Executive Summary
Case Questions
Does Panera need to take on debt to fund the $75 million stock repurchase?
Recommendations: * We recommend financing the stock repurchase using a $75MM long term loan. * We want to maintain a safe cash balance in order to meet short term obligations. * Taking on debt gives the company the ability to use cash for projects and short term investments. * We want to avoid sacrificing our liquidity ratios in order to finance this repurchase. * * We do not recommend taking on debt beyond the $75M needed to repurchase stock. * The company has sufficient liquidity to finance ongoing operations without taking on additional debt. * Taking on debt more than
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* 100% Funded by Debt * All assumptions are identical as base case except for changes to equity and debt. * $75M is added to Long Term Debt in 2008 to fund repurchase. * $75M is deducted from equity through the creation of treasury stock, which is a contra-equity account.
Ratio Analysis * We calculated liquidity, efficiency, leverage, coverage and profitability ratios for Panera for past years and projected forecasts. * We also calculated these ratios for competitors to establish an industry benchmark. * We compared our past and projected ratios to the industry benchmarks to analyze the effects of taking on different levels of debt.
Analysis/Justification
Base Case Assumptions * The base case does not assume any stock repurchase or additional debt. * Revenue is grown at 25% from 2008-2009 and 5% for 2010 – 2012. * Cost of Goods Sold is calculated as a percentage of revenue. * Bakery Cafe costs as a percent of revenue are following a rising trend * We increased this costs as a percent of revenue 2.7% over the previous year for all forecasted periods * Dough Sold to Franchisees are following a falling trend year over year * We decreased this cost as a percent of revenue 1.5% below the previous year for all forecasted periods * Depreciation is dependent on
At the end of 2007, Panera Bread Company was in an unfamiliar position where taking out debt was a necessary action to gain funding. Raising prices would be an option to help with the deteriorating margins, but there is fear that this move will slow the growth of the company. Other options, such as lowering the quality of food, would go against Panera’s fundamental goal of serving high quality food. At this time, Panera is in a position where it needs to repurchase stock. The $75 million buy-back should help give confidence to their shareholders. However, to accomplish their growth goals and stock repurchase, Panera will require external funding for the first time.
2. to avoid the company dwindling away assets and further reducing any return to creditors.
Although the company’s liquidity ratios have dropped their ratios are still outperforming their RMA industry average by 15%. The decrease in the company’s liquidity ratios is the result of their current liabilities increasing 6.5% from fiscal year 2014 and their current assets only increasing 0.7% from fiscal year 2014. The company saw a decrease in cash and equivalents, accounts receivable, and income tax receivable in 2015. While also increasing accounts payable, accrued expenses, and deferred revenue and other liabilities. The combination of the movement in these accounts result in lower liquidity ratios for fiscal year 2015.
Panera Case Analysis Austin Howe 10/25/15 In the modern society there are several companies that are synonymous with a type of product. This includes companies such as Mcdonalds being synonymous with fast food and Lamborghini being synonymous with quality cars. However in recent years there have been some newcomers to the industry that have made quite the name for themselves, companies like Chipotle, Panda Express, B-Good, and Panera bread. Panera Bread was founded in 1987 by Kade King, Ken Rosenthal, and Ronald M. Shaich in Kirkwood, Missouri.
From the Panera’s exhibit 2, it can be derived that Panera Bread’s overall functional or operating performance is not bad. The exhibit indicates that the company revenue has being progressively growing since 2011 with much of the revenue coming from Panera’s franchises and stores even after the strong impact of the great recession of 2008 and 2009. In addition, the company adopted strategies that continued provision of unique and quality products which provide customers with great options thus increasing sales.
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Panera Bread has become one of the largest food-service companies in the United States. With 1,380 company-owned and franchise-operated bakery-café locations across the country and Canada, Panera offers a memorable experience with superior customer service. In 2009, the bakery-café had increased their revenues from $350.8 million in the year 2000 to $1,353.5 million. With continued growth, Panera had anticipated opening 80 to 90 systemwide bakery-cafés in 2010. By expanding their operations to new and existing markets, Panera has the ability to achieve targeted returns on their invested capital.
Marion HORY BUDV 450-08 10/06/2016 Nexus Consulting Individual Readiness Assignment #2 Panera Bread Case Study I.A Identify the important stakeholders and categorize them by the four Balanced Scorecard strategic factors (Customer, Financial, Internal process, Learning and Growth). What do we know about the mission/vision from the values and beliefs of these stakeholders? Customer Perspective: Panera bread have a strong customers perspectives because they first have a good customer’s service with their loyalty Program “Mypanera”. Their loyalty program reward regular customers who dined at Panera Bread.
Liquidity ratios measure the ability of a firm to meet its short-term obligations. A company that is not able
Panera relies heavily on outside suppliers for key ingredients used in manufacturing products which makes up 36.2% of total consolidated expnses. The company’s
In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.
This video highlights the origins of Panera Bread Company and its gradual transformation into the large corporate chain restaurant that it is now. The business strategies that were adopted in order to propel the growth of Panera Bread Company since its establishment in 1981 as local St.
The liquidity position of a company can be evaluated using several ratios which evaluate short-term assets and liabilities and a firm’s ability to settle short-term debts (Gibson, 2011). These ratios can provide insight into a firm’s ability to repay its debts in the short term (Gibson, 2011). In turn they suggest a firm’s capacity for debt-satisfying capabilities into the future (Gibson, 2011). This paper will use financial statement data as cited in Gibson (2011) from 3M Company (3M) to better understand liquidity measures to evaluate a firm’s total liquidity position. The following paper will focus on various liquidity calculations, their meaning, and their interpretation relative to 3M. Finally, an overall view of 3M’s liquidity
This case study is about Panera Bread Company and its strategy it wishes to employ to become the best brand name of fresh bread in the United States. Panera Bread’s use of a broad differentiation strategy has helped their profitability and growth and rivals have found it hard to compete with the competitiveness of Panera Bread. A SWOT analysis will reveal the competitive advantage Panera Bread has and why this company is in an attractive situation and what Panera Bread must do to strengthen its competitive advantage against rival chains.
Liquidity ratios determine the company’s liquid assets to pay off short-term debt. The current ratio shows for every dollar of current