Einstein Bros 2004 Annual Report Download - page 35

http://www.sec.gov/Archives/edgar/data/949373/000104746905006202/a2153240z10-k.htm[9/11/2014 10:13:29 AM]
Notes to Consolidated Financial Statements
(dollars in thousands, except share and per share amounts)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The consolidated financial statements of New World Restaurant Group, Inc. and its wholly-owned subsidiaries (collectively, the Company)
have been prepared in conformity with accounting principles generally accepted in the United States of America. All inter-company accounts and
transactions have been eliminated in consolidation. The Company owns, franchises or licenses various restaurant concepts under the brand names
of Einstein Bros. Bagels and Einstein Bros. Café (collectively known as Einstein Bros.), Noah's New York Bagels (Noah's), Manhattan Bagel
Company (Manhattan), Chesapeake Bagel Bakery (Chesapeake) and New World Coffee (New World).
We have a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2004, 2003 and 2002 each contained 52 weeks
and ended on December 28, 2004, December 30, 2003, and December 31, 2002, respectively.
Certain reclassifications have been made to conform previously reported data to the current presentation. These reclassifications have no effect
on net income or financial position as previously reported.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restatement of Prior Financial Information
It has been our longstanding historical accounting policy to amortize our leasehold improvements over a period that included both the
noncancelable term of the lease and its option periods (or the useful life of the asset, if shorter). Concurrently, we used the noncancelable lease term
in determining whether each of our leases was an operating lease or a capital lease and in calculating our straight-line rent expense. We believed
that these accounting treatments were appropriate under generally accepted accounting principles. Furthermore, we believed that these accounting
treatments were comparable to the practices of other public companies. However, we have since concluded that we should use the same lease term
in amortizing leasehold improvements as we use in determining capital versus operating leases and in calculating straight-line rent expense.
Accordingly, we have adopted the following policy: the depreciable lives for our leasehold improvements, which are subject to a lease, will be
limited to the lesser of the useful life or the noncancelable lease term. In circumstances where we would incur an economic penalty by not
exercising one or more option periods, as contemplated by Statement of Financial Accounting Standards (SFAS) No. 13 "Accounting for Leases,"
we may include one or more option periods when determining the depreciation period. In either circumstance, our policy requires consistency
when calculating the depreciation period, in classifying the lease, and in computing straight-line rent expense.
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As a result of this change, our financial statements have been restated as follows:
2003
As reported Adjustments Restated
Balance Sheet:
Property and equipment, net $ 67,800 $ (13,287) $ 54,513
Total assets 195,025 (13,287) 181,738
Accumulated deficit (257,461) (13,287) (270,748)
Total stockholders' deficit (81,866) (13,287) (95,153)
Statement of Operations:
Depreciation and amortization 28,200 5,813 34,013
Loss from operations (11,802) (5,813) (17,615)
Loss before income taxes (66,896) (5,813) (72,709)
Net loss (67,708) (5,813) (73,521)
Net loss available to common stockholder (82,131) (5,813) (87,944)
Net loss per common share, basic and diluted $ (21.20) $ (1.51) $ (22.71)
2002