Net income and margins overview
Panera Bread Company (PNRA) reported a net income of $39.2 million, which declined 8.3% compared to $42.8 million during the same quarter a year ago. Net profit margins also declined to 6.3% from 7.5% over the same period. The decline was primarily due to an increase in operating expense by 2% to $562 million year-over-year (or YoY). The increase in operating expense resulted from increases in labor and food costs, as we discussed in the earlier parts of this series.
General and administrative costs increase
Panera’s general and administrative costs for the quarter were $35 million, which increased 19% from $29 million compared to the corresponding quarter last year. This impacted the margins negatively by 0.5%. Depreciation and amortization costs also increased by 18% to $31 million from $26 million, which further squeezed the profit margins by 0.4%.
Interest and tax expense
Panera’s interest expenses increased significantly to $462 million from $75 million in 3Q13. The effective tax rate for the quarter was 32.6%, which was slightly lower compared to 33.4% during the corresponding quarter last year.
As of the end of the third quarter, Panera Bread cash stood at $146 million, with the third quarter generating $48 million in cash flows. The company had capital expenditures of $65 million and repurchased shares worth $29 million during the quarter.
In the next part of this series, we’ll look at the management’s guidance for the rest of the year.