Panera Bread 2007 Annual Report Download - page 45

including the pace of expansion, real estate markets, site locations, and the nature of the arrangements negotiated
with landlords. We believe that our cash flow from operations and the exercise of employee stock options, as well as
available borrowings under our existing credit facility, will be sufficient to fund our capital requirements for the
foreseeable future. We currently anticipate total capital expenditures for fiscal year 2008 of approximately
$90 million to $110 million, which consists of the following: $55 million to $65 million related to the opening
of at least 40 new Company-owned bakery-cafes and the costs incurred on early 2009 openings, $20 million to
$25 million related to the remodeling of existing bakery-cafes, $5 million to $8 million related to the opening of new
fresh dough facilities and the remodeling and expansion of existing fresh dough facilities, and $10 million to
$12 million of other capital needs including on our concept, information technology, and infrastructure. We expect
future bakery-cafes will require, on average, an investment per bakery-cafe (excluding pre-opening expenses which
are expensed as incurred) of approximately $1.0 million. Our 2008 projection of capital expenditures for new
Company-owned bakery-cafes reflects our decision to reduce our 2008 bakery-cafe growth in an effort to focus on
our return on invested capital. Our strategy to improve return on invested capital includes raising our sales hurdles
for new bakery-cafes to adjust to the contraction in margins we have experienced. We expect to do this by focusing
our real estate decision-making process to only build bakery-cafes that can deliver a 50 percent or greater
probability against our revised return on investment goals and bakery-cafes that reach mature returns in a shorter
amount of time. As margins improve and the trajectory of our return on invested capital improves, we will once
again consider expanding development as appropriate.
We used $71.0 million of cash flows for acquisitions, net of cash acquired, in fiscal year 2007, $9.1 million
in fiscal year 2006, and $28.3 million in fiscal year 2005. In fiscal year 2007, we acquired 51 percent of the
outstanding stock of Paradise, then owner and operator of 22 bakery-cafes and one commissary and franchisor of
22 bakery-cafes and one commissary, and 36 bakery-cafes, as well as two bakery-cafes still under construction,
from franchisees. We also made required payments of a portion of the remaining acquisition purchase price for
three of our acquisitions in fiscal year 2007. As of December 25, 2007, we had a total of $2.5 million of accrued
purchase price affiliated with acquisitions completed in fiscal years 2006 and 2007, which is anticipated to be
paid within the next twelve months. In the prior years, we acquired significantly fewer bakery-cafes, which
included 13 bakery-cafes, as well as one bakery-cafe still under construction, in fiscal year 2006, and 21 bakery-
cafes, as well as one bakery-cafe still under construction, in fiscal year 2005. See Note 3 to the accompanying
consolidated financial statements for further information with respect to our acquisition activity in fiscal years
2007, 2006 and 2005.
Historically, we invested a portion of our cash balances on hand in a private placement of units of beneficial
interest in the Columbia Strategic Cash Portfolio, or Columbia Portfolio, which is an enhanced cash fund sold as an
alternative to traditional money-market funds, and we appropriately classified the amounts as trading securities in
Cash and Cash Equivalents in the Consolidated Balance Sheets as the fund was considered both short-term and
highly liquid in nature. These investments are subject to credit, liquidity, market and interest rate risk. For example,
the Columbia Portfolio includes investments in certain asset backed securities and structured investment vehicles
that are collateralized by sub-prime mortgage securities or related to mortgage securities, among other assets. As a
result of adverse market conditions that have unfavorably affected the fair value and liquidity of collateral
underlying the Columbia Portfolio, the Columbia Portfolio was overwhelmed with withdrawal requests from
investors and it was closed with a restriction placed upon the cash redemption ability of its holders in the fourth
quarter of 2007. At such time, we reclassified the $26.5 million of units in the Columbia Portfolio to short-term
investments from cash and cash equivalents in our Consolidated Balance Sheets, and as an outflow from investing
activities in our Consolidated Statements of Cash Flows. Additionally, we assessed the fair value of the underlying
collateral for the Columbia Portfolio through review of current investment ratings, as available, coupled with the
evaluation of the liquidation value of assets held by each investment and their subsequent distribution of cash. We
then utilized this assessment of the underlying collateral from multiple indicators of fair value, which were then
discounted to reflect the expected timing of disposition and market risks to arrive at an estimated fair value of the
Columbia Portfolio units of $0.960 per unit as of December 25, 2007. Accordingly, we recognized an unrealized
loss on the Columbia Portfolio units of $1.0 million in the fiscal year ended December 25, 2007 and included the
loss in net cash provided by operating activities. As of December 25, 2007, we have received $2.4 million of cash
redemptions subsequent to the withdrawal restriction, which we classified as investment maturity proceeds
provided by investing activities, and recognized $0.03 million of realized losses. Information and the markets
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