Einstein Bros 2011 Annual Report Download - page 23

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
•
Average Unit Volume of $1.9 million in 2011.
• +12% Comparable sales growth in 2011.
• Awarded Dallas/Fort Worth Airport (Terminal A) for potential opening in Q4 2012.
• Awarded two locations in San Diego Airport for potential opening in Q4 2012.
We expect to spend between $24 million and $26 million in capital expenditures in 2012 which includes the opening of company-owned
restaurants and the relocation of additional company-owned restaurants, along with the continued roll-out of our new POS system. We also intend
to deploy our capital into areas such as installing drive-thru lanes and adding new exterior signage.
As we move into 2012, we have a robust pipeline of existing franchise development agreements and new license locations. We will continue
to host discovery days for potential franchisees as well as expand our license footprint.
We believe we are well positioned to execute on our 2012 plan as our free cash flow continues to be consistently robust as a result of a strong
balance sheet as well as our utilization of our deferred tax assets, primarily our net operating loss carryforwards. Furthermore, we expect favorable
interest rates in 2012 which, coupled with lower debt balances, will further benefit net income.
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, we have provided certain non-GAAP financial information, including adjusted earnings before interest, taxes, depreciation
and amortization, adjustment for Series Z modification, restructuring expenses, write-off of debt issuance costs, and other operating
expenses/income
27
Table of Contents
(“Adjusted EBITDA”); net income adjusted for changes in our tax valuation allowance, all adjustments related to the Series Z modification,
restructuring expenses, write-off of debt issuance costs, and the reversing effect of a residual amount in other comprehensive income related to a
cash flow hedge (“Adjusted Net Income”); earnings per share (“EPS”) adjusted for changes in our tax valuation allowance, all adjustments related
to the Series Z modification, restructuring expenses, write-off of debt issuance costs, and the reversing effect of residual amount in other
comprehensive income related to cash flow hedge (“Adjusted EPS”) and “Free Cash Flow”, which we define as net cash provided by operating
activities less net cash used in investing activities. 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 our ongoing business performance and certain
components of our results. In addition, the Board uses this non-GAAP financial information to evaluate the performance of the company and its
management team. 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. Not all of the aforementioned items defining Adjusted EBITDA, Adjusted Net Income or Adjusted
EPS occur in each reporting period, but have been included in our definitions of these terms based on historical activity. We have reconciled the
non-GAAP financial information to the nearest GAAP measure on pages 29, 34, 39 and 43.
We include in this report information on system-wide comparable store sales percentages. In fiscal 2011, we modified the method by which
we determine restaurants included in our comparable store sales percentages to include those restaurants in operation for a full six fiscal quarters.
Previously, comparable store sales percentages were based on restaurants that had been in operation for thirteen months. This methodology
modification did not have a material impact on previously reported amounts, and therefore previously reported amount have not been restated.
Comparable store sales percentages refer to changes in sales of our restaurants, whether operated by the company or by franchisees and licensees,
in operation for six fiscal quarters including those restaurants temporarily closed for an immaterial amount of time. Some of the reasons restaurants
may be temporarily closed include remodeling, relocations, road construction, rebuilding related to site-specific catastrophes and natural
disasters. Franchise and license comparable store sales percentages are based on sales of franchised and licensed restaurants, as reported by
franchisees and licensees. System-wide sales include sales at all our restaurants including those operated by franchisees and licensees.
Management reviews the increase or decrease in comparable store sales to assess business trends. Comparable store sales exclude closed locations.
We use company-owned store sales, franchise and license sales and the resulting system-wide sales information internally in connection
with restaurant development decisions, planning, and budgeting analyses. We believe system-wide comparable store sales information is useful in
assessing consumer acceptance of our brands; facilitates an understanding of our financial performance and the overall direction and trends of sales
and operating income; helps us appreciate the effectiveness of our advertising and marketing initiatives; and provides information that is relevant
for comparison within the industry.
Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for
other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by