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Assignment 2

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Assignment 2

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  1. Project 2:
    Revenue Recognition at TSA, Inc. – A Roller Coaster Ride

In this project, you will research the FASB Codification to make decisions relevant to recognizing revenue according to ASC 606 and ASU 2014-09.  The project includes a group component to reflect the collaborative nature of accountants who must work together to determine the timing and proper implementation of new and updated accounting standards.

 

  1. Introduction:

You did such a great job on Project I that your company’s controller (the professor) now feels confident you can conduct professional accounting research using the FASB Accounting Standards Codification.  Specifically, the controller is interested in the revenue recognition accounting at TSA, Inc.  The company’s primary focus is on software development and marketing.  The controller encourages you to use your critical thinking skills to make effective decisions regarding the recording and reporting of revenue.

 

Your boss (instructor) will be setting up an online discussion group and assigning you and a few of your colleagues(students) to a group.  In your online discussion group, you may discuss the case issues and collaboratively decide how to account for the revenue recognition issues presented in the case.  Each person will be required to write and submit his/her own report, but you may share your research and brainstorm the case issues within the discussion group.

 

Eager to prove you’re a born researcher with the writing skills of Charles Dickens, you begin planning the process you’ll use to impress the controller.  You plan to submit a draft of your report to the editing department (graduate writing tutors) before delivering your final work to the Controller.

 

  • Steps to Completion:

    Step 1 – Read the case study and review the requirements for Revenue Recognition at TSA, Inc., which is posted in: Content/Course Resources/Projects & Rubrics/Project 2 Case Review.
  • Case Citation:
    • Chandra, U., Dutta, S., & Marcinko, D. (2018) Revenue Recognition at TSA, Inc. – A Roller Coaster Ride. Issues in Accounting Education: August 2018, Vol. 33, No. 3, pp. 101-116.

 

Step 2 – Conduct accounting research using the FASB Codification

 

  • Introduce yourself to your colleagues in the Online Study Group Discussion and begin to discuss how you plan to work collaboratively to research the case issues and make decisions, which you will use to write your individual paper. The case is complex and requires students of diverse backgrounds to contribute to making the correct determination.
  • Login credentials to the FASB Accounting Standards Codification (ASC) and the link are provided in Course Resources section in the classroom in the FASB’s ASC, GARS and COSO module.
  • Research the FASB ASC 606 and ASU 2014-09 for guidance on revenue recognition issues.
  • Brainstorm with your colleagues in the Online Study Group Discussions to enhance your final deliverable.
  • To deepen your understanding of the FASB ASC topics related to case issues, read the appropriate sections in Wiley GAAP 2018: Interpretation & Application of GAAP.
  • Research the UMUC library to find current articles in academic journals related to the case issues.

 

Step 3 – Complete case requirements

 

  • Complete Case Requirement numbers 1 and 2, which begin on page 6.

 

Milestone 1: Optional opportunity to receive feedback on Case Requirements 1 and 2, in advance of submitting your final file for a grade.

 

  • Complete Case Requirement numbers 3, and 7

 

  1. Deliverables:
  • Report for your boss
    • Use APA style formatting
    • Approximate length of the report using APA style is 6 – 8 pages
    • Correct spelling is mandatory
    • Grammar must be clear, correct, and concise
  1. Hints and Tips:
  • As your professor, please note that I have very little interest in reading what others in the field have written. It is fine to quote sources to illustrate or support your own thoughts, however, every graded assessment in graduate accounting courses will be based on the content you have thought about and you have written in your own words. To properly guide you, I need to read your thoughts and interpretations and observe you making presentations which demonstrate your comprehension of the learning goals and ability to perform the competencies.
  • Read the grading rubric before beginning the project to fully understand the requirements; ask questions about the requirements if needed.
  • Review and refresh your memory of APA style formatting 3-4 weeks before the assignment is due. The resources may be helpful:
    • Writing a research paper: https://owl.english.purdue.edu/owl/resource/658/01/
    • APA: https://owl.english.purdue.edu/owl/section/2/10/
    • Developing your graduate level writing skills: https://owl.english.purdue.edu/owl/section/1/2/
    • What Constitutes Graduate Level Writing; source unknown. In LEO, Content, Course Resources, Project 2.
  • Demonstrate through your writing that you have gained a/an:
    • deeper understanding of the FASB ASC guidelines for the development of internal-use software to be marketed and sold to external users,
    • applied judgment and decision-making skills to the complex scenario described in the case study and have enhanced your professional research skills using the UMUC library, FASB ASC, and other academic resources.
  • Prepare a draft version of your report 2 weeks before it is due.
  • Ask a classmate, friend, or family member to read your report before submitting it to the Graduate Writing Center.
  • Use the Graduate Writing Center:
    • Submit your draft to the Graduate Writing Center at least 1 week before the project is due.  This FREE resource can be accessed in your LEO classroom.
    • Make edits to your report after reviewing feedback from the writing center tutors.
    • Note: Failure to submit your document to the Graduate Writing Center and or failure to improve your document based on guidance from the writing tutors, before submitting the final version is unwise.
  • Submit the deliverable on or before the due date.
  • Ask your professor questions as needed.

  1.  Rubric:

You will find the rubric in LEO under Contents>Course Resources>Projects & Rubrics

 

Assignment 2

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Assignment 2

Description

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Details:

Taking a family history is an important step in determining current and future health needs and education. There are many tools available to complete a comprehensive health history. The Surgeon General’s Family Health History tool is part of the larger Family Health History Initiative that encourages people to talk about and write down health issues that seem to run in the family, bringing a larger focus on this important issue. This assignment allows the learner to use the tool and become familiar with this initiative.

General Guidelines:

Use the following information to ensure successful completion of the assignment:

  • This assignment requires that at least two additional scholarly research sources related to this topic, and at least one in-text citation from each source be included. Modern scholarly nursing articles
  • You are required to submit this assignment to Turnitin. Please refer to the directions in the Student Success Center.
  • Use the Surgeon General’s Family History Tool at (http://www.hhs.gov/familyhistory/portrait/index.html) to complete this assignment.

Directions:

Use the Surgeon General’s Family History Tool (http://www.hhs.gov/familyhistory/portrait/index.html) to document your own family history.

Designate a proband for the pedigree with a disease or condition of interest.

Write a 750-1,000 word summary of your findings. Include the following information:

  • Discussion of the heredity patterns discovered.
  • Evaluate the risk of transmission to other/new family members.
  • Propose the feasibility of using this tool in your own practice.

Assignment 2 essay paper

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Assignment 2

ORDER A PLAGIARISM FREE PAPER NOWAssignment 1 (DQ 1)

Select a research article, other than the articles from your assignments, from the GCU library. Provide an Assignment 2 overview of the study and describe the strategy that was used to select the sample from the population. Evaluate the effectiveness of the sampling method selected. Provide support for your answer. Include the article title and permalink in your post.

 

Assignment 2 (DQ 2)

Using the research article selected for DQ 1, identify three key questions you will ask and answer when reading the research study and why these questions are important. When responding to peers, provide other questions and answers that could be considered in relation to the peers’ studies.Assignment 2

 

Assignment 3

Article Analysis 1

Assessment Description

The interpretation of research in health care is essential to decision making. By understanding research, health care providers can identify risk factors, trends, outcomes for treatment, health care costs and best practices. To be effective in evaluating and interpreting research, the reader must first understand how to interpret the findings. You will practice article analysis in Topics 2, 3, and 5.Assignment 2

For this assignment:

Search the GCU Library and find three different health care articles that use quantitative research. Do not use articles that appear in the topic Resources or textbook. Complete an article analysis for each using the “Article Analysis 1” template.

Refer to the “Patient Preference and Satisfaction in Hospital-at-Home and Usual Hospital Care for COPD Exacerbations: Results of a Randomised Controlled Trial,” in conjunction with the “Article Analysis Example 1,” for an example of an article analysis.

Assignment 2 While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.

This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.

Rubric Criteria

Collapse All Rubric CriteriaCollapse All

Three Quantitative Articles

12 points

Criteria Description

Three Quantitative Articles

5. 5: Excellent

12 points

Three articles are presented. All three articles are based on quantitative research.

4. 4: Good

10.2 points

Assignment 2 N/A

3. 3: Satisfactory

9 points

Three articles are presented. Of the articles presented, only two articles are based on quantitative research.

2. 2: Less Than Satisfactory

7.8 points

N/A

1. 1: Unsatisfactory

0 points

Fewer than three articles are presented. None of the articles presented use quantitative research.

Article Citation and Permalinka 2

12 points

Criteria Description

Article Citation and Permalinka Assignment 22

5. 5: Excellent

12 points

Article citation and permalink are presented. Article citation is accurately presented in APA format. Page numbers are accurate and used in all areas when citing information.

4. 4: Good

10.2 points

Article citation and permalink are presented. Article citation is presented in APA format. Page numbers are used to cite information. There are minor errors.

3. 3: Satisfactory

9 points

Article citation and permalink are presented. Article citation is presented in APA format, but there are errors. Page numbers to cite information are missing, or incorrect, in some areas.

Assignment 2 2. 2: Less Than Satisfactory

7.8 points

Article citation and permalink are presented. There are significant errors. Page numbers are not indicated to cite information, or the page numbers are incorrect.

1. 1: Unsatisfactory

0 points

Article citation and permalink are omitted.

Broad Topic Area/Title

12 points

Criteria Description

Broad Topic Area/TitleAssignment 2 

5. 5: Excellent

12 points

Broad topic area and title are fully presented and accurate.

4. 4: Good

10.2 points

Broad topic area and title are presented. There are some minor errors, but the content overall is accurate.

3. 3: Satisfactory

9 points

Broad topic area and title are summarized. There are some minor inaccuracies.

Assignment 2
2. 2: Less Than Satisfactory

7.8 points

Broad topic area and title are referenced but are incomplete.

1. 1: Unsatisfactory

0 points

Broad topic area and title are omitted.

Independent and Dependent Variables and Type of Data for Variables

12 points

Criteria Description

Independent and Dependent Variables and Type of Data for Variables

5. 5: Excellent

12 points

Variable types and data for variables are presented and accurate.

4. 4: Good

10.2 points

Variable types and data for variables are presented. Minor detail is needed for accuracy.

3. 3: Satisfactory

9 points

Variable types and data for variables are presented. There are inaccuracies.

2. 2: Less Than Satisfactory

7.8 points

Variable types and data for variables are presented. There are major inaccuracies or omissions.

1. 1: Unsatisfactory

0 points

Variable types and data for variables are omitted.

Population of Interest for the Study

12 points

Criteria Description

Population of Interest for the Study

5. 5: Excellent

12 points

Population of interest for the study is presented and accurate.

4. 4: Good

10.2 points

Population of interest for the study is presented. Minor detail is needed for accuracy.

3. 3: Satisfactory

9 points

Population of interest for the study is presented. There are inaccuracies.

2. 2: Less Than Satisfactory

7.8 points

Population of interest for the study is presented. There are major inaccuracies or omissions.

1. 1: Unsatisfactory

0 points

Population of interest for the study is omitted.

Sample

12 points

Criteria Description

Sample

5. 5: Excellent

12 points

Sample is presented and accurate.

4. 4: Good

10.2 points

Sample is presented. Minor detail is needed for accuracy.

3. 3: Satisfactory

9 points

Sample is presented. There are inaccuracies.

2. 2: Less Than Satisfactory

7.8 points

Sample is presented. There are major inaccuracies or omissions.

1. 1: Unsatisfactory

0 points

Sample is omitted.

Sampling Method

12 points

Criteria Description

Sampling Method

5. 5: Excellent

12 points

Sampling method is presented and accurate.

4. 4: Good

10.2 points

Sampling is presented. Minor detail is needed for accuracy.

3. 3: Satisfactory

9 points

Sampling is presented. There are inaccuracies.

2. 2: Less Than Satisfactory

7.8 points

Sampling is presented. There are major inaccuracies or omissions.

1. 1: Unsatisfactory

0 points

Sampling method is omitted.

Descriptive Statistics

12 points

Criteria Description

Descriptive Statistics (mean, median, mode; standard deviation) (Identify examples of descriptive statistics in the article.)

5. 5: Excellent

12 points

Descriptive statistic examples from the article are presented and accurate.

4. 4: Good

10.2 points

N/A

3. 3: Satisfactory

9 points

Descriptive statistic examples from the article are presented. There are some very minor inaccuracies or omissions.

2. 2: Less Than Satisfactory

7.8 points

N/A

1. 1: Unsatisfactory

0 points

Descriptive statistic examples from the article are omitted. There are major inaccuracies or omissions.

Inferential Statistics (Identify examples of inferential statistics in the article.)

12 points

Criteria Description

Inferential Statistics (Identify examples of inferential statistics in the article.)

5. 5: Excellent

12 points

Inferential statistic examples from the article are presented and accurate.

4. 4: Good

10.2 points

N/A

3. 3: Satisfactory

9 points

Inferential statistic examples from the article are presented. There are some very minor inaccuracies or omissions.

2. 2: Less Than Satisfactory

7.8 points

N/A

1. 1: Unsatisfactory

0 points

Inferential statistic examples from the article are omitted. There are major inaccuracies or omissions.

Mechanics of Writing

12 points

Criteria Description

Mechanics of Writing (includes spelling, punctuation, grammar, and language use)

5. 5: Excellent

12 points

The writer is clearly in command of standard, written, academic English.

4. 4: Good

10.2 points

Prose is largely free of mechanical errors, although a few may be present. The writer uses a variety of effective sentence structures and figures of speech.

3. 3: Satisfactory

9 points

Some mechanical errors or typos are present, but they are not overly distracting to the reader. Correct and varied sentence structure and audience-appropriate language are employed.

2. 2: Less Than Satisfactory

7.8 points

Frequent and repetitive mechanical errors distract the reader. Inconsistencies in language choice (register) or word choice are present. Sentence structure is correct but not varied.

1. 1: Unsatisfactory

0 points

Surface errors are pervasive enough that they impede communication of meaning. Inappropriate word choice or sentence construction is employed.

Total120 points

Assignment 2 essay paper

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Assignment 2

ORDER A PLAGIARISM FREE PAPER NOWThis case considers the buyout of Panera Bread from the perspective of a private equity fund. In early 2017, KLG Managing Director Tom Denning is considering a leveraged buyout of Panera Bread, a rapidly growing fast-casual restaurant company. A surprising Bloomberg News story signals that the deal process is broadening and KLG will have to act quickly if it hopes to buy Panera Bread. Students assume the role of Tom Denning as he prepares an investment recommendation for KLG’s investment committee. In doing so, students are required to consider a very Assignment 2 large and expensive investment. Students are challenged to create an investment recommendation by performing due diligence, determining additional questions to ask, and pricing a buyout bid that incorporates an optimal capital structure and meets KLG’s return requirements. The Panera Bread case is designed to give students insight into the private equity investment process.

 

 

Resources

Exhibit 1: US Limited-Service Revenues ($ in Billions)

 

Long Description

 
  2011 2012 2013 2014 2015 2016
Fast food sales $199 $206 $212 $218 $231 $244
     YoY % growth   3.7% 2.6% 3.0% 5.9% 5.6%
Fast casual sales $29 $32 $36 $40 $44 $47
     YoY % growth   10.3% 12.5% 11.1% 10.0% 6.8%
     as a % of fast-food sales 14.6% 15.5% 17.0% 18.4% 19.1% 19.3%

Source: Technomic State of the Fast Casual Industry, IBISWorld—Fast Food Report.Assignment 2

Exhibit 2: Fast-Casual 2016 US Sales by Menu Type ($ in Billions)

A donut chart shows the various menu types and the sales in fast casual restaurants for the year 2016 in U.S.

Source: Technomic State of the Fast Casual Industry.

Long Description

Exhibit 3: Fast-Casual Growth by Menu Type

 
Menu Type 2016 Growth (%)
Pizza 37%
Seafood 25%
Healthy 21%
BBQ 18%
Chicken 17%
Burger 13%
Asian/Noodle 12%
Sandwich 11%
Bakery-Café 4%
Mexican −5%

Source: Technomic State of the Fast Casual Industry.

Exhibit 4: Panera Bakery-Cafés

 
  2012 2013 2014 2015 2016
Company-owned 809 867 925 901 902
Franchise-operated 843 910 995 1,071 1,134
System-wide 1,652 1,777 1,920 1,972 2,036

Source: Panera Bread FYE 2016 10 K SEC filing.

Exhibit 5: PE Dry Powder ($ in Billions)

A vertical bar graph shows the private equity dry powder for the years 2005–2016.

Source: PitchBook 2017 PE & VC Fundraising Annual Report.Assignment 2

Long Description

Exhibit 6: Number of US PE Deals by Type and Year

 
  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Buyout/LBO 1,218 1,392 1,028 606 936 1,012 1,179 972 1,178 1,249 1,175 313
Add-on 1,058 1,491 1,132 792 1,192 1,404 1,587 1,528 1,999 2,086 2,163 573
Recap 12 14 8 6 13 19 28 56 48 39 24 8
PE growth/expansion 498 620 542 470 608 664 693 829 965 991 988 291
Platform creation 78 72 69 50 61 67 74 85 102 78 87 39

Source: PitchBook 3Q 2018 US PE Breakdown Summary.

Exhibit 7: US PE Buyout Multiples

Two vertical bar graphs and a line graph shows the private equity buyout multiples for years 2006–2017 in U.S.

Long Description

 
  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EV/EBITDA 10.0× 10.3× 12.6× 7.0× 8.2× 9.1× 8.4× 10.0× 12.4× 10.4× 10.8× 12.1×
Debt/EBITDA 6.1× 5.7× 7.5× 3.0× 4.7× 4.9× 4.2× 6.0× 7.2× 5.7× 5.3× 6.2×
Equity/EBITDA 3.9× 4.6× 5.1× 3.9× 3.5× 4.3× 4.2× 4.0× 5.2× 4.7× 5.5× 5.9×
Debt percent 61% 55% 59% 44% 57% 53% 50% 60% 58% 55% 50% 52%

Source: PitchBook 3Q 2018 US PE Breakdown Summary.

Exhibit 8: US PE Deals by Size ($ in Billions)

 
  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Under $25M 8.6 10.3 11.4 6.9 8.0 9.0 10.1 10.9 12.3 13.9 13.9 3.4
$25M–$100M 33.8 37.8 39.4 18.8 23.1 28.3 36.2 31.0 40.6 38.6 45.0 9.1
$100M–$500M 131.5 157.9 103.1 49.0 98.7 125.9 139.3 153.2 202.4 166.7 175.0 51.0
$500M–$1B 99.8 122.3 52.7 26.0 103.3 88.2 104.1 105.4 159.7 162.6 133.5 55.6
$1B–$2.5B 54.4 90.7 32.7 12.9 29.1 39.1 59.5 41.0 75.4 58.0 69.5 12.4
$2.5B+ 136.2 395.3 90.7 29.8 37.0 55.4 32.7 106.5 46.4 123.6 176.7 11.6
Total 464.2 814.4 330.1 143.4 299.1 345.7 381.9 447.9 536.7 563.4 613.6 143.2

Source: PitchBook 3Q 2018 US PE Breakdown Summary.Assignment 2

Exhibit 9: Number of US PE Deals by Size

 
  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Under $25M 1,101 1,367 1,271 1,086 1,297 1,455 1,545 1,598 1,855 2,099 2,004 601
$25M–$100M 800 950 841 479 623 741 957 768 973 1,001 1,104 222
$100M–$500M 730 937 535 293 649 757 804 864 1,117 978 1,004 283
$500M–$1B 176 229 95 50 213 175 207 197 282 311 257 106
$1B–$2.5B 36 61 25 9 21 27 39 29 52 40 46 8
$2.5B+ 21 44 12 7 8 12 8 13 12 14 22 3
Total 2,864 3,588 2,779 1,924 2,811 3,167 3,560 3,469 4,291 4,443 4,437 1,223

Source: PitchBook 3Q 2018 US PE Breakdown Summary.

Exhibit 10: Average Debt/EBITDA Multiples for Large LBO Transactions

A vertical bar graph shows the average debt/EBITDA multiples for larger LBO transactions for years 2006–2016.

Long Description

 
  2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
First-lien 3.7× 4.0× 3.3× 3.2× 3.5× 3.8× 3.7× 4.0× 4.2× 4.2× 4.2×
Second-lien 0.7× 0.7× 0.2× 0.2× 0.1× 0.3× 0.7× 0.8× 1.2× 1.0× 0.9×
Other senior debt 0.3× 0.6× 0.6× 0.2× 0.7× 0.9× 0.6× 0.4× 0.4× 0.4× 0.2×
Subordinated debt 0.7× 0.8× 0.7× 0.3× 0.3× 0.2× 0.2× 0.3× 0.0× 0.0× 0.0×

Note: Large LBO transactions are defined as issuers with EBITDA greater than $50 million. Ratios are not calculated cumulatively, unlike in the given model.

Source: S&P CapIQ LCD and Bain & Company Global Private Equity Report 2018.Assignment 2

Exhibit 11: Percentage of US PE Exits by Type (Past Twelve Months)

 
  Strategic Buyer Financial Buyer IPO
Total 46% 42% 12%

Source: PitchBook 3Q 2018 US PE Breakdown Summary.

Exhibit 12: Panera Bread Annotated Stock Chart

An annotated stock chart of Panera Bread shows the PNRA and S&P 500 values and the trend of the curve at key dates.

Source: Mergent Online and Yahoo Finance.

Long Description

Exhibit 13: Analyst Quotes

“We believe Panera’s ongoing comp outperformance vs. the industry (500bps+ in ‘16) provides further validity that the strategic plan is working, with investor comfort in the turnaround on the rise.”  1

“Panera is at an inflection point, as 2.0 start-up and transition costs begin to ease and sales continue to gain momentum, and well positioned for outsized EPS growth starting 2017.”  2

“We believe 4Q validates our thesis that PNRA’s 2.0 investment cycle has positioned the company to outperform peers and set the stage for double-digit EPS growth over the coming years… the widening gap between the strength of PNRA’s business and that of the rest of the industry (+500 bps sales gap to industry in 4Q and LTM) argues for a premium to history and peers… The opportunity for margin recovery (2016 EBIT margin is ~400 bps below 2013 peak) offers further support Assignment 2 for a premium multiple, in our view.”  3

“Panera’s strategic approach has helped improve the brand’s image and drive top-line results, but its ongoing investments have not yet materialized in the form of sustained profit growth or improved returns. In our view, PNRA’s management is moving the company in the right direction by capitalizing on trends including better food, customization, digitalization, and greater guest insight (1:1 marketing, its loyalty program).”  4

“Better than expected 1Q SSS guidance suggests that trends remain strong in Jan and that the ‘digital flywheel’ continues to build on itself. Quarterly EPS will be lumpy due to Easter shifts (1Q to 2Q), start-up costs for delivery (2Q), and SBC tax benefit (3Q). Labor inflation remains a headwind.” 5

“Delivery roll out is still expected to be 35–40% system-wide by end of 2017 (not a decrease to 30–40% that was published in the release), with ~30% franchised units targeted implying ~40–50% of company conversions. PNRA is now citing a ~$5k/store lift within 6-9 M (vs 6 M prior).”  6

“Key Value Drivers 2.0 SSS Lift: Panera 2.0 supports comps lift of ~1.5% in ‘17 and ‘18. Delivery: Delivery could add an additional 1–3% comp lift on top of 2.0 lift. Operating margins will be less constrained by labor investments, IT spend, P2.0 and other investments aimed at throughput and operational capability as 2.0 rollout is complete, and margins should start to lever in ‘17 and ‘18. New store volumes – still strong at both franchise & company stores.”  7

“We believe PNRA’s mix of food value proposition, service model, and flexibility in customer access/asset format, combined with clear solutions to prior year headwinds can sustain years of high-teens EPS growth beginning in 2017, and a ~20% CAGR over the next few years. We are optimistic that benefits from rapid pick-up, 2.0 and delivery will drive traffic and sales over time, with leverage and cost efficiencies supportive of improved margins. With upside to consensus and optionality from several promising growth adjacencies and strategic initiatives, risk/reward remains attractive.”  8

“Q: Against soft industry trends, are PNRA’s initiatives enough to support ~MSD?

Yes, multiple sales initiatives and greater awareness and rollout of 2.0 cafes, rapid pick-up, catering and delivery, and more drive our estimated ~4% system CAGRs over the next several years.

Q: Can margins return to prior peak levels, and if not, how much margin can be recovered?

We think by 2020 PNRA can recover ~120 bps (from 2015) of the 400 bps of restaurant margin lost since prior peak. Some structural cost increases will limit full recovery anytime soon, but gains will come from: sales leverage, technology driven savings, supply chain efficiencies, & reduced investment.”  9

“We are raising our valuation range to better reflect a higher scarcity premium for stocks within the restaurant sector related to companies with visibility into same store sales, margin improvement and EPS growth in the years ahead.” 10

Exhibit 14: Mean Wall Street Consensus Estimates ($ in Millions)

 
  2017E 2018E 2019E 2020E 2021E
Income Statement
Revenue $2,846.1 $3,083.1 $3,374.4 $3,886.9 $4,220.0
     Growth 1.8% 8.3% 9.4% 15.2% 8.6%
EBITDA $440.9 $489.4 $561.1 $631.6 $692.1
     Growth   11.0% 14.7% 12.6% 9.6%
     Margin 15.5% 15.9% 16.6% 16.3% 16.4%
EBIT $278.5 $322.0 $380.8 $425.3 $471.7
     Growth   15.6% 18.3% 11.7% 10.9%
     Margin 9.8% 10.4% 11.3% 10.9% 11.2%
Net income $170.0 $192.3 $231.7 $256.1 $285.3
     Margin 6.0% 6.2% 6.9% 6.6% 6.8%
Cash Flow
     Capital expenditures $210.9 $199.8 $195.9 $196.4 $192.7
     Margin 7.4% 6.5% 5.8% 5.1% 4.6%

Source: Barclays, Credit Suisse, Morgan Stanley, UBS, Wells Fargo, Piper Jaffrey, and Guggenheim equity research reports retrieved from Thomson Reuters database.

Exhibit 15: Management Estimates ($ in Millions)

 
  2017E 2018E 2019E 2020E 2021E
Income Statement
Revenue $2,987.0 $3,296.0 $3,667.0 $4,062.0 $4,504.0
     Growth 6.9% 10.3% 11.3% 10.8% 10.9%
EBITDA $458.0 $533.0 $624.0 $722.0 $821.0
     Growth   16.4% 17.1% 15.7% 13.7%
     Margin 15.3% 16.2% 17.0% 17.8% 18.2%
EBIT $287.0 $346.0 $412.0 $486.0 $562.0
     Growth   20.6% 19.1% 18.0% 15.6%
     Margin 9.6% 10.5% 11.2% 12.0% 12.5%
Net income $175.0 $214.0 $256.0 $306.0 $360.0
     Margin 5.9% 6.5% 7.0% 7.5% 8.0%
Cash Flow
     Capital expenditures $187.0 $200.0 $240.0 $255.0 $258.0
     Margin 6.3% 6.1% 6.5% 6.3% 5.7%

Source: Company Schedule 14A SEC filings.

Exhibit 16: Panera Bread Same-Store Sales Growth

 
  2012 2013 2014 2015 2016
Company-owned 6.5% 2.6% 1.4% 3.0% 4.2%
Franchise-operated 5.0% 2.0% 0.9% 1.0% 0.7%
System-wide 5.7% 2.3% 1.1% 1.9% 2.4%

Note: Panera Bread does not record franchise-operated net bakery-cafe sales as revenues.

Source: Panera Bread FYE 2016 10 K SEC filing.

Exhibit 17: Excerpts From Panera Bread’s Q4 2016 Earnings Call Transcript

Ronald M. Shaich

Great. Good morning, everybody, and I do hope you got a better sleep. Thank you, Steve, and let’s let it rock. For the last several years, you’ve heard us talk about our strategy to evolve Panera, and you’ve heard us talk about the themes that we believe will define success in our business in the future. Let’s start by discussing our multiyear strategic plan. That strategic plan has four objectives and a number of initiatives.

Our first objective is to make Panera bakery-cafés a better competitive alternative, so that customers choose us over competitors. Our intent is to better compete by intensifying desire and reducing friction at Panera. Initiatives to deliver against this objective include Panera 2.0, which is inclusive of both digital access and operational integrity, and it includes innovation in food, innovation in operations, innovation in marketing, and innovation in store design, consistent with our North Star, which we call Concept Essence.

Our second objective is to build expanded runways for growth by pursuing an omni-channel strategy that leverages our brand credibility into new sales channels. To that end, we are focused on initiatives that generate growth through traditional and new formats and in several multimillion- dollar adjacent businesses including catering, delivery, and consumer packaged goods, which we call Panera at Home.

Our third objective is to build capabilities to execute our strategy. These capabilities include both human capabilities and technological capabilities. And our fourth objective is to execute value-enhancing initiatives to fund our strategic plan. To that end, we’ve undertaken initiatives including an intensive margin improvement effort and returning cash to shareholders. The expected byproduct of this multiyear strategic plan, indeed what we are aiming for, is sustained double-digit EPS growth.

Underlying this strategic plan are themes we’ve been working on the past half-decade. We believe these themes will shape our industry long into the future. These themes include: first, using digital to create a frictionless and joyful eat-in, to-go, and delivery guest experience, and thereby driving frequency; second, to build on our two-decade-long commitment to food that can be trusted by offering 100% clean food, genuine transparency, and real options, and thus truly being recognized by our guests as their ally in wellness; third, creating the largest and most successful loyalty program in the industry and using that program to drive more relevant one-to- one marketing; fourth, utilizing rapid pickup, catering, delivery, and Panera at Home to offer an omni-channel experience; and fifth, developing new formats that allow us to shift our paradigm from attempting to maximize the number of cookie-cutter cafés we can open, to maximizing the amount of high ROI sales we can extract from a given ZIP code through diverse format.

Brian Bittner

It’s not easy following those thoughtful words, Ron. On just delivery, big-picture question here, you’re targeting 35% to 40% of the system. It’s a very ambitious target to go from 15% just in one year. I’m actually wondering, do you have any initial thoughts on where we go from there? Have you identified yet what amount of the system you think can ultimately support delivery over the long-term?

Ronald M. Shaich

Brian, first on your first comment, ambitious, I think it was ambitious getting to 15% in one year, and that was tough because we had to start the machine up. I think Blaine and the team have built an extraordinary capability now. There’s tremendous enthusiasm as results are coming in. This is probably as powerful an initiative as we’ve seen in Panera in a long, long time, maybe the initiative of the decade in Panera. It’s really the big deal.

So, there’s tremendous capability, tremendous traction, and tremendous enthusiasm behind getting this done, and most importantly, getting it done right. I think our mission now is set on getting to the 35% to 40% goal; doing it well, that’s more important than anything else, instead of hitting the number; and continuing to reap the kinds of data that Blaine shared with you since that we are the best performing delivery experience among all 25 delivery companies. That’s what’s going to drive the future. That’s the leading indicator.

And so, I think we’ll take that step into 2017. We’ll make the commitment we’re going to get there to 35% to 40%. We’ll make the commitment we’re going to get there with high sales volumes and build this into a mass market opportunity by doing it well. And as we complete that, we’ll reappraise, we’ll learn, and we’ll give you an assessment of where we’re going in 2018.

Brett Levy

Would you be able to talk a little bit more about the macro landscape? And I know you’ve spoken in the past that 2.0 seems to be the differentiator between your company and your franchise comps, but it seemed that the gap widened this quarter. Would you be willing to share a little bit more on your internal and your external thoughts? Thank you.

Ronald M. Shaich

I would start and say, we as a rule don’t spend a lot of time studying or thinking about the external environment. And I say that to you straight up because we don’t control it and don’t have much ability to influence it, and simply are at the effect of it. So, what we spend our time thinking about is how we take market share in whatever environment is going to come, and that’s the gut split for us.

I think clearly we see the same data you do. I think the fourth quarter was weak for this industry, December was particularly weak for this industry, and we’re gratified to see that our gap through the industry as measured in Black Box has continued to grow and I think hit a record in December. You can look at the data, but I think we were pushing nearly 900 basis points. And I wouldn’t say that’s going to continue, but it’s reflective of what Panera is doing.

Relative to the question of franchise versus company comps, as Blaine had said, we were with our franchisees two weeks ago, and I think everybody completely understands and gets the power of these initiatives, and I think that there’s tremendous excitement in it. Again, one of the things about us have been that we’re trying to do it in a very disciplined way, to rationalize both ops integrity and the necessary capabilities and capacity, to rationalize the right markets to put delivery into versus 2.0 and vice versa. But I think in its core, we take that variation or the gap between company and franchise as a statement about the power of these initiatives. What I can tell you is, when things work, people get them done.

Operator

Okay. Our last question comes from Greg Francfort with Bank of America Merrill Lynch.

Please go ahead.

Gregory Francfort

Just can you talk a little bit about who you are taking share from on delivery? Is this people who would be otherwise you get home, is it food otherwise ordering delivery from another concept, just what customer are you sort of drawing over and where are they coming from?

Ronald M. Shaich

I don’t think we fully know yet. I would tell you this. I think generally most of these food markets are highly fragmented. So when you take share, you don’t necessarily take it out of somebody specifically tied, I think it’s in a general sense. I will say that there was an analyst report that said Panera is building up momentum in delivery and will take share down the road from people like Domino’s.

My own view, and I’ll be restrained, we don’t think that’s the way it’s going to play at all. We think that folks like Domino’s and Papa John’s, the pizza guys, they serve one need state. It’s Friday night for the kids, it’s Sunday during the Super Bowl game. We think Panera serves a very different need state; it completes a different job for guests.

Panera serves the need for lunch Monday through Friday generally, not only, but serves that job in that role for those folks that are sitting in their office, two or three people, are hungry for lunch, don’t have an executive assistant to go get them lunch or he isn’t getting them lunch, and they call Panera. It’s the place and its quality and it’s real, and we think that it’s that need thing that we’re there. And therefore, we think of our friends at Domino’s and elsewhere as non-competitive for using the skills of delivery to serve a different need state, just to clarify. If you want to add anything…

Source: Transcripts, SA. “Panera Bread’s (PNRA) CEO Ronald Shaich on Q4 2016 Results – Earnings Call Transcript.” Seeking Alpha, February 8, 2017, seekingalpha.com/article/4044012-panera-breads-pnra-ceo-ronald-shaich-q4-2016-results-earnings-call-transcript.

Exhibit 18: Comparable Public Companies

 
  EV/EBITDA P/E
Company 2017E 2018E 2017E 2018E
FAST CASUAL
     Chipotle 25.9× 18.8× 54.8× 37.1×
     Shake Shack 14.8× 11.7× 66.8× 53.0×
     Wingstop Inc. 24.7× 21.2× 44.2× 36.3×
     Potbelly 7.7× 7.0× 30.2× 26.2×
     Zoe’s Kitchen 16.0× 12.8× NM NM
     Habit Restaurants 10.2× 8.6× 60.0× 54.5×
     Freshii 26.5× 18.5× 42.0× 28.8×
     Noodles & Company 8.1× 7.2× NM NM
MULTINATIONAL QSR
     Domino’s 20.2× 17.7× 35.4× 29.7×
     McDonald’s 13.6× 13.3× 21.0× 19.6×
     Starbucks 14.8× 13.0× 26.4× 23.3×
     Yum! Brands 15.5× 15.0× 23.4× 20.3×
     Restaurant Brandsa 13.5× 12.5× 29.7× 22.9×
DOMESTIC QSR
     Dunkin’ Brands 15.0× 14.1× 23.1× 20.5×
     Wendy’s 14.4× 13.3× 29.6× 24.3×
     Jack in the Box 11.4× 10.9× 21.5× 18.4×
     Papa John’s 15.9× 14.9× 28.6× 25.4×
     Sonic 11.4× 11.0× 19.7× 17.6×
     Bojangles’ 12.1× 11.3× 22.0× 20.5×
     Fiesta Restaurant Group 8.1× 7.5× 21.4× 19.1×
     El Pollo Loco 8.7× 7.7× 18.1× 16.7×
     Del Taco 9.4× 8.7× 24.3× 22.1×

aPro forma for announced acquisition of Popeyes Louisiana Kitchen by Restaurant Brands.

Source: Company Schedule 14A SEC filings.

Exhibit 19: Precedent Transactions

 
Acquirer Target EV/LTM EBITDA Premium to Trailing 30-Trading-Day VWAP
JAB Peet’s Coffee & Tea 22.3× 26%
Restaurant Brands Int’l Popeyes Louisiana Kitchen 20.5× 27%
JAB Krispy Kreme Doughnuts 18.3× 25%
Starbucks Teavana 17.4× 34%
Darden Restaurants Yard House 15.0× N/A
Burger King Worldwide Tim Hortons 14.8× 40%
JAB Caribou Coffee 11.3× 36%
JAB Einstein Noah Restaurant Group 10.1× 47%
Golden Gate Capital Red Lobster 9.2× N/A
Angelo, Gordon & Co. Benihana 9.1× 47%
Levy Acquisition Corp. Del Taco Restaurants 8.7× N/A
Centerbridge Partners P.F. Chang’s China Bistro 8.3× 29%

Source: Company Schedule 14A SEC filings.

Exhibit 20: Mean Wall Street Consensus Stock Price Targets

An annotated stock chart shows the stock price of Panera Bread company and the price target for each quarter for dates from 3/31/2014 to 3/31/2017.

Source: Mergent Online and Barclays, Credit Suisse, Morgan Stanley, UBS, Wells Fargo, Piper Jaffrey, and Guggenheim. Barclays, Credit Suisse, Deutsche Bank, Morgan Stanley, Piper Jaffray, UBS, and Wells Fargo equity research reports retrieved from Thomson Reuters databases.

Long Description

Exhibit 21: Earnings Predictability

 
Year EPS % Difference
  Actual Estimate  
2013 $6.68 $6.66 0.3%
2014 $6.53 $6.51 0.3%
2015 $6.21 $6.12 1.5%
2016 $6.74 $6.70 0.6%
2017 N/A $7.67 N/A
2018 N/A $9.14 N/A

Source: Thompson Reuters Consensus Estimates (via Morgan Stanley equity research reports).

Exhibit 22: Panera Bread’s Historical EBITDA Multiples ($ in Millions)

 
  2011 2012 2013 2014 2015 2016
Enterprise value $4,834.6 $4,432.6 $4,676.4 $4,639.4 $5,065.6 $5,596.4
EBITDA $300.2 $373.8 $416.3 $400.1 $394.1 $403.2
EV/EBITDA 16.1× 11.9× 11.2× 11.6× 12.9× 13.9×

Source: Company 14A and 10K SEC filings.

Exhibit 23: Available Debt-Financing Terms

 
  Maximum Amount ($) Origination Fee Interest Rate Loan Term Maximum Total Debt × FYE 2016 EV/EBITDA
Bank revolver $1,500,000,000 2.25% 3.7% 5 years 7.44×
Bank term loan $2,250,000,000 2.25% 6.3% 15 years 7.44×
Subordinated debentures $120,000,000 3.00% 9.5% 15 years 7.44×

Source: Created by the authors.

Notes

1.  Ibid.

2.  Barclays Panera Bread 4Q16 Equity Research Report.

3.  Credit Suisse Panera Bread 4Q17 Equity Research Report.

4.  Deutsche Bank Panera Bread 4Q17 Equity Research Report.

5.  Morgan Stanley Panera Bread 4Q17 Equity Research Report.

6.  Wells Fargo Panera Bread 4Q17 Equity Research Report.

7.  Ibid.

8.  UBS Panera Bread 4Q17 Equity Research Report.

9.  Wells Fargo Panera Bread 4Q17 Equity Research Report.

10.  Ibid.