Einstein Bros 2006 Annual Report Download - page 50

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http://www.sec.gov/Archives/edgar/data/949373/000104746907001622/a2176540z10-k.htm[9/11/2014 10:12:36 AM]
We view our company as one business with three sources of revenue: restaurant sales, manufacturing revenue and franchise and license related
revenues. Our main business focus is operating restaurants under the Einstein and Noah's brands, which have similar investment criteria and
economic and operating characteristics. Our manufacturing operations and franchise and license operations support our main business focus but
allow us to leverage our inherent cost structure via third party business and enhance our brands through new product channels. We manage our
business and allocate resources via a combination of restaurant sales reports and gross profit information related to our three sources of revenue,
which are presented in their entirety within the consolidated statements of operations. We do not regularly review reports related to balance sheet or
asset information during this process.
Our manufacturing operations, which include our USDA approved commissaries, are ancillary and support our restaurant operations through
the production and distribution of bagel dough, cream cheese and other products to our restaurants, licensees and franchisees and other third parties.
These operations reduce costs via vertical integration, enable us to control the quality and consistency of ingredients delivered to our restaurants,
manage inventory levels, and expose our brands to new product channels. Although the primary focus of our manufacturing and commissary
operations is to produce and distribute products to our restaurants, our third party revenues have increased over time. The overall results of
operations of our manufacturing operations historically have not and currently do not have a material impact on our operating profit. We report the
results of manufacturing operations associated with our third party sales separately on our consolidated statements of operations. The net costs
associated with internal "sales" to our restaurants are included in restaurant costs.
Our franchise and license operations complement our restaurant operations by expanding the awareness of our brands. We report royalties and
other fees earned from the use of trademarks and operating systems developed for the Manhattan, Einstein Bros. and Noah's brands separately on
our consolidated statements of operations. The overall results of operations of our franchise and license operations historically have not and
currently do not have a material impact on our operating profit.
Net Loss per Common Share
In accordance with SFAS No. 128, "Earnings per Share," we compute basic net loss per common share by dividing the net loss 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 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
60
equivalents are excluded from the computation of diluted net income (loss) 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 loss per common share for the periods indicated (in thousands of dollars, except share and per share data):
For the years ended:
January 2
2007
January 3,
2006
December 28,
2004
Weighted average shares outstanding 10,356,415 9,878,665 9,842,414
Net loss (6,868) $ (14,018) $ (17,405)
Basic and diluted net loss per share $ (0.66) $ (1.42) $ (1.77)
Stock options and warrants to purchase an aggregate of 993,707, 1,737,113, and 1,764,372 shares of common stock were outstanding as of
January 2, 2007, January 3, 2006 and December 28, 2004, respectively. These stock options and warrants were not included in the computation of
diluted earnings per share because their effect would have been anti-dilutive.
Stock-Based Compensation