Einstein Bros 2008 Annual Report Download - page 25

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312509042707/d10k.htm[9/11/2014 10:10:56 AM]
Percent of total revenue
1.4%
1.6%
Franchise and license gross margin 100.0% 100.0% 0.0%
Number of franchise and license restaurants 196 223
Overall, licensee and franchisee revenue improved predominantly due to improved comparable sales by franchisees and licensees of the
Manhattan Bagel and Einstein Bros. brands of 8.6% in fiscal 2008 compared to the same period in 2007 and a net increase of 28 license
restaurants, partially offset by a net decrease of one franchise restaurant since January 1, 2008.
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Table of Contents
General and Administrative Expenses
(dollars in thousands)
Increase/
(Decrease)
Fiscal
2007
Fiscal
2008
2008
vs. 2007
General and administrative expenses 40,635 36,356 (10.5%)
California wage and hour settlements — 1,900 **
Senior management transition costs — 1,335 **
Total general and administrative, labor settlements and
transition expense 40,635 39,591
As a percentage of total revenue 10.1% 9.6%
Our general and administrative expenses decreased $4.3 million for the fifty-two weeks ended December 30, 2008, respectively, compared
to the same period in 2007. The overall decrease was partially related to a decrease in stock-based compensation expense that was primarily due to
the additional options that were granted and vested in the second quarter of 2007 related to the secondary public offering, which did not occur
again in 2008. Additionally, in 2008 compared to 2007, the Company had decreases in travel expense, recruiting and referral fees, sales and use
tax expense and relocation expense related to our corporate headquarters, partially offset by an increase in our professional service fees.
In addition, the Company experienced a decrease in compensation and related benefits as a result of a reduction in administrative positions
that occurred in the latter half of 2008, decreased insurance costs, partially offset by an increase in incentive compensation expense.
The Company recorded $1.9 million in operating expenses during 2008 pursuant to SFAS No. 5, Accounting for Contingencies, to satisfy the
two California wage and hour settlements. This accrual represents the Company’ s current estimate of the aggregate amount that is probable to be
paid pursuant to these settlements, but there can be no assurance that amounts actually paid will not be more or less than the amount recorded by
the Company.
In late 2008 we experienced turnover at the senior management level. In November, our Chief Marketing Officer left the Company, and in
December we transitioned to a new Chief Executive Officer. These events resulted in $0.9 million in severance charges and $0.4 million in
recruiting and other costs.
Depreciation and Amortization, Disposal and Impairment Charges
(dollars in thousands)
Increase/
(Decrease)
Fiscal
2007
Fiscal
2008
2008
vs. 2007
Depreciation and amortization 11,192 14,100 26.0%
As a percentage of total revenue 2.8% 3.4%
Loss on sale, disposal or abandonment of assets, net 601 198 (67.1%)
Impairment charges and other related costs 236 263 11.4%
Total depreciation and amortization, disposal and impairment
charges 12,029 14,561
As a percentage of total revenue 3.0% 3.5%
Depreciation and amortization expenses increased $2.9 million for the fifty-two weeks ended December 30, 2008, when compared to the
same periods in 2007. The increase is due to the additional depreciation expense on our new corporate headquarters that we occupied in May 2007
and the additional assets invested in the company-owned restaurants that were added or upgraded since the end of 2007.
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