Einstein Bros 2013 Annual Report Download - page 25

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
Provision for income taxes
8,103
7,329
(9.6%)
Depreciation and amortization 19,707 18,203 (7.6%)
Restructuring expenses 480 — **
Strategic alternatives expenses 3,677 — **
Other operating expenses, net 1,592 1,138 (28.5%)
Adjusted EBITDA $ 49,684 $ 47,205 (5.0%)
** Not meaningful
To stimulate transaction growth in fiscal 2013, we concentrated on value bundling to our customers. Our discounting, which is recorded
against revenue, increased $7.7 million from fiscal 2012. While fiscal 2013 proved to be challenging, we believe that this investment in
discounting has had a positive impact on transaction growth for the year and that we are well positioned for fiscal 2014. Strong third-party sales
from our manufacturing operation and an increase in comparable store sales from our franchise and license operations of +0.4% helped mitigate
the impact of this discounting at our company-owned restaurants.
Our income from operations increased by $3.6 million in fiscal 2013 to $27.9 million primarily as a result of the reversing effect of expenses
incurred with the strategic alternatives review process we undertook in 2012, improved manufacturing results and increased franchise and license
revenue, partially offset by a decline in operations at our company-owned restaurants resulting from the deleveraging of costs associated with our
investment in discounting.
Net income was $14.6 million for fiscal 2013, an increase of $1.8 million, or 14.3%, from fiscal 2012. We attribute this increase to an
improvement in overall income from operations, the reversing effect of one-time expenses related to the strategic alternatives review process
incurred by us in fiscal 2012 and a lower effective tax rate, partially offset by increased interest expense due primarily to a larger amount of debt in
fiscal 2013.
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Table of Contents
Company-Owned Restaurant Operations
Fiscal Year Ended
(in thousands)
Increase/
(Decrease)
Percentage of company-owned
restaurant sales
January 1,
2013
December 31,
2013
2013
vs. 2012
January 1,
2013
December 31,
2013
Company-owned restaurant sales $384,783 $ 388,362 0.9%
Percent of total revenues 90.1% 89.4%
Cost of sales (exclusive of depreciation and
amortization):
Cost of goods sold $106,925 $ 109,122 2.1% 27.8% 28.1%
Labor costs 111,784 113,849 1.8% 29.0% 29.3%
Rent and related expenses 41,993 44,233 5.3% 10.9% 11.4%
Other operating costs 40,320 42,962 6.6% 10.5% 11.1%
Marketing costs 11,380 10,906 (4.2%) 3.0% 2.8%
Total company-owned restaurant costs $312,402 $ 321,072 2.8% 81.2% 82.7%
Total company-owned restaurant
gross margin $ 72,381 $ 67,290 (7.0%) 18.8% 17.3%
In fiscal 2013, we opened ten restaurants, acquired three restaurants from a franchisee, closed ten restaurants and sold six restaurants to
franchisees.
Company-owned restaurant sales for fiscal 2013 increased $3.6 million. We attribute this increase to net incremental revenue of $3.9 million
from new company-owned restaurants opened in 2013, $6.9 million from stores opened in fiscal 2012 that are not yet eligible to be included in our
comparable store base and $0.4 million from stores we acquired from franchisees, partially offset by a $2.8 decline in year-over-year sales at
restaurants closed during 2013, a $3.3 million decline in year-over-year sales from restaurants that were sold to franchisees and a decline in
company-owned comparable store sales.
Company-owned comparable store sales decreased -0.6% in fiscal 2013. The decrease in company-owned comparable store sales is due to a
decrease in transactions (-2.7%) and the impact of discounting (-1.9%), partially offset by an increase from pricing (+0.9%) and a shift in product
mix (+3.1%). We took two price increases in fiscal 2013, totaling approximately 1.4%.