Panera Bread 2008 Annual Report Download - page 38

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related to severance, the write-off of capitalized assets and overhead costs and the termination of leases for specific
sites that we decided in the first quarter of 2008 to no longer develop in connection with the adjustment of our 2008
development plans, and a charge of $0.6 million related to on-going legal settlements.
Other Income and Expense
Other income and expense in fiscal 2008 increased to $0.9 million of expense, or 0.1 percent of total revenue,
from $0.3 million of expense, or less than 0.1 percent of total revenue, in fiscal 2007. The year-over-year change in
other income and expense between the 2008 and 2007 fiscal years was primarily from a net charge of $1.9 million in
fiscal 2008 to recognize realized and unrealized gains and losses on the changes in fair value of its investment in the
Columbia Portfolio and related redemptions received; a $0.5 million gain from the sale of a bakery-cafe to a
franchisee in fiscal 2007; and lower interest income in fiscal 2008 resulting from lower interest rates on cash and
investments on-hand. Partially offsetting these items was a charge of approximately $0.2 million in fiscal 2007
stemming from the Paradise acquisition and a charge of approximately $1.1 million in fiscal 2007 relating to the
termination of franchise agreements for certain acquired franchise-operated bakery-cafes that operated at a royalty
rate lower than the current market royalty rates.
Income Taxes
The provision for income taxes increased to $41.3 million in fiscal 2008 compared to $31.4 million in fiscal
2007. The tax provision for the 2008 and 2007 fiscal years reflects an effective tax rate of 38.0 percent and
35.4 percent, respectively. The tax provision in fiscal 2008 includes a $0.5 million favorable adjustment to
recognize the benefit of tax credits not previously recognized and a $1.0 million increase in our reserves for
potential exposures relating to various ongoing tax audits and legal and legislative developments in certain
jurisdictions not yet under audit. The tax provision in fiscal 2007 included $0.9 million of charges to increase our
reserves for unrecognized tax benefits primarily related to certain state tax law changes; a $1.5 million tax benefit
reflecting the expiration of the statute of limitations on the recovery of certain previously deducted expenses; and a
$0.8 million favorable provision to return adjustment to fully recognize the benefit of deductions not previously
recognized.
Fiscal 2007 Compared to Fiscal 2006
Revenues
Total revenues in fiscal 2007 increased 28.7 percent to $1,066.7 million compared to $829.0 million in fiscal
2006. The growth in total revenue in fiscal 2007 compared to the prior year is primarily due to the opening of 169
new bakery-cafes system-wide in fiscal 2007, the acquisition of 44 system-wide bakery-cafes on February 1, 2007
as a result of the purchase of 51 percent of the outstanding stock of Paradise, and the increase in system-wide
comparable bakery-cafe sales in fiscal 2007 of 1.6 percent.
The system-wide average weekly sales per bakery-cafe for the periods indicated are as follows:
December 25,
2007
December 26,
2006
Percentage
Change
For the Fiscal Year Ended
System-wide average weekly sales ................... $38,668 $39,150 ⫺1.2%
Bakery-cafe sales in fiscal 2007 increased 34.3 percent to $894.9 million compared to $666.1 million in fiscal
2006. The increase in bakery-cafe sales in fiscal 2007 compared to the prior fiscal year is primarily due to the impact
of a full year’s operations of the 70 Company-owned bakery-cafes opened in 2006, the opening of 89 new
Company-owned bakery-cafes, the acquisition of 36 bakery-cafes from franchisees in 2007, and to a lesser extent
the 1.9 percent increase in comparable Company-owned bakery-cafe sales in fiscal 2007. Bakery-cafe sales were
also positively impacted by revenues from the 22 Paradise company-owned bakery-cafes acquired on February 1,
2007 and consolidated into our results prospectively from the acquisition date. In total, Company-owned bakery-
cafe sales as a percentage of total revenue increased by 3.5 percentage points to 83.9 percent in fiscal 2007 as
compared to 80.4 percent in the prior fiscal year. Bakery-cafes included in comparable sales increases and not
included in comparable sales increases consisted of 4.8 percent and 95.2 percent, respectively, of the $228.8 million
31