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Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai. Agenda. Company Background Inventory Method Operating Leases Share-based Compensation Issues. Company Background. Einstein Noah Restaurant Inc.

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Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

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  1. Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

  2. Agenda • Company Background • Inventory Method • Operating Leases • Share-based Compensation • Issues

  3. Company Background • Einstein Noah Restaurant Inc. • largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. • Business presence • it had 817 restaurants in 40 states and in the District of Columbia. • Business Emphasize • high-quality foods for breakfast, lunch and afternoon snacks in a bakery-café atmosphere • Brands • Einstein Bros. restaurants, • Noah’s restaurants in California • Manhattan Bagel restaurants

  4. Inventory Method • Inventories • 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. • No need for adjustment

  5. Operating Lease The Company leases all of its restaurant properties and some equipment under operating leases.

  6. Operating Lease (Cont’) Calculate implied interest rate and PV of operating lease payments

  7. Operating Lease (Cont’) Adjust NEA, NFL, EPAT and FEAT

  8. Share Based Compensation • Stock options overhang • Considerable amount of liabilities; ignore price increases

  9. Share Based Compensation (Cont’) $14.50 $12.61

  10. Share Based Compensation (Cont’) Effect of change in exercisable options Effect of exercising, cancellation and forfeiture 1,631,660-586,291-2,196,509-10,328,-80602

  11. Share Based Compensation (Cont’)

  12. Issue: Sales • Earnings conference call • Sales moderated • Focus on cost cutting • Focus on franchising • Value menu expansion • Analysts expectations • Hold/(Buy) • Moderate earnings growth projections for 2014-2016 • High: 6% Low: 1.2% Median: 2-3%

  13. Strategic Alternative Review • On May 3, 2012 • authorized a review of strategic alternatives to the Company, including a possible business combination or sale • On December 6, 2012 • completed its review and elected to recapitalize the Company by amending existing credit facility and declaring a one-time special cash dividend • Going concern? • Profitability?

  14. Thanks!Q&A

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