Einstein Bros 2013 Annual Report Download - page 28

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
majority of these vacant positions. While this resulted in an increase to our base compensation (including payroll taxes) of $0.8 million, our
performance incentive compensation decreased $1.7 million from fiscal 2012 as we reached a lower bonus threshold in fiscal 2013 than we did in
fiscal 2012. This decrease was offset by increased professional fees and travel charges. We expect general and administrative expenses for fiscal
2014 to be approximately $10.5 million to $11.5 million per quarter.
Depreciation and amortization expenses decreased $1.5 million, or 7.6%. This decrease is primarily due to three and five year equipment
becoming fully depreciated and the write-off of fixed assets relating to store closures. Based on our current planned purchases of capital assets, our
existing base of assets and our projections for new purchases of fixed assets, we believe depreciation expense for fiscal 2014 will be in the range of
$16.0 million to $18.0 million.
Pre-opening expenses, which include rent, wages, marketing, food and other restaurant operating costs, remained flat. We estimate pre-
opening expenses to be approximately $65,000 to $75,000 per new Company-owned restaurant.
We incurred an additional $0.5 million of restructuring expenses in fiscal 2012 related to the closure of our five commissaries. All of our
commissaries were closed by the end of the first quarter 2012.
In fiscal 2012, we expensed approximately $1.2 million for an employee benefit settlement. We also incurred $0.1 million in acquisition
costs in fiscal 2012 towards the purchase of seven restaurants from our franchisees. In fiscal 2013, we recorded losses of $1.3 million on the
closure of six company-owned restaurants. We also expensed approximately $0.8 million for an employee wage settlement and approximately $0.4
million of losses on the retirement of fixed assets. These expenses were offset by gains of approximately $1.3 million as we sold five existing
restaurants to a franchisee in Pittsburgh, Pennsylvania and one restaurant to a franchisee in Fairfield, Connecticut. These items are recorded as
components of other operating expenses, net on our consolidated statements of income and consolidated income.
Interest expense, net has increased in fiscal 2013 due to additional borrowings and an increase in our weighted average interest rate. Our
average debt balance increased from $75.1 million for fiscal 2012 to $125.7 million for fiscal 2013. Our weighted average interest rate for fiscal
2013 was 3.8% compared to 3.4% for fiscal 2012. We amended our Senior Credit Facility in June 2013. This amendment reduced the applicable
margin on Eurodollar and base rate loans by 75 basis points. This amendment, combined with our consolidated leverage rate, resulted in a
weighted average interest rate of 3.1% as of December 31, 2013. Subject to pay-downs of the revolving credit facility, we estimate interest expense
to be in the range of $4.5 million to $5.0 million for fiscal 2014.
The components of our provision for income taxes were as follows:
Fiscal Year Ended
January 1,
2013
December 31,
2013
(in thousands)
Current
Total current income tax provision $ 235 $ 415
Deferred
Total deferred income tax provision 12,658 6,914
Change in valuation allowance (4,790) —
Total deferred income tax provision 7,868 6,914
Total income tax provision $ 8,103 $ 7,329
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Our effective tax rate decreased from 38.9% for fiscal 2012 to 33.5% for fiscal 2013 as a result of deferred tax true-ups, the effects of
estimate-to-actual income tax provision adjustments and federal employment tax credits. The American Taxpayer Relief Act of 2012 was enacted
on January 2, 2013, which coincided with the start of our 2013 fiscal year. As a result, these federal employment tax credits were applied to our
fiscal 2013 annual effective tax rate.
Results of Operations for Fiscal 2012 as compared to Fiscal 2011
Financial Highlights
• System-wide comparable store sales increased +1.0%.
• Total revenues increased $3.4 million, or 0.8%, which was driven by an increase in company-owned restaurant revenue of $6.1 million
and franchise and license related revenue of $0.9 million, partially offset by a decline in manufacturing and commissary revenue. The
extra 53 week in fiscal 2011 contributed an additional $7.3 million of revenue. Excluding the extra week in fiscal 2011, total revenues
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