Einstein Bros 2013 Annual Report Download - page 51

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
The Company computes basic net income per common share by dividing the net income available to common stockholders for the period by
the weighted-average number of shares of common stock outstanding during the period.
Diluted net income per share is computed by dividing the net income available to common stockholders for the period by the weighted-
average number of shares of common stock and potential common stock equivalents outstanding during the period using the treasury stock method.
Potential common stock equivalents include incremental shares of common stock issuable upon the exercise of stock options and warrants.
Potential common stock equivalents are excluded from the computation of diluted net income per share when their effect is anti-dilutive.
The following table summarizes the weighted-average number of common shares outstanding, as well as sets forth the computation of basic
and diluted net income per common share for the periods:
Fiscal Year Ended
January 3,
2012
January 1,
2013
December 31,
2013
(in thousands, except earnings per share and related
share information)
Net income available to common stockholders (a) $ 13,203 $ 12,741 $ 14,565
Basic weighted average shares outstanding (b) 16,629,098 16,935,018 17,373,396
Dilutive effect of stock options, SARs and RSUs 251,223 282,162 440,001
Diluted weighted average shares outstanding (c) 16,880,321 17,217,180 17,813,397
Net income available to common stockholders per share—Basic (a)/(b) $ 0.79 $ 0.75 $ 0.84
Net income available to common stockholders per share—Diluted (a)/(c) $ 0.78 $ 0.74 $ 0.82
Anti-dilutive stock options, SARs and RSUs 405,374 622,731 227,123
Stock-Based Compensation
The Company maintains several equity incentive plans under which it may grant non-qualified stock options, incentive stock options, stock
appreciation rights (“SARs”), restricted stock units (“RSUs”) or restricted stock to employees, non-employee directors and consultants. Restricted
stock and RSUs are valued using the closing stock price on the date of grant. The fair value of an option award or SAR is determined using the
Black-Scholes option pricing model, which incorporates ranges of assumptions for inputs. The Company’ s assumptions are as follows:
• Expected Term—The expected term of options is based upon evaluations of historical and expected future exercise behavior.
• Risk Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the expected term at the grant date.
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
• Implied Volatility—Implied volatility is based on the mean reverting average of the Company’ s historical stock volatility and that of an
industry peer group. The Company believes that the use of mean reversion is supported by evidence of a correlation between stock
price volatility and a company’ s leverage, combined with the effects that mandatory principal payments will have on the Company’ s
capital structure, as defined under its debt facility.
• Dividend Yield—The Company declared dividends in fiscal 2011, fiscal 2012 and fiscal 2013, and anticipates that it will continue to
pay dividends in the future, at the discretion of its Board of Directors (the “Board”). The payment of dividends is dependent on a
variety of factors, including available cash and the overall financial condition of the Company.
Under the plans, vesting of awards can either be based on the passage of time or on the achievement of performance goals. For awards that
vest on the passage of time, compensation cost is recognized using a graded vesting attribution method over the vesting period. For performance
based awards, the Company will recognize compensation costs over the requisite service period when conditions for achievement become
probable. The Company also estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ
or are expected to differ.
Concentrations of Risk
The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has
not experienced any losses related to these balances and management believes its credit risk to be minimal.