Einstein Bros 2012 Annual Report Download - page 23

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312513085036/d445565d10k.htm[9/11/2014 10:07:50 AM]
• Awarded two locations in San Diego Airport for potential opening in 2013.
• Awarded Atlanta (Terminal D) for potential opening in the second quarter of 2013.
We expect to spend between $20 million and $22 million in capital expenditures in 2013 which includes the opening of company-owned
restaurants and the relocation of additional company-owned restaurants. We also intend to deploy our capital into areas such as installing drive-thru
lanes and adding new exterior signage.
As we move into 2013, we continue to 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. Thus far in fiscal 2013, we have opened three
licensed units and two franchised units, including the entry into Montana, our 40 state where we have operations. As of February 25, 2013, we
have 28 development agreements in place for 136 total restaurants, 34 of which have already opened. Based upon the development agreements, we
expect the remaining 102 new restaurants will open on various dates through 2021. We expect to enter into 10 to 12 new agreements for a total of
60 to 70 new units, bringing our remaining total pipeline to 162 to 172 additional new units.
We expect our free cash flow will continue to be robust and we are comfortable with our financial ability to have the financial resources to execute
on our 2013 plan including the servicing of our elevated level of debt.
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Table of Contents
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 non-GAAP total revenues excluding the extra week
in fiscal 2011; adjusted earnings before interest, taxes, depreciation and amortization, Series Z modifications, restructuring expenses, strategic
alternative expenses, write-off of debt issuance costs, and other operating expenses/income (“Adjusted EBITDA”); net income adjusted for the
extra 53 week in fiscal 2011, restructuring expenses, strategic alternatives expense, incremental interest expense on additional credit facility
borrowings and other operating expenses/income (“Adjusted Net Income”); earnings per share adjusted for the extra 53 week in fiscal 2011,
restructuring expenses, strategic alternatives expense, incremental interest expense on additional credit facility borrowings and other operating
expenses/income (“Adjusted Net Income Per Share”); 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 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 30, 35, 36 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.
System-wide 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. Management reviews the increase or decrease in comparable store sales to assess business
trends. Comparable store sales exclude permanently closed locations. When we intend to relocate a restaurant, we consider that restaurant to be
temporarily closed for up to twelve months after it ceases operations. If a suitable relocation site has not been identified by the end of twelve
months, we consider the restaurant to be permanently closed. Until that time, we include the restaurant in our open store count, but exclude its
sales from our comparable store sales. As of January 1, 2013, there are seven stores that we intend to relocate, and are thus considered to be
temporarily closed.
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.
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