Einstein Bros 2003 Annual Report Download - page 29

http://www.sec.gov/Archives/edgar/data/949373/000104746904009609/a2132006z10-k.htm[9/11/2014 10:13:55 AM]
entities (VIE's). This interpretation applies immediately to VIE's created after January 31, 2003 and in the first fiscal year or interim period
beginning after June 15, 2003, to VIE's in which an enterprise held an interest prior to February 1, 2003. In October 2003, the FASB issued FASB
Staff Position (FSP) No. FIN 46-6, "Effective Date of FASB Interpretation 46." This interpretation deferred the effective date for applying FIN 46
to an interest held in a VIE or potential VIE that was created before February 1, 2003 until the end of the first interim or annual period ending after
December 15, 2003, except if we had already issued statements reflecting a VIE in accordance with FIN 46. An additional revision in December of
2003 deferred the implementation for all entities to no later than the end of the first reporting period that ends after March 15, 2004, unless the VIE
is a special purpose entity, in which case the December 15, 2003 date still applies. We are not
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a party to any VIE's and intend to adopt FIN 46 when required in fiscal 2004. We do not expect adoption of FIN 46 to have a significant impact on
our financial statements.
In April 2003, FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities" ("SFAS 149"). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. The accounting and
reporting requirements were effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of SFAS 149 did not have a significant impact on our financial statements.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" ("SFAS 150"). SFAS 150 changes the classification in the statement of financial position of certain
common financial instruments from either equity or mezzanine presentation to liabilities and requires an issuer of those financial statements to
recognize changes in fair value or redemption amount within the statement of operations. This statement takes effect with this filing. The adoption
of this new standard resulted in our pre-existing Series F subject to mandatory redemption requirements being reclassified as a liability on July 2,
2003 rather than the historical mezzanine presentation. There was no impact on our statement of operations upon adoption of SFAS 150 given that
the Series F had been previously stated at the present value of its redemption amount. The Series Z Preferred Stock exchanged for the remaining
Series F in the Equity Recap has also been classified as a liability since its inception. Dividends and accretion of discount or amortization of
premiums, if any, will be recognized as interest expense.
We have considered all other recently issued accounting pronouncements and do not believe that the adoption of such pronouncements will
have a material impact on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Through December 30, 2003, our results of operations, financial position and cash flows have not been materially affected by changes in the
relative values of non-U.S. currencies to the U.S. dollar. We do not use derivative financial instruments to limit our foreign currency risk exposure.
Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of collection risks. See Note 1 to the Consolidated Financial Statements.
Our debt at December 30, 2003 is principally comprised of the $160 Million Facility due 2008 and the AmSouth Revolver. A 100 basis point
increase in market interest rates would have an immaterial effect on our borrowing costs, since the interest rate on the $160 Million Facility is
fixed. The interest rate on the AmSouth Revolver does change with any change in the prime rate, but is immaterial in relation to interest expense in
our results of operations and financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information in response to this Item is set forth in the Financial Statements beginning on page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
On July 29, 2002, we dismissed Arthur Andersen LLP as our independent auditors and engaged the accounting firm of Grant Thornton LLP as
our new independent auditors. The decision to change auditors was recommended by the Audit Committee of the Board of Directors and
unanimously