Einstein Bros 2012 Annual Report Download - page 51

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312513085036/d445565d10k.htm[9/11/2014 10:07:50 AM]
Fiscal year ended
December 28, January 3, January 1,
2010 2012 2013
(in thousands, except earnings per share and related
share information)
Net income $ 10,623 $ 13,203 $ 12,741
Less: Additional redemption on temporary equity (387) — —
Add: Accretion of premium on Series Z preferred stock 1,072 — —
Net income available to common stockholders (a) $ 11,308 $ 13,203 $ 12,741
Basic weighted average shares outstanding (b) 16,532,420 16,629,098 16,935,018
Dilutive effect of stock options, SARs and RSUs 272,306 251,223 282,162
Diluted weighted average shares outstanding (c) 16,804,726 16,880,321 17,217,180
Net income available to common stockholders per share—Basic (a)/(b) $ 0.68 $ 0.79 $ 0.75
Net income available to common stockholders per share—Diluted (a)/(c) $ 0.67 $ 0.78 $ 0.74
Anti-dilutive stock options, SARs and RSUs 236,275 405,374 622,731
Stock-Based Compensation
The Company maintains several equity incentive plans under which it may grant non-qualified stock options, incentive stock options, stock
appreciation rights (“SARs”), restricted stock units (“RSUs”) or restricted stock to employees, non-employee directors and consultants. Restricted
stock and RSUs are valued using the
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
closing stock price on the date of grant. The fair value of an option award or SAR is determined using the Black-Scholes option pricing model,
which incorporates ranges of assumptions for inputs. The Company’ s assumptions are as follows:
• Expected Term—The expected term of options is based upon evaluations of historical and expected future exercise behavior.
• Risk Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the expected term at the grant date.
• Implied Volatility—Implied volatility is based on the mean reverting average of the Company’ s historical stock volatility and that of an
industry peer group. The Company believes that the use of mean reversion is supported by evidence of a correlation between stock
price volatility and a company’ s leverage, combined with the effects that mandatory principal payments will have on the Company’ s
capital structure, as defined under its debt facility.
• Dividend Yield—The Company declared dividends in fiscal 2010, fiscal 2011 and fiscal 2012, and anticipates that it will continue to
pay dividends in the future, at the discretion of its Board of Directors (the “Board”). The payment of dividends is dependent on a
variety of factors, including available cash and the overall financial condition of the Company.
Vesting of awards can either be based on the passage of time or on the achievement of performance goals. For awards that vest on the passage
of time, compensation cost is recognized using a graded vesting attribution method over the vesting period. For performance based awards, the
Company will recognize compensation costs over the requisite service period when conditions for achievement become probable. The Company
also estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ or are expected to differ.
Concentrations of Risk
The Company maintains cash and cash equivalent balances with financial institutions that exceed federally insured limits. The Company has
not experienced any losses related to these balances and management believes its credit risk to be minimal.
The Company purchases its raw materials from various suppliers; and in some cases, it has selected a single supplier for a key product to
take advantage of economies of scale. The Company has elected to purchase all of its cream cheese from a single supplier. Also, the Company
purchases a majority of its frozen bagel dough from one supplier, who uses the Company’ s proprietary processes and on whom the Company is
dependent in the short-term. All of the Company’ s remaining frozen bagel dough is produced at its dough manufacturing facility in Whittier,
California or by a second supplier. Although to date the Company has not experienced significant difficulties with its suppliers, its choice to
purchase most of its key ingredients from respective suppliers subjects the Company to a number of risks, including possible delays or interruption