Panera Bread 2009 Annual Report Download - page 38

increase in the fresh dough cost of sales to franchisees rate in fiscal 2008 compared to the prior fiscal year was
primarily the result of the year-over-year significant increase in wheat costs and diesel costs per gallon previously
described, which were only partially offset by our ability to increase prices and our improved leverage of our fresh
dough manufacturing costs due to additional bakery-cafe openings.
General and administrative expenses were $84.4 million, or 6.5 percent of total revenue, in fiscal 2008
compared to $69.0 million, or 6.5 percent of total revenue, in fiscal 2007. This consistency in general and
administrative expenses as a percentage of total revenue was primarily due to disciplined expense management and
improved leverage of our expenses due to higher sales, which was partially offset by normalized incentive
compensation expense and higher self-insured benefits expense compared to the prior year, a charge of $2.8 million
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.
Liquidity and Capital Resources
Cash and cash equivalents were $246.4 million at December 29, 2009 compared to $74.7 million at
December 30, 2008. This $171.7 million increase was primarily a result of $214.9 million of cash generated
from operations, $22.8 million received from the exercise of employee stock options, and $5.5 million received in
investment maturity proceeds, partially offset by $54.7 million used for capital expenditures and $20.1 million used
to repurchase the remaining 49 percent of Paradise in fiscal 2009. Our primary source of liquidity was cash provided
by operations, although in prior years we have also borrowed under a credit facility principally to finance
repurchases of our common stock. Historically, our principal requirements for cash have resulted from our capital
expenditures for the development of new Company-owned bakery-cafes, for maintaining or remodeling existing
Company-owned bakery-cafes, for purchasing existing franchise-operated bakery-cafes or ownership interests in
other restaurant or bakery-cafe concepts, for developing, maintaining or remodeling fresh dough facilities, and for
other capital needs such as enhancements to information systems and other infrastructure.
32