Einstein Bros 2002 Annual Report Download - page 17

http://www.sec.gov/Archives/edgar/data/949373/000104746903027186/a2116520z10-ka.htm[9/11/2014 10:14:22 AM]
Restated amounts were derived from changes in the accounting treatment applied primarily in the following categories in fiscal 2000 and
fiscal 2001:
Reorganization Accruals. Certain restructuring and integration liabilities that were incorrectly established in years prior to fiscal 2000 related
to our acquisition of Manhattan Bagel Company and Chesapeake Bagel Franchise Corp. were inappropriately reversed into income and ongoing
period costs were charged against such liabilities in error. The restated results reflect the reversal of such treatment and the treatment of period
costs as operating expenses.
Manufacturing Revenue and Cost of Goods Sold. Manufacturing revenue and cost of goods sold were reduced in the restated results to correct
an erroneous gross-up on sales and costs of goods sold recorded on sales to franchisees through a third-party distributor. The restatement had no
impact on loss from operations and did not affect invoices to franchisees or distributors.
Assets Held for Resale. The restatements reflect the expensing of certain costs improperly capitalized into assets held for resale, revised
impairment charges based on an assessment of fair value and the reversal of depreciation expenses charged erroneously against these assets, which
represent company-operated locations expected to be sold to franchisees.
Deferred Tax Asset. The restatement reversed an income tax benefit and associated addition to deferred tax asset in fiscal 2000 as such
recognition was in error in accordance with criteria established by SFAS No. 109.
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Purchase Accounting. Certain costs capitalized relating to the Einstein Acquisition were expensed or reclassified as debt issuance costs. In
addition, we corrected our allocation of the purchase price in connection with the Einstein Acquisition to reflect the proper application of APB 16.
Debt, Preferred Stock and Equity Adjustments. Our accounting for many of our debt and equity instruments was substantially revised to
correct the allocation of proceeds between the instruments and associated warrants, the recognition of increasing rate interest and dividends, and
the treatment of contingently issuable warrants as derivative liabilities.
The reaudits also resulted in other corrections to our consolidated financial statements, which are detailed in our consolidated financial
statements included in this Form 10-K. The impacts of the restatements by period are summarized below. For detailed descriptions of the nature of
the adjustments, please see Note 3 to our consolidated financial statements.
A. Beginning Balance for Fiscal 2000
In the process of reviewing the accounting treatment of certain transactions, we have identified certain adjustments to prior period balances,
which changes are reflected on the adjusted opening balance sheet for fiscal 2000. The impact of the adjustments on stockholders' equity is
summarized below (amounts in thousands):
Beginning fiscal 2000 stockholders' equity, as previously reported $ 12,372
Depreciation expense 545
Franchisee debt guarantee payments (229)
Pre-opening rent (102)
Beginning fiscal 2000 stockholders' equity, as restated $ 12,586
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B. Restatement of Fiscal 2000 Financial Statements
The primary effects of the restatement of the fiscal 2000 financial statements are summarized below:
Fiscal 2000
(amounts in thousands) Revenue
Income/(Loss)
From Operations
Net Income/(Loss)
Available To
Common
Stockholders'
Equity