Einstein Bros 2013 Annual Report Download - page 23

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
Our free cash flow is expected to continue to provide us with the financial resources to execute on our fiscal 2014 plan, including the
continued servicing of our elevated level of debt.
Use of Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
included in this filing, we have provided certain non-GAAP financial information, including non-GAAP total revenues excluding the extra week
in fiscal 2011; adjusted earnings before interest, taxes, depreciation and amortization, restructuring expenses, strategic alternative expenses, and
other operating expenses/income (“Adjusted EBITDA”); net income adjusted for the extra 53 week in fiscal 2011, restructuring expenses,
strategic alternatives expense, incremental interest expense on additional credit facility borrowings and other operating expenses/income
(“Adjusted Net Income”); earnings per share adjusted for the extra 53 week in fiscal 2011, restructuring expenses, strategic alternatives expense,
incremental interest expense on additional credit facility borrowings and other operating expenses/income (“Adjusted Net Income Per Share”); and
“Free Cash Flow”, which we define as net cash provided by operating activities less net cash used in investing
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activities. Management believes that the presentation of this non-GAAP financial information provides useful information to investors because this
information may allow investors to better evaluate our ongoing business performance and certain components of our results. In addition, the Board
uses this non-GAAP financial information to evaluate the performance of the Company and its management team. This information should be
considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. Not all
of the aforementioned items defining Adjusted EBITDA occur in each reporting period, but have been included in our definitions of these terms
based on historical activity. We have reconciled the non-GAAP financial information to the nearest GAAP measure on pages 31, 37, 42 and 46.
We include in this report information on system-wide comparable store sales percentages. Restaurants included in our comparable store sales
percentages include those restaurants in operation for a full six fiscal quarters. System-wide comparable store sales percentages refer to changes in
sales of our restaurants, whether operated by the Company or by franchisees and licensees, in operation for six fiscal quarters including those
restaurants temporarily closed for an immaterial amount of time. Some of the reasons restaurants may be temporarily closed include remodeling,
relocations, road construction, rebuilding related to site-specific catastrophes and natural disasters. Franchise and license comparable store sales
percentages are based on sales of franchised and licensed restaurants, as reported by franchisees and licensees. Management reviews the increase or
decrease in comparable store sales to assess business trends. Comparable store sales exclude permanently closed locations. When we intend to
relocate a restaurant, we consider that restaurant to be temporarily closed for up to twelve months after it ceases operations. If a suitable relocation
site has not been identified by the end of twelve months, we consider the restaurant to be permanently closed. Until that time, we include the
restaurant in our open store count, but exclude its sales from our comparable store sales. As of December 31, 2013, there are four stores that are
currently closed but that we intend to relocate, and are thus considered to be temporarily closed.
We use company-owned store sales, franchise and license sales and the resulting system-wide sales information internally in connection
with restaurant development decisions, planning, and budgeting analyses. We believe system-wide comparable store sales information is useful in
assessing consumer acceptance of our brands; facilitates an understanding of our financial performance and the overall direction and trends of sales
and operating income; helps us appreciate the effectiveness of our advertising and marketing initiatives; and provides information that is relevant
for comparison within the industry.
Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for
other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by
other companies. We do not record franchise or license restaurant sales as revenues. However, royalty revenues are calculated based on a
percentage of franchise and license restaurant sales, as reported by the franchisees or licensees.
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Results of Operations for Fiscal 2013 as compared to Fiscal 2012
Financial Highlights
• Total revenues increased $7.5 million, or 1.8%, which was driven by an increase in company-owned restaurant revenue of $3.6 million,
an increase of $3.0 million from our manufacturing operations and an increase in franchise and license related revenue of $1.3 million,
partially offset by a decline in revenue of $0.5 million from commissaries that were closed by the end of the first quarter of fiscal 2012.
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