Einstein Bros 2008 Annual Report Download - page 21

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312509042707/d10k.htm[9/11/2014 10:10:56 AM]
recorded as an unrealized loss in other liabilities and accumulated other comprehensive loss in stockholders’ deficit.
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• Realization of deferred tax assets—Our deferred income tax assets have been fully reserved. We reviewed various
qualitative and quantitative data in regards to the realization of our deferred tax assets and due to the current economic
climate did not adjust our valuation allowance at December 30, 2008.
See pages 32
and 44
• California wage and hour settlements—The Company accrued $1.9 million to cover the estimated settlement amounts. See page 31
• Senior management transition—$1.3 million was accrued to pay for recruiting and severance charges related to changes in
senior management.
See page 31
2009 Outlook
New Restaurant Openings
We intend to continue to expand our company-owned restaurants in 2009 with the addition of six to eight new units in markets that are
underpenetrated. The reduction of development in 2009 from the levels in 2007 and 2008 will reduce the amount of cash required for development
and provide free cash flow to permit the Company to redeem outstanding shares of the Series Z Preferred Stock. We believe this strategy is
appropriate given the current state of the economy and consumer sentiment.
Our site selection process focuses on identifying markets, trade areas and specific sites based on several factors including visibility, ready
accessibility (particularly for morning and lunch time traffic), parking, signage and adaptability of any current structures.
The Company has several franchise and license agreements in place and plans on moving forward with the opening of locations within this
segment. We opened two franchise restaurants in 2008 and have three locations which were in various stages of development during the fourth
quarter of 2008 with openings scheduled for the first half of 2009. In 2009 we plan to open six to eight franchise locations. During fiscal year
ended December 30, 2008 we opened 32 Einstein Bros. and Noah’ s license restaurants. We plan to open 30 to 35 license restaurants in fiscal year
2009.
Results of Operations for fiscal year 2008 as compared to fiscal year 2007
Consolidated Results
(dollars in thousands)
Increase/
(Decrease)
Fiscal
2007
Fiscal
2008
2008
vs. 2007
Revenue 402,902 413,450 2.6%
Cost of sales 321,972 331,682 3.0%
Total gross profit 80,930 81,768 1.0%
Operating expenses 52,664 54,152 2.8%
Income from operations 28,266 27,616 (2.3%)
Other expenses 15,226 5,439 (64.3%)
Income before income taxes 13,040 22,177 70.1%
Income taxes 454 1,100 142.3%
Net income $ 12,586 $ 21,077 67.5%
For the fiscal period ended December 30, 2008 compared to the same period in fiscal 2007 ended January 1, 2008, total revenue increased
$10.5 million, gross profit increased $0.8 million, income from operations declined
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$0.7 million, and our income before income taxes increased $9.1 million. This growth is primarily due to having 10 additional company-owned
restaurants and 27 additional franchise and license locations from a year ago, which increased our sales and cost of sales. System-wide comparable
store sales increased 1.4% in fiscal 2008 compared to the same period a year ago. Additionally, revenues have increased as a result of increased