 per pound in 2005.
General and administrative expenses were $59.3 million, or 7.2% of total revenue, and $46.3 million, or 7.2%
of total revenue, for the fiscal years ended December 26, 2006 and December 27, 2005, respectively. The increase in
the general and administrative expense between 2006 and 2005 was primarily due to an increase in stock based
compensation costs of $7.4 million primarily related to the adoption of SFAS 123R, increased marketing expenses
related to our evening daypart initiative, and higher legal costs related to litigation that was favorably resolved in the
third quarter, partially offset by the leveraging of these costs over higher sales volumes and lower incentive bonus
expense as a result of weaker corporate performance.
Other Income and Expense
Other income and expense for the fiscal year ended December 26, 2006 increased to $2.0 million of income, or
0.2% of total revenue, from $1.1 million of income, or 0.2% of total revenue, for the fiscal year ended December 27,
2005. The increase in other income and expense results primarily from increased interest income in 2006 resulting
from higher interest rates, partially offset by $1.5 million of charges associated with the Paradise acquisition. See
Note 16 of our Consolidated Financial Statements for further information with respect to the charges associated
with the Paradise acquisition.
Income Taxes
The provision for income taxes increased to $33.8 million for the fiscal year ended December 26, 2006
compared to $30.0 million for the fiscal year ended December 27, 2005. The tax provisions for the fiscal year ended
December 26, 2006 and December 27, 2005 reflected a consistent combined federal, state, and local effective tax
rate of 36.5%.
Net Income
Net income for the fiscal year ended December 26, 2006 increased $6.6 million, or 13%, to $58.8 million, or
$1.84 per diluted share, compared to net income of $52.2 million, or $1.65 per diluted share, for the fiscal year
ended December 27, 2005. On a comparable basis, net income for the fiscal year ended December 26, 2006
increased to $58.8 million, or $1.84 per diluted share, compared to pro forma net income of $48.1 million, inclusive
of SFAS 123 stock option expense, or $1.52 per diluted share, for the fiscal year ended December 27, 2005. The
increase in net income in 2006 resulted from the factors described above.
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