Einstein Bros 2013 Annual Report Download - page 34

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
Estimated interest expense on our credit facility (a)
14,118
3,559
6,524
4,035
—
Capital lease obligations 855 288 561 6 —
Operating lease obligations (b) 200,190 36,666 66,387 41,376 55,761
Purchase obligations (c) 26,676 26,676 — — —
Other long-term obligations (d) 4,451 — 1,800 1,610 1,041
Accounts payable and accrued expenses 39,032 39,032 — — —
Total $392,322 $109,971 $91,522 $134,027 $56,802
(a) Calculated as of December 31, 2013, using the variable LIBOR and U.S. Prime rates, plus the applicable margin in effect for the remainder.
As the interest rates on our term loan facility and the revolving credit facility are variable, actual payments could differ materially.
(b) Amounts represent cash payments and do not include potential renewal options.
(c) Purchase obligations consist of non-cancelable minimum purchases of certain raw ingredients that are used in our products.
(d) Other long-term obligations primarily consist of the remaining liability related to minimum future purchase commitments with a supplier that
advanced us $10.0 million in 1996.
Financial Condition, Liquidity and Capital Resources
The restaurant industry is predominantly a cash business where cash is received at the time of the transaction. We believe that we will
generate sufficient cash flow to fund operations, capital expenditures, and required debt and interest payments. Our investment in inventory is
minimal because our products are perishable. Our accounts payable are on terms that we believe are consistent with those of other companies
within the industry.
The primary driver of our operating cash flow is our restaurant revenue, specifically the gross margin from our company-owned restaurants.
Therefore, we focus on the elements of those operations including store sales and controllable expenses to ensure a steady stream of operating
profits that enable us to meet our cash obligations.
Including tenant improvement allowances that we typically receive from the landlord, the average cost of a new restaurant was approximately
$556,000 in 2013. This amount can vary and is dependent on square footage, layout and location. The cost includes equipment, leasehold
improvements, furniture and fixtures, and other related capital. This average cost does not include any pre-opening expenses or capitalized internal
development costs. While tenant allowances reduce the cash cost of our restaurants, the amounts vary amongst restaurants as they depend on the
location of the restaurant and on other terms of the lease. We continue to deploy our capital into specific areas of the business such as adding drive-
thru lanes to restaurants, adding new exterior signage, upgrades and remodels.
We anticipate that the majority of our capital expenditures for 2014 will be focused on the addition of fifteen to twenty new company-owned
restaurants and the relocation of seven to ten company-owned restaurants. We also intend to deploy capital into areas such as the remodeling or
refreshing of existing properties, installing drive-thru lanes and adding new exterior signage.
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Table of Contents
The following is information on our restaurant economics as of December 31, 2013 and represents the average company-owned restaurant
that has been open longer than one year:
Unit Economics
December 31,
2013
(in thousands)
A) Last 12 months average restaurant sales $ 874
B) Restaurant operating profit $ 162
C) Margin (B/A) 18.5%
D) Cash investment cost $ 556
E) Cash on cash return (B/D) 29%
F) Restaurant-level earnings before interest, taxes, depreciation,
amortization and rent $ 237
G) Fully capitalized investment $ 1,156
H) Fully capitalized cash on cash return (F/G) 21%
Amount excludes pre-opening expenses.
Restaurant operating profit $162,000 plus 2013 average restaurant rent expense of $75,000 per year.
(1)
(2)
(3)
(1)
(2)
(3)