Einstein Bros 2013 Annual Report Download - page 49

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
effect for the year these differences are expected to be taxable or refunded. Deferred income tax expenses or credits are based on the changes in the
asset or liability, respectively, from period to period. A deferred tax asset or liability is recognized whenever there are future tax effects from
existing temporary differences and operating loss and tax credit carry forwards. If the Company 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;
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
• the cyclical nature of the Company’ s business;
• the health of the economy; and
• historical trending.
As of January 3, 2012, the Company had a valuation allowance of approximately $4.8 million established against its deferred tax assets. This
valuation allowance was applied against net operating losses (“NOLs”) that will expire prior to their utilization. During fiscal 2012, the Company
eliminated these NOLs and accordingly eliminated the related valuation allowance.
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 sell 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 currency exchange issues. Shipping charges billed to third parties are recognized as
revenue, and the related shipping costs are included in manufacturing and commissary costs. Approximately $7.1 million, $9.4 million and $10.4
million of sales shipped internationally are included in manufacturing and commissary revenues for fiscal years 2011, 2012 and 2013, respectively.
All of the Company’ s commissaries were closed by the first quarter of fiscal 2012.
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 2011, 2012 and 2013 include the following:
Fiscal Year Ended
January 3,
2012
January 1,
2013
December 31,
2013
(in thousands)
Royalties $ 9,457 $ 10,452 $ 11,481
Fees 873 734 1,053
Total $ 10,330 $ 11,186 $ 12,534
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