Einstein Bros 2012 Annual Report Download - page 50

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312513085036/d445565d10k.htm[9/11/2014 10:07:50 AM]
(in thousands)
Deferred franchise and license revenue—current 386 495
Deferred franchise and license revenue—long-term 663 563
Deferred franchise and license revenue $ 1,049 $ 1,058
Gift Cards – Proceeds from the sale of gift cards are recorded as deferred revenue within accrued expenses, and recognized as income when
redeemed by the holder. There are no expiration dates on the Company’ s gift cards and the Company does not charge any service fees that would
result in a decrease to a customer’ s available balance.
While the Company will continue to honor all gift cards presented for payment, it may determine the likelihood of redemption to be remote
for certain gift card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent the Company determines
there is no requirement for remitting balances to government agencies under unclaimed property laws, outstanding gift card balances may then be
recognized as breakage in the consolidated statements of income and comprehensive income as a component of company-owned restaurant sales.
Income from gift card breakage was $0.2 million, $0.2 million and $0.9 million for fiscal years ended 2010, 2011 and 2012, respectively. For
fiscal year 2010, the Company also recognized $0.4 million in revenue related to gift certificate breakage from a gift certificate program that no
longer existed. While these gift certificates will continue to be honored, the Company has determined the likelihood to be remote for redemption
of these gift certificates due to their age and the fact that the program is no longer in place.
Pre-opening Costs
Pre-opening costs, including rent, wages, food, marketing and other restaurant operating costs, are expensed as incurred prior to a restaurant
opening for business.
Advertising Costs
The Company expenses advertising costs as incurred except for expenses related to the development and production of a major commercial or
media campaign which are expensed during the period in which the advertisement is first presented by the media. Advertising costs were $9.9
million, $9.9 million and $11.4 million for fiscal years 2010, 2011 and 2012, respectively, and are included in company-owned restaurant costs in
the consolidated statements of income and comprehensive income. The Company had $0.6 million and $0.8 million of prepaid advertising expenses
as of January 3, 2012 and January 1, 2013, respectively, which are included as a component of prepaid expenses on the consolidated balance sheet.
Leases and Deferred Rent
The Company leases all of its restaurant properties under operating leases. The Company also has equipment leases that qualify as either an
operating lease or capital lease.
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For a lease that contains rent escalations, the Company records the total rent payable during the lease term on a straight-line basis over the
term of the lease and records the difference between rent paid and the straight-line rent expense as deferred rent payable. Incentive payments
received from landlords are recorded as an increase to deferred rent payable and are amortized on a straight-line basis over the lease term as a
reduction of rent. As of January 3, 2012 and January 1, 2013, the Company had $5.7 million and $6.2 million, respectively, of deferred rent
payable, net of landlord incentives, recorded as a component of other liabilities on the consolidated balance sheet.
Net Income per Common Share
The Company computes basic net income per common share by dividing the net income available to common stockholders for the period by
the weighted-average number of shares of common stock outstanding during the period.
Diluted net income per share is computed by dividing the net income available to common stockholders for the period by the weighted-
average number of shares of common stock and potential common stock equivalents outstanding during the period using the treasury stock method.
Potential common stock equivalents include incremental shares of common stock issuable upon the exercise of stock options and warrants.
Potential common stock equivalents are excluded from the computation of diluted net income per share when their effect is anti-dilutive.
The following table summarizes the weighted-average number of common shares outstanding, as well as sets forth the computation of basic
and diluted net income per common share for the periods: