Einstein Bros 2009 Annual Report Download - page 43

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
(in thousands, except earnings per share and related
share information)
Net income (a) $ 12,586 $ 21,077 $ 71,995
Basic weighted average shares outstanding (b) 13,497,841 15,934,796 16,175,391
Dilutive effect of stock options and SARs 737,784 444,169 351,478
Diluted weighted average shares outstanding (c) 14,235,625 16,378,965 16,526,869
Basic earnings per share (a)/(b) $ 0.93 $ 1.32 $ 4.45
Diluted earnings per share (a)/(c) $ 0.88 $ 1.29 $ 4.36
Anti-dilutive stock options and SARs 293,898 262,414 407,539
Stock-Based Compensation
Our stock-based compensation cost for the years ended January 1, 2008, December 30, 2008 and December 29, 2009 was $1.7 million, $0.9
million and $0.9 million, respectively, and has been included in general and administrative expenses. No tax benefits were recognized for these
costs due to our cumulative losses. Included in the cost for the year ended January 1, 2008 was approximately $0.7 million of expense from the
options granted related to the secondary public offering as further described in Note 11.
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
January 1,
2008
December 30,
2008
December 29,
2009
Expected life of options and SARs from date of grant 4.0 years 3.25 - 6.0 years 2.75 - 6.0 years
Risk-free interest rate 3.31 - 5.02% 1.30 - 2.92% 1.13 - 2.80%
Volatility 29.0% - 97.0% 31.0% - 38.0% 40.0% - 42.0%
Assumed dividend yield 0.0% 0.0% 0.0%
The expected term of options is based upon evaluations of historical and expected future exercise behavior. The risk-free interest rate is
based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Prior to the
secondary offering that was completed in June of 2007, our implied volatility was based on the mean reverting average of our stock’ s historical
volatility. Our implied volatility is now based on the mean reverting average of our stock’ s historical volatility and that of an industry peer group.
The use of mean reversion is supported by evidence of a correlation between stock price volatility and a company’ s leverage combined with the
effects mandatory principal payments will have on our capital structure, as defined under our new debt facility. We have not historically paid any
dividends and are precluded from doing so under our debt covenants.
As of December 29, 2009, we have approximately $0.8 million of total unrecognized compensation cost related to non-vested awards
granted under our option and SARs plans, which we expect to recognize over a weighted-average period of 1.45 years. As of December 29, 2009,
we have approximately $0.2 million of total unrecognized compensation cost related to our restricted stock plan, which we expect to recognize
over a weighted-average period of 1.56 years.
Recent Accounting Pronouncements
In April 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 165,
Subsequent Events (“SFAS No. 165”) codified as FASB Accounting Standards Codification Topic 855 (“ASC 855”). ASC 855 establishes general
standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to
be issued. We adopted SFAS No. 165 for the quarter ending June 30, 2009. Adoption did not have a material impact on our consolidated financial
statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles (“SFAS No. 168”), which identifies the FASB Accounting Standards Codification as the authoritative source of generally
accepted accounting principles in the United States. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under
federal securities laws are also sources of authoritative generally accepted accounting principles for SEC registrants. SFAS No. 168 is effective for
financial statements issued for interim and annual periods ending after September 15, 2009. Adoption did not have a material impact on our
consolidated financial statements.