Einstein Bros 2011 Annual Report Download - page 49

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
determines that a deferred tax asset could be realized in a greater or lesser amount than recorded, the asset’ s recorded amount is adjusted and the
income statement is either credited or charged, respectively, in the period during which the determination is made.
The Company reduces its deferred tax assets by a valuation allowance if it determines that it is more likely than not that some portion or all
of these tax assets will not be realized. In making this determination, the Company considers various qualitative and quantitative factors, such as:
• the level of historical taxable income;
• the projection of future taxable income over periods in which the deferred tax assets would be deductible;
• events within the restaurant industry;
• the cyclical nature of the Company’ s business;
• the health of the economy; and
• historical trending.
As of January 3, 2012, the Company has established a valuation allowance of approximately $4.8 million on its deferred tax assets.
The Company recognizes the tax benefit from an uncertain tax position when it determines that it is more-likely-than-not that the position
would be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater
than 50% likelihood of being realized upon ultimate settlement. If the Company derecognizes an uncertain tax position, the Company’ s policy is to
record any applicable interest and penalties within the provision for income tax.
Revenue Recognition
Company-owned restaurant sales – The Company records revenue from the sale of food, beverage and retail items as products are sold.
Sales tax amounts collected from customers that are remitted to governmental authorities are excluded from net revenue.
Manufacturing and commissary revenues – Manufacturing and commissary revenues are recorded at the time of shipment to customers. The
Company produces bagels for sale to third party resellers, including sales to a wholesaler and a distributor who take possession in the United
States and sells outside of the United States. As the product is shipped FOB domestic dock, invoiced in U.S. dollars and paid in U.S. dollars, the
Company is not exposed to international risks of loss or foreign exchange currency issues. Approximately $5.3 million, $5.3 million and $7.1
million of sales shipped internationally are included in manufacturing and commissary revenues for fiscal years 2009, 2010 and 2011, respectively.
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Franchise and license related revenues – Initial fees received from a franchisee or licensee to establish a new location are recognized as
income when the Company has performed its obligations required to assist the franchisee or licensee in opening a new location, which is generally
at the time the franchisee or licensee commences operations. Continuing royalties are calculated as a percentage of the net sales of the Company’ s
franchised and licensed locations. Franchise and license related revenues for fiscal years 2009, 2010 and 2011 include the following:
Fiscal year ended
December 29,
2009
December 28,
2010
January 3,
2012
(in thousands)
Royalties $ 6,902 $ 8,131 $ 9,457
Fees 610 984 873
Total $ 7,512 $ 9,115 $ 10,330