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10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS
Einstein Noah Restaurant Group, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) is the largest owner/operator,
franchisor and licensor of bagel specialty restaurants in the United States. As of December 31, 2013, the Company owned, franchised or licensed
852 restaurant concepts located in 42 states and the District of Columbiaunder the brand names of Einstein Bros. Bagels (“Einstein Bros.”), Noah’ s
New York Bagels (“Noah’ s”) and Manhattan Bagel Company (“Manhattan Bagel”).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
The Company operates three business segments: company-owned restaurant operations, manufacturing operations, and franchising and
licensing operations. These reportable segments are supported by the Company’ s corporate unit. The company-owned restaurants segment includes
brands that have similar investment criteria and economic and operating characteristics. The manufacturing segment produces and distributes bagel
dough and other products to the Company’ s restaurants and other third parties. The franchise and license segment earns royalties and other fees
from the use of trademarks and operating systems developed for the Company’ s brands.
Information regarding the revenues and costs of sales for each business segment has been reported in Note 19 for fiscal years 2011, 2012 and
2013.
Fiscal Year
The Company has a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2012 and 2013 ended on January 1,
2013 and December 31, 2013, respectively, and each contained 52 weeks. Fiscal year 2011 ended on January 3, 2012 and contained 53 weeks.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions
for the reporting period and as of the reporting date. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and
expenses, and the disclosure of contingencies. Actual results could differ from those estimates.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. GAAP requires fair value measurement to be classified and disclosed in one of the following three
categories:
• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities.
• Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the
full term of the asset or liability.
• Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(i.e., supported by little or no market activity).
59
Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company’ s financial instruments typically consist of cash equivalents, accounts receivable, accounts payable and debt. The fair values of
accounts receivable and accounts payable approximate their carrying values, due to their short-term maturities. As of January 1, 2013 and
December 31, 2013, total debt under the Company’ s amended and restated credit facility was $136.7 million and $107.0 million, respectively, and
had a fair value of $136.7 million and $107.2 million, respectively. The fair value of the Company’ s debt was estimated based on current rates