Ratio Analysis for Panera Bread Refer to the financial statement information of Panera Bread and answer the following questions. Required: 1. Compute the following ratios and other amounts for each of the two years, ending December 30, 2015, and December 31, 2014. Because only two years of data are given on the balance sheets, to be consistent, you should use year-end balances for each year in lieu of average balances. Assume 360 days to a year. Enter dollar amounts in thousands. In your computations, round the tax percentage to one decimal place. Round your final answers as indicated below. Use a minus sign for any negative amounts. 2015 2014 a. Working capital (to whole number) 1,972 x 0 x b. Current ratio (to three decimal places) c. Acid-test ratio (to three decimal places) d. Cash flow from operations to current liabilities (to three decimal places) e. Debt-to-equity ratio (to three decimal places) times f. Cash flow from operations to capital expenditures (to three decimal places) g. Asset turnover (to three decimal places) h. Return on sales (to two decimal places) i. Return on assets (to two decimal places) j. Return on common stockholders' equity (to two decimal places) 2. Which of the following statements is (are) true when describing Panera Bread's financial performance in 2015? Panera Bread appears to be liquid and has generated sufficient cash from operating activities to pay for additions to fixed assets. For the fiscal year ended (1) (in thousands, except per share and percentage information) 160 106 December 29, December 30, December 31, December 25, December 27, 2015 2014 2013 2012 2011 Revenues: Bakery-cafe sales, net $ 2,358,794 $2,230,370 $ 2,108,908 $ 1,879,280 $ 1,592,951 Franchise royalties and fees 138,563 123,686 112,641 102,076 92,793 Fresh dough and other product sales to franchisees 184,223 175,139 163,453 148,701 136,288 Total revenues 2,681,580 2,529,195 2,385,002 2,130,057 1,822,032 Costs and expenses: Bakery-cafe expenses: Cost of food and paper products $ 715,502 $ 669,860 $ 625,622 $ 552,580 $ 470,398 Labor 685,576 625,457 559,446 484,014 Occupancy 169,998 159,794 148,816 130,793 115,290 Other operating expenses 334,635 314,879 295,539 256,029 216,237 Total bakery-cafe expenses 1,974,781 1,830,109 1,695,434 1,498,848 1,285,939 Fresh dough and other product cost of sales to franchisees 160,706 152,267 142,160 131,006 116,267 Depreciation and amortization 135,398 124,109 106,523 90,939 79,899 General and administrative expenses 142,904 138,060 123,335 117,932 113,083 Pre-opening expenses 9,089 8,707 7,794 8,462 6,585 Refranchising loss 17,108 Total costs and expenses 2,439,986 2,253,252 2,075,246 1,847,187 1,601,773 Operating profit 241,594 275,943 309,756 282,870 220,259 Interest expense 3,830 1,824 1,053 1,082 822 Other (income) expense, net 1,192 (3,175) (4,017) (1,208) (466) Income before income taxes 236,572 277,294 312,720 282,996 219,903 Income taxes 87,247 98,001 116,551 109,548 83,951 Net income 149,325 179,293 196,169 173,448 135,952 Less: Net loss attributable to noncontrolling interest (17) Net income attributable to Panera Bread Company $ 149,342 $ 179,293 $ 196,169 $ 173,448 $ 135,952 Earnings per common share attributable to Panera Bread Company: Basic $ 5.81 $ 6.67 $ 6.85 $ 5.94 $ 4.59 Diluted 5.79 S 6 .64 $ 6.81 $ 5.89 $ 4.55 Weighted average shares of common and common equivalent shares outstanding: Basic 25,685 26,881 28,629 29,217 29,601 Diluted 25,788 26,999 28,794 29,455 29,903 C-3 Appendix C Excerpts from Panera Bread Company Form 10-K for the Fiscal Year Ended December 29, 2015 For the fiscal year ended (1) (in thousands, except per share and percentage information) December 29, December 30, December 31, December 25, December 27, 2015 2014 2013 2012 2011 $ $ $ $ $ 241,886 115,786 776,248 1,475,318 399,443 574,594 3,981 497,300 $ 2,477,963 196,493 106,653 787,294 1,390,686 352,712 301,790 125,245 84,602 669,409 1,180,862 303,325 177,645 297,141 86,262 571,754 1,268,163 277,540 168,704 Consolidated balance sheet data: Cash and cash equivalents Trade and other accounts receivable Property and equipment, net Total assets Current liabilities Long-term liabilities Redeemable noncontrolling interest Stockholders' equity Franchisee revenues (2) Comparable net bakery-cafe sales percentage for (2)3): Company-owned bakery-cafes Franchise-operated bakery-cafes Bakery-cafe data: Company-owned bakery-cafes open Franchise-operated bakery-cafes open Total bakery-cafes open 222,640 54,709 492,022 1,027,322 238,334 133,912 736,184 S 2,281,755 699,892 $ 2,175,155 8 21,919 1,981,674 655,076 1,828,188 $ $ 2.6% 3.0% 1.0% 1.4% 0.9% 2.0% 6.5% 5.0% 4.9% 3.4% 901 1,071 1,972 925 955 1,880 867 910 1,777 809 843 1,652 740 801 1,541 (1) The fiscal year ended December 31, 2013, or fiscal 2013, was a 53 week year consisting of 371 days. All other fiscal years presented contained 52 weeks consisting of 364 days. (2) We do not record franchise-operated net bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated net bakery-cafe sales, as reported by franchisees. We use franchise-operated and system- wide sales information internally in connection with store development decisions, planning, and budgeting analyses. We believe franchise-operated and system-wide sales information is useful in assessing consumer acceptance of our brand, facilitates an understanding of financial performance and the overall direction and trends of sales and operating income, helps us appreciate the effectiveness of our advertising and marketing initiatives to which our franchisees also contribute based on a percentage of their sales, and provides information that is relevant for comparison within the industry. (in thousands, except share and per share information) December 29, December 30, 2015 2014 Assets Current assets: Cash and cash equivalents $ 241,886 $ 196,493 Trade accounts receivable, net 38,211 36,584 Other accounts receivable 77,575 70,069 Inventories 22,482 22,811 Prepaid expenses and other 59,457 51,588 Deferred income taxes 34,479 28,621 Assets held for sale 28,699 Total current assets 502,789 406,166 Property and equipment, net 776,248 787,294 Other assets: Goodwill 121,791 120,778 Other intangible assets, niet 63,877 70,940 Deposits and other 10,613 5,508 Total other assets 196,281 1 97,226 Total assets $ 1,475,318 $ 1,390,686 Liabilities, Redeemable Noncontrolling Interest, and Stockholders' Equity Current liabilities: Accounts payable $ 19,805 $ 19,511 Accrued expenses 359,464 333,201 Current portion of long-term debt 17,229 Liabilities associated with assets held for sale 2,945 Total current liabilities 399,443 352,712 Long-term debt 388,971 99,784 Deferred rent 62,610 67,390 Deferred income taxes 70,447 76,589 Other long-term liabilities 52,566 58,027 Total liabilities 974,037 654,502 Commitments and contingencies (Note 14) Redeemable noncontrolling interest 3,981 Stockholders' equity: Common stock, $.0001 par value per share: Class A, 112,500,000 shares authorized; 30,836,669 shares issued and 23.346.188 shares outstanding at December 29, 2015 and 30,703,472 shares issued and 25,442,728 shares outstanding at December 30, 2014 Class B, 10,000,000 shares authorized; 1,381,730 shares issued and outstanding at December 29, 2015 and 1,381,865 shares issued and outstanding at December 30, 2014 Treasury stock, carried at cost; 7,490,481 shares at December 29, 2015 and 5,260,744 (1,111,586) (706,073) shares at December 30, 2014 Preferred stock, S.0001 par value per share; 2,000,000 shares authorized and no shares issued or outstanding at December 29, 2015 and December 30, 2014 Additional paid-in capital 235,393 214,437 Accumulated other comprehensive income (loss) (5,029) (1,360) Retained earnings 1,378,519 1,229,177 Total stockholders' equity 497,300 736,184 Total liabilities, redeemable noncontrolling interest, and stockholders' equity S 1,475,318 $ 1,390,686 The accompanying notes are an integral part of the consolidated financial statements. - Ratio Analysis for Panera Bread Refer to the financial statement information of Panera Bread and answer the following questions. Required: 1. Compute the following ratios and other amounts for each of the two years, ending December 30, 2015, and December 31, 2014. Because only two years of data are given on the balance sheets, to be consistent, you should use year-end balances for each year in lieu of average balances. Assume 360 days to a year. Enter dollar amounts in thousands. In your computations, round the tax percentage to one decimal place. Round your final answers as indicated below. Use a minus sign for any negative amounts. 2015 2014 a. Working capital (to whole number) 1,972 x 0 x b. Current ratio (to three decimal places) c. Acid-test ratio (to three decimal places) d. Cash flow from operations to current liabilities (to three decimal places) e. Debt-to-equity ratio (to three decimal places) times f. Cash flow from operations to capital expenditures (to three decimal places) g. Asset turnover (to three decimal places) h. Return on sales (to two decimal places) i. Return on assets (to two decimal places) j. Return on common stockholders' equity (to two decimal places) 2. Which of the following statements is (are) true when describing Panera Bread's financial performance in 2015? Panera Bread appears to be liquid and has generated sufficient cash from operating activities to pay for additions to fixed assets. For the fiscal year ended (1) (in thousands, except per share and percentage information) 160 106 December 29, December 30, December 31, December 25, December 27, 2015 2014 2013 2012 2011 Revenues: Bakery-cafe sales, net $ 2,358,794 $2,230,370 $ 2,108,908 $ 1,879,280 $ 1,592,951 Franchise royalties and fees 138,563 123,686 112,641 102,076 92,793 Fresh dough and other product sales to franchisees 184,223 175,139 163,453 148,701 136,288 Total revenues 2,681,580 2,529,195 2,385,002 2,130,057 1,822,032 Costs and expenses: Bakery-cafe expenses: Cost of food and paper products $ 715,502 $ 669,860 $ 625,622 $ 552,580 $ 470,398 Labor 685,576 625,457 559,446 484,014 Occupancy 169,998 159,794 148,816 130,793 115,290 Other operating expenses 334,635 314,879 295,539 256,029 216,237 Total bakery-cafe expenses 1,974,781 1,830,109 1,695,434 1,498,848 1,285,939 Fresh dough and other product cost of sales to franchisees 160,706 152,267 142,160 131,006 116,267 Depreciation and amortization 135,398 124,109 106,523 90,939 79,899 General and administrative expenses 142,904 138,060 123,335 117,932 113,083 Pre-opening expenses 9,089 8,707 7,794 8,462 6,585 Refranchising loss 17,108 Total costs and expenses 2,439,986 2,253,252 2,075,246 1,847,187 1,601,773 Operating profit 241,594 275,943 309,756 282,870 220,259 Interest expense 3,830 1,824 1,053 1,082 822 Other (income) expense, net 1,192 (3,175) (4,017) (1,208) (466) Income before income taxes 236,572 277,294 312,720 282,996 219,903 Income taxes 87,247 98,001 116,551 109,548 83,951 Net income 149,325 179,293 196,169 173,448 135,952 Less: Net loss attributable to noncontrolling interest (17) Net income attributable to Panera Bread Company $ 149,342 $ 179,293 $ 196,169 $ 173,448 $ 135,952 Earnings per common share attributable to Panera Bread Company: Basic $ 5.81 $ 6.67 $ 6.85 $ 5.94 $ 4.59 Diluted 5.79 S 6 .64 $ 6.81 $ 5.89 $ 4.55 Weighted average shares of common and common equivalent shares outstanding: Basic 25,685 26,881 28,629 29,217 29,601 Diluted 25,788 26,999 28,794 29,455 29,903 C-3 Appendix C Excerpts from Panera Bread Company Form 10-K for the Fiscal Year Ended December 29, 2015 For the fiscal year ended (1) (in thousands, except per share and percentage information) December 29, December 30, December 31, December 25, December 27, 2015 2014 2013 2012 2011 $ $ $ $ $ 241,886 115,786 776,248 1,475,318 399,443 574,594 3,981 497,300 $ 2,477,963 196,493 106,653 787,294 1,390,686 352,712 301,790 125,245 84,602 669,409 1,180,862 303,325 177,645 297,141 86,262 571,754 1,268,163 277,540 168,704 Consolidated balance sheet data: Cash and cash equivalents Trade and other accounts receivable Property and equipment, net Total assets Current liabilities Long-term liabilities Redeemable noncontrolling interest Stockholders' equity Franchisee revenues (2) Comparable net bakery-cafe sales percentage for (2)3): Company-owned bakery-cafes Franchise-operated bakery-cafes Bakery-cafe data: Company-owned bakery-cafes open Franchise-operated bakery-cafes open Total bakery-cafes open 222,640 54,709 492,022 1,027,322 238,334 133,912 736,184 S 2,281,755 699,892 $ 2,175,155 8 21,919 1,981,674 655,076 1,828,188 $ $ 2.6% 3.0% 1.0% 1.4% 0.9% 2.0% 6.5% 5.0% 4.9% 3.4% 901 1,071 1,972 925 955 1,880 867 910 1,777 809 843 1,652 740 801 1,541 (1) The fiscal year ended December 31, 2013, or fiscal 2013, was a 53 week year consisting of 371 days. All other fiscal years presented contained 52 weeks consisting of 364 days. (2) We do not record franchise-operated net bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated net bakery-cafe sales, as reported by franchisees. We use franchise-operated and system- wide sales information internally in connection with store development decisions, planning, and budgeting analyses. We believe franchise-operated and system-wide sales information is useful in assessing consumer acceptance of our brand, facilitates an understanding of financial performance and the overall direction and trends of sales and operating income, helps us appreciate the effectiveness of our advertising and marketing initiatives to which our franchisees also contribute based on a percentage of their sales, and provides information that is relevant for comparison within the industry. (in thousands, except share and per share information) December 29, December 30, 2015 2014 Assets Current assets: Cash and cash equivalents $ 241,886 $ 196,493 Trade accounts receivable, net 38,211 36,584 Other accounts receivable 77,575 70,069 Inventories 22,482 22,811 Prepaid expenses and other 59,457 51,588 Deferred income taxes 34,479 28,621 Assets held for sale 28,699 Total current assets 502,789 406,166 Property and equipment, net 776,248 787,294 Other assets: Goodwill 121,791 120,778 Other intangible assets, niet 63,877 70,940 Deposits and other 10,613 5,508 Total other assets 196,281 1 97,226 Total assets $ 1,475,318 $ 1,390,686 Liabilities, Redeemable Noncontrolling Interest, and Stockholders' Equity Current liabilities: Accounts payable $ 19,805 $ 19,511 Accrued expenses 359,464 333,201 Current portion of long-term debt 17,229 Liabilities associated with assets held for sale 2,945 Total current liabilities 399,443 352,712 Long-term debt 388,971 99,784 Deferred rent 62,610 67,390 Deferred income taxes 70,447 76,589 Other long-term liabilities 52,566 58,027 Total liabilities 974,037 654,502 Commitments and contingencies (Note 14) Redeemable noncontrolling interest 3,981 Stockholders' equity: Common stock, $.0001 par value per share: Class A, 112,500,000 shares authorized; 30,836,669 shares issued and 23.346.188 shares outstanding at December 29, 2015 and 30,703,472 shares issued and 25,442,728 shares outstanding at December 30, 2014 Class B, 10,000,000 shares authorized; 1,381,730 shares issued and outstanding at December 29, 2015 and 1,381,865 shares issued and outstanding at December 30, 2014 Treasury stock, carried at cost; 7,490,481 shares at December 29, 2015 and 5,260,744 (1,111,586) (706,073) shares at December 30, 2014 Preferred stock, S.0001 par value per share; 2,000,000 shares authorized and no shares issued or outstanding at December 29, 2015 and December 30, 2014 Additional paid-in capital 235,393 214,437 Accumulated other comprehensive income (loss) (5,029) (1,360) Retained earnings 1,378,519 1,229,177 Total stockholders' equity 497,300 736,184 Total liabilities, redeemable noncontrolling interest, and stockholders' equity S 1,475,318 $ 1,390,686 The accompanying notes are an integral part of the consolidated financial statements