Einstein Bros 2007 Annual Report Download - page 36

http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
Net Income (Loss) and Income Taxes
For our financial statements prepared in accordance with generally accepted accounting principles ("GAAP"), we reported net income for
2007 of $12.6 million, versus the net loss of $6.9 million we reported for 2006. This increase is due to improved operations, the result of the
interest savings from the reduction of the principal and the interest rate on our debt facility which we amended during 2007, the reduction of
depreciation expense as many of our assets became fully depreciated in 2006, and the reduction of expense on our amortizing intangible assets
became fully amortized in 2006.
For tax purposes, our net operating loss carryforward reduced our federal and state income tax liability incurred for 2007. We have recorded a
provision for income taxes in the amount of $0.5 million for 2007 as a result of our estimate of state income tax and alternative minimum tax, and
there was no provision recorded for 2006.
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As of January 1, 2008, our net operating loss carryforwards for U.S. federal income tax purposes were $148.8 million, $102.2 million of
which are subject to an annual usage limitation of $4.7 million, and were subject to the following expiration schedule (in thousands of dollars):
Net Operating Loss
Carryforwards Expiration Date
$ 6,058 12/31/2012
14,553 12/31/2018
6,862 12/31/2019
10,424 12/31/2020
10,515 12/31/2021
35,688 12/31/2022
42,362 12/31/2023
12,003 12/31/2024
5,413 12/31/2025
4,900 12/31/2026
$ 148,778
Our ability to utilize the approximately $46.6 million of our net operating losses that are not currently subject to limitation could become
limited, and our ability to utilize our remaining net operating losses could be limited further, in the event that we undergo an "ownership change"
as that term is defined for purposes of Section 382 of the Internal Revenue Code. We are in the process of filing a request with the Internal
Revenue Service to review our methodology for determining ownership changes in accordance with Internal Revenue Code Section 382. Upon
acceptance of our request, we believe that our NOLs will be available for utilization. In the event that our request is not accepted, approximately
$17.9 million of NOLs will be at risk to expire prior to utilization.
Our net operating loss carryforwards are one of our deferred income tax assets; however, the ultimate realization of these deferred income tax
assets is dependent upon generation of future taxable income. We made $12.6 million in net income for fiscal 2007 and we expect to continue to
be profitable in fiscal 2008. However, due to the uncertainty of future taxable income, deferred tax assets resulting from these net operating losses
have been fully reserved. In accordance with SFAS No. 109, "Accounting for Income Taxes," ("SFAS No. 109") we will assess each quarter of
2008 whether there is a continuing need for a valuation allowance that results from uncertainty regarding our ability to realize the benefits of our
deferred tax assets.
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Results of Operations for fiscal year 2006 as compared to fiscal year 2005
For the year ended:
(in thousands of dollars)
Increase/
(Decrease)
For the year ended:
(percent of total revenue)
January 3,
2006
January 2,
2007
2005
vs. 2006
January 3,
2006
January 2,
2007
Revenues: