Einstein Bros 2007 Annual Report Download - page 58

http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
for the years ended January 3, 2006, January 2, 2007, and January 1, 2008. Our chief operating decision maker manages our business and allocates
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. Due to the immateriality of all other financial information in relation to the restaurant segment, including but not limited to
assets, capital expenditures, depreciation and amortization and general and administrative expenses, our chief operating decision maker does not
regularly review any additional information for purposes of making decisions about allocating resources and assessing performance for each
business segment.
Our manufacturing operations, which include our United States Department of Agriculture 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.
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 Income (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 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 year to date periods ended
January 3,
2006
January 2,
2007
January 1,
2008
(In thousands of dollars, except share and per share data)
Net income (loss) (a) $ (14,018) $ (6,868) $ 12,586
Basic weighted average shares outstanding (b) 9,878,665 10,356,415 13,497,841
Dilutive effect of stock options and SARs — — 737,784
Diluted weighted average shares outstanding (c) 9,878,665 10,356,415 14,235,625
Basic earnings (loss) per share (a)/(b) $ (1.42) $ (0.66) $ 0.93