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Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
The Company operates three business segments: company-owned restaurant operations, manufacturing and commissary operations, and
franchising and licensing operations. A fourth reportable segment, the corporate support unit, facilitates all of the company-owned restaurants, the
manufacturing facilities and commissaries, supports the franchisees and licensees, and handles general corporate governance. The company-owned
restaurants segment includes brands that have similar investment criteria and economic and operating characteristics. The manufacturing segment
produces and distributes bagel dough and other products to the restaurants, licensees, franchisees and other third parties. Intercompany sales to
company-owned restaurants have been eliminated. The franchise and license segment earns royalties and other fees from the use of trademarks and
operating systems developed for the Company’ s brands.
Information regarding the revenues and costs of sales for each business segment has been reported in Note 19 for fiscal years 2009, 2010 and
2011.
Fiscal Year
The Company has a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2009 and 2010, which ended on
December 29, 2009 and December 28, 2010, respectively, each contained 52 weeks. Fiscal year 2011, which ended on January 3, 2012, contained
53 weeks.
Reclassifications
For the December 28, 2010 consolidated balance sheet, the Company has reclassed $449,000 of debt issuance costs, which reflects the current
portion as of December 28, 2010, from a component of Other Assets to a component of Other Current Assets. The Company has also reclassed
$30,000 of capital lease obligations to accrued expenses on the December 28, 2010 consolidated balance sheet.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions
for the reporting period and as of the reporting date. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and
expenses, and the disclosure of contingencies. Actual results could differ from those estimates.
57
Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. GAAP requires fair value measurement to be classified and disclosed in one of the following three
categories:
• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities.
• Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the
full term of the asset or liability.
• Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(i.e., supported by little or no market activity).
The Company’ s financial instruments typically consist of cash equivalents, accounts receivable, accounts payable and debt. The fair values of
accounts receivable and accounts payable approximate their carrying values, due to their short-term maturities. As of December 28, 2010 and
January 3, 2012, total debt under the senior secured credit facility was $87.7 million and $74.2 million, respectively, and had a fair value of $87.7
million and $71.8 million, respectively, due to the changing credit markets. The fair value of the Company’ s debt was estimated based on current
rates found in the market place for debt with the same remaining maturities.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid instruments with original maturities of three months or less when