Einstein Bros 2011 Annual Report Download - page 25

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
increase in average check of +3.7% that was partially offset by a decline in system-wide transactions of -3.3%. Our comparable transactions
decreased from 2010
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primarily due to the transaction impact of our 2011 promotion not generating as many transactions as our 2010 free bagel Friday promotion. We
believe that our catering business will continue to be a strong revenue generator, as evidenced by an increase in catering sales of 16.3% over fiscal
2010. In addition, we maintained our focus on delivering product innovation focused on health and quality, under the theme of “Club Favorites”, a
new menu program we introduced in 2011.
Net income increased for fiscal 2011 due to decreases in our overall interest expense, a lower effective tax rate, partially offset by a decline
in income from operations. Interest expense, net decreased by $1.8 million primarily due to realizing the impacts of decreasing our overall debt
balance during the second half of 2010. The refinancing of our debt combined with the expiration of our interest rate swap, the pay down of our
credit facility and the full redemption of our Series Z lowered our average debt balance from $101.6 million for fiscal 2010 to $78.9 million for
fiscal 2011. These efforts also decreased our weighted average interest rates on our overall debt from 4.6% for fiscal 2010 to 3.1% for fiscal 2011.
Our effective tax rate decreased from 48.3% from fiscal 2010 to 37.6% for fiscal 2011. This decrease relates to the elimination of several items
that were non-deductible in 2010, including the $0.9 million adjustment on the modification of the Series Z, the additional redemption amount of
the Series Z and the remaining deferred tax associated with our interest rate swap which expired in 2010. Also, the realization of higher federal
employment tax credits in 2011 lowered our effective tax rate.
Company-Owned Restaurant Operations
Fiscal year ended
Increase/
(Decrease)
Percentage of company-owned
restaurant sales (in thousands)
December 28,
2010
January 3,
2012
2011
vs. 2010
December 28,
2010
January 3,
2012
Company-owned restaurant sales $ 372,191 $378,723 1.8%
Percent of total revenues 90.4% 89.4%
Cost of sales:
Cost of goods sold $ 106,035 $112,018 5.6% 28.5% 29.6%
Labor costs 109,005 110,595 1.5% 29.3% 29.2%
Rent and related expenses 39,731 40,322 1.5% 10.7% 10.6%
Other operating costs 37,732 39,116 3.7% 10.1% 10.3%
Marketing costs 9,854 9,836 (0.2%) 2.6% 2.6%
Total company-owned restaurant costs $ 302,357 $311,887 3.2% 81.2% 82.4%
Total company-owned restaurant gross
margin $ 69,834 $ 66,836 (4.3%) 18.8% 17.6%
Comparable store sales for our company-owned restaurants for each quarter in 2010 and 2011 were as follows:
Fiscal 2010 Fiscal 2011 Change
First Quarter -0.2% -1.4% -1.2%
Second Quarter -2.2% -0.3% +1.9%
Third Quarter -0.2% +0.7% +0.9%
Fourth Quarter +1.0% +0.8% -0.2%
Annual -0.4% 0.0% +0.4%
Company-owned restaurant sales for fiscal 2011 increased $6.5 million, which was primarily due to the impact of the additional 53 week in
fiscal 2011. Company-owned comparable store sales remained flat, with transactions declining by -4.0% offset by an increase in average check of
+4.0%. In fiscal 2011, we acquired nine restaurants, opened an additional four restaurants and closed one restaurant. The majority of our
acquisitions and
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rd