Einstein Bros 2009 Annual Report Download - page 20

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
effectively reduced costs at both the restaurant level and the corporate support level while expanding the gross margins in our
manufacturing and commissaries segment.
Use of Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
included in this filing, the Company has provided certain non-GAAP financial information, Adjusted EBITDA and free cash flow. Management
believes that the presentation of this non-GAAP financial information provides useful information to investors because this information may allow
investors to better evaluate ongoing business performance and certain components of the Company’ s results. This information should be
considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The
Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure in context.
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Table of Contents
Consolidated Results
52 weeks ended
(dollars in thousands)
Increase/
(Decrease)
Percentage of
total revenues
December 30,
2008
December 29,
2009
2009
vs. 2008
December 30,
2008
December 29,
2009
Revenues $ 413,450 $ 408,562 (1.2%)
Cost of sales 331,682 330,830 (0.3%) 80.2% 81.0%
Total gross profit 81,768 77,732 (4.9%) 19.8% 19.0%
Operating expenses 54,152 52,815 (2.5%) 13.1% 12.9%
Income from operations 27,616 24,917 (9.8%) 6.7% 6.1%
Interest expense 5,439 6,114 12.4% 1.3% 1.5%
Income before income taxes 22,177 18,803 (15.2%) 5.4% 4.6%
Total provision (benefit) for income tax 1,100 (53,192) ** 0.3% -13.0%
Net income $ 21,077 $ 71,995 241.6% 5.1% 17.6%
Adjustments to net income:
Interest expense, net 5,439 6,114 12.4%
Provision (benefit) for income taxes 1,100 (53,192) **
Depreciation and amortization 14,100 16,627 17.9%
Other operating expenses 461 725 57.3%
Earnings before interest, taxes, deprecation,
amortizationand other operating expenses
(adjusted EBITDA) $ 42,177 $ 42,269 0.2% 10.2% 10.3%
** not meaningful
System-wide comparable store sales decreased 2.4% in 2009. When the year began, we had negative 3.4% system-wide comparable store
sales comprised of negative 8.1% in transactions and positive 5.2% for the average check related to a prior year price increase. By December of
2009 our system-wide comparable store sales were virtually flat at a negative 0.4% and negative 0.2% in both transactions and average check. We
achieved this through our increased marketing initiatives, focused around our core breakfast product offerings as well as other value-oriented
initiatives aimed at increasing transactions and the frequency of guest visits. We believe that the difficult economic climate also put pressure on our
catering sales as demand from our business customers has declined.
Our gross profit margins have been pressured due primarily to the unfavorable deleveraging of certain operating expenses, higher health care
benefit costs and the impact of increased investments in marketing initiatives. During periods of lower sales, we typically experience deleveraging
in those cost elements that are not fully variable to changes in sales. These costs include other operating expenses, rent and related costs, and to a
lesser extent, labor costs. Our health care benefit costs increased $1.9 million in 2009. We also continued to support our focus around our core
breakfast offerings and other value-oriented initiatives by increasing our investments in marketing by $2.3 million in 2009.
While our revenues declined in 2009 and our cost of sales reflected a $1.9 million increase in health care benefit costs, our focus on our cost
initiatives resulted in our Adjusted EBITDA being virtually flat in 2009 compared to 2008.
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