Essay about Panera Bread Case

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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…show more content…
* 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

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