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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended April 3, 2012 OR
Commission File Number 001-33515
Einstein Noah Restaurant Group, Inc. (Exact name of registrant as specified in its charter)
555 Zang Street, Suite 300, Lakewood, Colorado 80228 (Address of principal executive offices) (303) 568-8000 (Registrant’s telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x As of April 30, 2012 there were 16,897,244 shares of the registrant’s Common Stock, par value of $0.001 per share outstanding.
Table of ContentsEINSTEIN NOAH RESTAURANT GROUP, INC.
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Table of ContentsPART I. FINANCIAL INFORMATION EINSTEIN NOAH RESTAURANT GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share information) (Unaudited)
The accompanying notes are an integral part of these consolidated financial statements.
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Table of ContentsEINSTEIN NOAH RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except earnings per share and related share information) (Unaudited)
The accompanying notes are an integral part of these consolidated financial statements.
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Table of ContentsEINSTEIN NOAH RESTAURANT GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
The accompanying notes are an integral part of these consolidated financial statements.
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Table of ContentsEINSTEIN NOAH RESTAURANT GROUP, INC. Notes to Consolidated Financial Statements (Unaudited)
The accompanying consolidated balance sheet as of January 3, 2012, which has been derived from audited financial statements, and the unaudited consolidated financial statements of Einstein Noah Restaurant Group, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished within this Form 10-Q reflects all adjustments (consisting only of normal recurring accruals and adjustments), which are, in the Company’s opinion, necessary to fairly state the interim operating results for the respective periods. As of April 3, 2012, the Company operated, franchised or licensed various restaurant concepts under the brand names of Einstein Bros. Bagels (“Einstein Bros.”), Noah’s New York Bagels (“Noah’s”), Manhattan Bagel Company (“Manhattan Bagel”) and Kettleman Bagel Company (“Kettleman Bagel”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States have been omitted pursuant to SEC rules and regulations. The notes to the consolidated financial statements (unaudited) should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s annual report on Form 10-K for the fiscal year ended January 3, 2012. The Company believes that the disclosures are sufficient for interim financial reporting purposes. However, these operating results are not necessarily indicative of the results expected for the full fiscal year.
The Company has considered recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on the Company’s consolidated financial statements.
The Company acquired seven restaurants from existing franchisees during the fiscal quarter ended April 3, 2012. The following table summarizes the preliminary estimated fair values of the Company’s acquisitions during the thirteen weeks ended April 3, 2012:
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Table of ContentsFor the quarter ended April 3, 2012, these acquired restaurants contributed $0.4 million in net operating revenue. The goodwill of $1.0 million arising from these acquisitions consists largely of the synergies and economies of scale expected from combining the acquired operations with the Company. All of the goodwill recognized is expected to be deductible for income tax purposes. The Company withholds certain amounts at the closing of each transaction which are applied to any outstanding liabilities that relate to the seller as of the closing date of the transaction. The Company will then pay the difference to the seller at an agreed upon date. For the thirteen weeks ended April 3, 2012, the Company has paid approximately $0.1 million of these amounts related to prior acquisitions. As of April 3, 2012, the Company has $0.3 million of withheld amounts that are recorded as a component of accrued expenses and other current liabilities on the accompanying consolidated balance sheet. The Company treats acquisition related costs as expenses in the periods in which they are incurred. For the fiscal quarter ended April 3, 2012, the Company recorded less than $0.1 million in acquisition costs related to these seven acquisitions. These amounts are included in other operating expenses, net on the accompanying consolidated statement of income and comprehensive income.
Inventories, which consist of food, beverage, paper supplies and bagel ingredients, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventories consist of the following:
As of April 3, 2012, the Company had three active stock-based compensation plans: the 2011 Omnibus Incentive Plan (the “Omnibus Plan”), the Equity Plan for Non-Employee Directors (the “Equity Plan”) and the Stock Appreciation Rights Plan (the “SARs Plan”). Outstanding awards previously issued under inactive or suspended plans will continue to vest and remain exercisable in accordance with the terms of the respective plans. As of April 3, 2012, there were 643,470 shares, 134,320 shares and 38,711 shares reserved for future issuance under the Omnibus Plan, Equity Plan and SARs Plan, respectively. The Company’s stock-based compensation cost for the thirteen weeks ended March 29, 2011 and April 3, 2012 was approximately $0.4 million and $0.6 million, respectively, and is included in general and administrative expenses. The fair value of stock options and stock appreciation rights (“SARs”) granted during the quarter was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
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Table of ContentsStock Option and SARs Activity Stock option and SARs transactions under all plans during the thirteen weeks ended April 3, 2012 were as follows:
The aggregate intrinsic value of stock options exercised during the thirteen weeks ended April 3, 2012 was $0.4 million. As of April 3, 2012, the Company had approximately $1.6 million of total unrecognized compensation cost related to non-vested awards granted under its plans, which will be recognized over a weighted average period of 1.6 years. Restricted Stock Units Stock-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant. Transactions during the thirteen weeks ended April 3, 2012 were as follows:
As of April 3, 2012, the Company has approximately $1.6 million of total unrecognized compensation cost related to RSUs, which will be recognized over a weighted average period of 1.7 years.
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In fiscal 2010 and 2011, the Company committed to plans to restructure the organization to align with its franchise growth model, to close all five of its commissaries and reduce associated headcount. As of April 3, 2012, all five commissaries have been closed. All restructuring costs are included in restructuring expenses on the consolidated statements of income and comprehensive income. It is the Company’s policy to record all restructuring costs within the corporate segment. The Company has current liabilities of $0.6 million for its restructurings as of April 3, 2012. The following table summarizes the Company’s restructuring activities for the thirteen weeks ended April 3, 2012:
The Company currently estimates its 2012 annual effective tax rate to be 38.9%, which compares to a fiscal 2011 annual effective tax rate of 37.6%. This increase relates primarily the elimination of certain federal employment tax credits that the Company received in fiscal 2011 that have not yet been reenacted by the U.S. Congress as of April 3, 2012, partially offset by a decrease in the Company’s projected blended state tax rate.
The following table sets forth the computation of weighted average shares outstanding:
Diluted net income per common 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, SARs and RSUs. Potential common stock equivalents are excluded from the computation of diluted net income per share when their effect is anti-dilutive.
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Letters of Credit and Line of Credit As of April 3, 2012, the Company had $6.8 million in letters of credit outstanding which reduce its availability under the revolving facility. The letters of credit expire on various dates, typically renew annually and are payable upon demand in the event that the Company fails to pay the underlying obligations. As of April 3, 2012, the Company had a balance of $6.7 million on its revolving facility. The availability under the Company’s $50.0 million revolving facility was $36.5 million as of April 3, 2012. Litigation The Company is subject to claims and legal actions in the ordinary course of business, including claims by or against its franchisees, licensees and employees or former employees and others. The Company does not believe any currently pending or threatened matter would have a material adverse effect on its business, results of operations or financial condition.
On May 1, 2012, the Company’s Board of Directors declared a cash dividend on the Company’s common stock in the amount of $0.125 per share, payable on July 15, 2012 to shareholders of record on June 1, 2012.
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Table of ContentsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements We wish to caution our readers that this Quarterly Report on Form 10-Q and certain information incorporated herein by reference contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future performance or achievements expressed or implied by these forward-looking statements. Factors that might cause actual events or results to differ materially from those indicated by these forward-looking statements may include matters such as future economic performance, general economic conditions, consumer preferences and spending, costs, competition, new product execution, restaurant openings or closings, operating margins, the availability of acceptable real estate locations, the sufficiency of our cash balances and cash generated from operating and financing activities for our future liquidity and capital resource needs, growth of franchise and licensing, the impact on our business as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and the rules promulgated thereunder, future litigation and other matters, and are generally accompanied by words such as: “believes,” “anticipates,” “plans,” “intends,” “estimates,” “predicts,” “targets,” “expects,” “contemplates” and similar expressions that convey the uncertainty of future events or outcomes. These risks and uncertainties include, but are not limited to, the risk factors described in our annual report on Form 10-K for the fiscal year ended January 3, 2012 as updated in subsequent quarterly reports on Form 10-Q, including Item 1A of Part II of this report. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as may be required under applicable law. General This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Form 10-K for the fiscal year ended January 3, 2012 (the “2011 Form 10-K”). We have a 52/53-week fiscal year ending on the Tuesday closest to December 31. The first quarters in fiscal years 2011 and 2012 ended on March 29, 2011 and April 3, 2012, respectively, and each quarter contained thirteen weeks. Our current fiscal year ends on January 1, 2013 and consists of 52 weeks. As used in this report, the terms “Company,” “ENRGI,” “we,” “our,” or “us” refer to Einstein Noah Restaurant Group, Inc. and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates. The terms “fiscal quarter ended,” “fiscal quarter,” or “quarter ended” refer to the entire fiscal quarter, unless the context otherwise indicates. 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 adjusted earnings before interest, taxes, depreciation and amortization, restructuring expenses, write-off of debt issuance costs and other operating expenses/income (“Adjusted EBITDA”) 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, our Board of Directors (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 definition based on historical activity. Our definitions of these non-GAAP disclosures may differ from how others in our industry may define them. We have reconciled the non-GAAP financial information to the nearest GAAP measure on pages 15 and 19.
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Table of ContentsWe include in this report information on system-wide comparable store sales percentages. 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 sales to assess business trends. Comparable store sales exclude permanently closed locations. We use company-owned comparable 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 evaluate the effectiveness of our advertising and marketing initiatives; and provides information that is relevant for comparison within the industry. Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by other companies. We do not record franchise or license restaurant sales as revenues. However, royalty revenues are calculated based on a percentage of franchise and license restaurant sales, as reported by the franchisees or licensees. Overview We are the largest owner/operator, franchisor and licensor of bagel bakery cafe restaurants in the United States. As a leading fast-casual restaurant chain, our restaurants specialize in high-quality foods for breakfast, lunch and afternoon snacks in a bakery-café atmosphere with a neighborhood emphasis. Our product offerings include fresh bagels and other bakery items baked on-site, made-to-order breakfast and lunch sandwiches on a variety of bagels, breads or wraps, gourmet soups and salads, assorted pastries, premium coffees and an assortment of snacks. In the context of our key strategies to drive comparable store sales growth, to enhance corporate margins and to accelerate unit growth, we evaluated our financial performance for the first quarter of 2012 by considering the following key factors:
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2012 Outlook Our execution plan to grow comparable store sales includes:
Our catering channel will continue to benefit from our online ordering system, an outsourced and expanded call center, focus on online and digital marketing, and an optimized menu. Our approach to enhancing corporate margins will extend and build on the initiatives that we have already started, namely, managing the sourcing of our commodities, streamlining our network of product distribution, completing the closure of our five food commissaries, utilizing point of sale technology to drive sustainable cost advantage, and improving restaurant level operating efficiency through targeted initiatives around product costs and labor.
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Table of ContentsOur emphasis on acceleration of unit growth will continue to focus on a “Franchise First” growth model, asset light unit economics, penetration into new key licensing channels and expansion of our refranchising and acquisition efforts. Our unit growth plan for 2012 considers our long-term annual growth objective of +10%, or 60 to 80 system-wide openings for 2012. This includes the openings of 8 to 12 company-owned restaurants, 12 to 14 franchised restaurants and 40 to 54 licensed restaurants. We view refranchising opportunistically as a strategy to attract high quality franchisees that will support our accelerated growth initiatives. We expect to spend between $24 million and $26 million in capital expenditures in 2012 which includes the opening of company-owned restaurants and the relocation of company-owned restaurants, along with the continued roll-out of our new point of sale (“POS”) system. We also intend to deploy our capital into areas such as installing drive-thru lanes and adding new exterior signage. We 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. We believe we are well positioned to execute on our 2012 plan as our free cash flow continues to be consistently robust as a result of a strong balance sheet as well as our utilization of our deferred tax assets, primarily our net operating loss carryforwards. Furthermore, we expect favorable interest rates in 2012 which, coupled with lower debt balances, will further benefit net income. Results of Operations for the Quarterly Periods Ended March 29, 2011 and April 3, 2012 Financial Highlights
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Table of ContentsConsolidated Results
During the first quarter of 2012, we maintained our focus on enhancing corporate margins by increasing comparable store sales, managing store level margins by focusing on food costs, and the implementation of cost saving initiatives. System-wide comparable store sales were +1.1% for the first quarter 2012. An increase in average check of +5.0% was partially offset by a decline in system-wide transactions of -3.9% for the first quarter, reflecting the continued roll-over of our Free Bagel Friday promotion in Q1 2011. Net income increased for the first quarter of 2012 from the first quarter 2011 primarily due to increased revenues. Company-Owned Restaurant Operations
Company-owned restaurant sales for the first quarter 2012 increased 4.1%, which management attributes to favorable company-owned comparable store sales and unit growth. Catering sales increased to approximately 7.0% of our total company-owned restaurant sales for the first quarter 2012, and continued to be a strong growth channel
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Table of Contentswith a year over year increase in comparable sales of 18.9% in the first quarter of 2012. Coffee sales also remain strong and grew to approximately 10.2% of our total company-owned restaurant sales, with a year over year increase in comparable store sales of 5.0%. We have also added a net of fifteen new company-owned stores since March 29, 2011. As a percentage of company-owned restaurant sales, we saw a decrease in our food costs to 28.2% in the first quarter 2012 from 29.1% in the first quarter 2011. This 90 basis point decrease includes the leveraged impact of our price increases (-100 basis points), savings from our initiatives (-80 basis points) and a shift in product mix towards coffee and sandwiches (-30 basis points), partially offset by the impact of inflation in our commodity costs (+120 basis points). We have secured protection for 81% of our wheat needs and approximately 100% of our remaining commodity needs (coffee, butter and Class III milk) for the remainder of 2012. As a percentage of company-owned restaurant sales, labor costs have declined due to favorable worker compensation claims that the company received during the first quarter of 2012 and the leveraged impact of our revenue increases. We invested less in marketing during the first quarter of 2012 than we had for the first quarter of 2011, which is largely a timing related shift in spending. Manufacturing and Commissary Operations
As of April 3, 2012, we have closed all of our commissaries. Manufacturing and commissary revenues for the first quarter 2012 were down 5.9% when compared to the first quarter 2011, primarily due to the closure of the commissaries. Sales that were previously made to our franchisees and licensees by the commissaries are now being handled through our distributors. Manufacturing and commissary gross margin as a percentage of manufacturing and commissary revenues increased +290 basis points in the first quarter of 2012 compared to the first quarter of 2011 primarily due to the cost savings associated with the closure of the commissaries. Our commissaries had negative gross margin of $0.3 million and $0.2 million for the first quarters of 2011 and 2012, respectively:
We expect the closing of these facilities will result in annual cost savings of approximately $1.5 million.
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Table of ContentsFranchise and License Operations
Franchise and license revenue improved by $0.5 million, or 20.5% in the first quarter of 2012 compared to the same quarter in 2011, primarily due to an increase in comparable store sales of +1.2% and unit growth. Corporate
Our total general and administrative expenses increased in the first quarter of 2012 primarily due to increases in variable incentive compensation plans. Depreciation and amortization expenses increased $0.2 million for the first quarter of 2012 when compared to the same period in 2011. The increase is due to additional investments in company-owned restaurants that were either added or upgraded since the first quarter of 2011. During fiscal 2011, we incurred $8.0 million related to the installation of new coffee machines at our stores and $1.9 million related to the implementation of new POS systems at our stores. 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 2012 will be in the range of approximately $19.0 million to $21.0 million. We incurred an additional $0.6 million of restructuring expenses in the first quarter of 2012 related to our plan to close our five commissaries. As of April 3, 2012, all of our commissaries have been closed. For the first quarter of 2011, restructuring expenses included charges related to the completion of our 2010 plan to restructure the organization to align with our franchise and license growth model. Other operating expenses, net increased slightly for the first quarter of 2012. In the first quarter of 2011 we recognized losses on the retirement of older fixed assets that were disposed related to the rollout of our new coffee equipment. For the first quarter of 2012, we incurred costs associated with our acquisitions of seven existing Manhattan Bagel franchises in Buffalo, NY in addition to losses on the retirement of fixed assets that were located at the commissaries that we closed.
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Table of ContentsInterest expense, net has decreased due to our quarterly scheduled debt payments. Our average debt balance was $85.0 million for the first quarter 2011 and $74.1 million for the first quarter 2012. Our weighted average interest rate for the thirteen weeks ended April 3, 2012 was 3.3%. We currently estimate our 2012 annual effective tax rate to be 38.9%, which compares to a fiscal 2011 annual effective tax rate of 37.6%. This increase relates primarily to the elimination of certain federal employment tax credits that we received in 2011 that have not yet been reenacted by the U.S. Congress as of April 3, 2012, partially offset by a decrease in our projected blended state tax rate. Financial Condition, Liquidity and Capital Resources The restaurant industry is predominantly a cash business where cash is received at the time of the transaction. We believe we will generate sufficient cash flow to fund operations, capital expenditures, and required debt and interest payments. Our investment in inventory is minimal because our products are perishable. Our accounts payable are on terms that we believe are consistent with those of other companies within the industry. The primary driver of our operating cash flow is our restaurant revenue, specifically the gross margin from our company-owned restaurants. Therefore, we focus on the elements of those operations, including store sales and controllable expenses, to help ensure a steady stream of operating profits that enable us to meet our cash obligations. Working Capital Our working capital position has increased by $1.5 million in fiscal 2012. We began fiscal 2012 with working capital of $0.2 million and ended the first quarter with $1.7 million in working capital.
This increase is primarily due to a decline in our accrued expenses and other current liabilities, which have declined primarily due to a decline in our workers compensation liability and a reduction of our deferred gift card balance. Other elements of working capital fluctuated in the normal course of business. As of April 3, 2012, we had unrestricted cash of $9.6 million, an increase of $0.9 million from January 3, 2012.
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Table of ContentsFree Cash Flow Our free cash flow increased by $0.7 million for the first quarter of 2012 compared to the same period in 2011 primarily due to a $3.6 million increase in cash provided by operations, partially offset by a $1.6 million increase in the purchase of property and equipment at our restaurants and $1.5 million towards the acquisition of franchise restaurants.
Covenants We are subject to a number of customary covenants under our term loan, including limitations on additional borrowings, acquisitions, and requirements to maintain certain financial ratios. As of April 3, 2012, we were in compliance with all debt covenants. Capital Expenditures During the thirteen weeks ended April 3, 2012, we used approximately $5.5 million of cash to pay for additional property and equipment that included the following:
The majority of our capital expenditures has been and will continue to be for upgrades in our current restaurants, including the installation of new coffee equipment in our restaurants and new exterior signs, and for new company-owned restaurants. Off-Balance Sheet Arrangements Other than our revolving credit facility and letters of credit, we do not have any off-balance sheet arrangements. Contractual Obligations There were no material changes outside the ordinary course of business to our contractual obligations since the filing of the 2011 Form 10-K.
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Table of ContentsCritical Accounting Policies and Estimates There were no material changes in our critical accounting policies since the filing of our 2011 Form 10-K. As discussed in that filing, the preparation of the consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. Item 3. Quantitative and Qualitative Disclosures about Market Risk There were no material changes in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Item 7A of our 2011 Form 10-K. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of April 3, 2012. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of April 3, 2012, our chief executive officer and our chief financial officer have concluded that, as of such date, our disclosure controls and procedures were effective. Changes in Internal Control over Financial Reporting During the first quarter of fiscal 2012, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that were identified in connection with the evaluation of our disclosure controls and procedures that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Table of ContentsPART II - OTHER INFORMATION We are subject to claims and legal actions in the ordinary course of business, including claims by or against our franchisees, licensees and employees or former employees and others. We do not believe any currently pending or threatened matter would have a material adverse effect on our business, results of operations or financial condition. Our business is subject to a number of risks, including those identified in Item 1A. — “Risk Factors” of our 2011 Form 10-K, that could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause our operating results to vary significantly from period to period. As of April 3, 2012, there have been no material changes to the risks disclosed in our 2011 Form 10-K. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In December 2010, our Board of Directors (the “Board”) approved a discretionary program to repurchase up to $20.0 million of our outstanding common stock. We did not purchase any shares of our common stock on the open market during the thirteen weeks ended April 3, 2012. The total remaining authorization under the repurchase program was $20.0 million as of April 3, 2012. The repurchase program expires in December 2012 and is subject to compliance with applicable laws and the terms of our senior credit facility. It is the current expectation of our Board that we will continue to pay a quarterly cash dividend, at the discretion of the Board, dependent on a variety of factors, including available cash and our overall financial condition. Like other companies incorporated in Delaware, we are also limited by Delaware law as to the payment of dividends. The payment of dividends is also subject to the terms of our senior credit facility. The exhibits listed in the Exhibit Index, which appears immediately following the signature page, are incorporated herein by reference.
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Table of ContentsSIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Table of ContentsEXHIBIT INDEX
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