Einstein Bros 2005 Annual Report Download - page 25

http://www.sec.gov/Archives/edgar/data/949373/000110465906016136/a06-3178_110k.htm[9/11/2014 10:13:03 AM]
redemption premium and accrued and unpaid interest to the redemption date. Additionally, debt issuance costs related to our $160 Million
Notes and AmSouth Revolver were written off. Our $170 million in new term loans mature on various dates beginning in 2011. In the event
that we have not extended the maturity date of the Series Z to a date that is on or after July 26, 2012 (July 26, 2013 for the Subordinated Term
Loan) or redeemed the Series Z by various dates in 2008 and 2009, then each of the loans have various accelerated maturity dates beginning in
December 2008. Under our new credit facility and based on LIBOR rates in effect as of February 28, 2006, we estimate that our cash interest
expense will decrease by approximately $5.2 million on an annual basis. For an additional discussion regarding our new debt facility, see
Note 27 to our consolidated financial statements included in Item 8 of this report.
(b) Purchase obligations consist of non-cancelable minimum purchases of frozen dough from Harlan Bakeries, Inc. and certain other raw
ingredients that are used in our products.
(c) Other long-term obligations primarily consist of the remaining liability related to minimum future purchase commitments with a supplier that
advanced us $10.0 million in 1996.
We also had $7.1 million in letters of credit outstanding under our AmSouth Revolver at January 3, 2006. The letters of credit expired on
various dates during 2006, were automatically renewable for one additional year and were payable upon demand in the event that we fail to pay
certain workers compensation claims. Upon funding of our new financing on February 28, 2006, the existing letters of credit were surrendered and
replaced with new letters of credit totaling $6.9 million. The new letters of credit expire on various dates during 2007.
Effective October 6, 2004, we executed a two-year supply agreement to purchase coffee for our New World Coffee cafés. The agreement
provided for agreed-upon pricing at cost plus a minimal mark-up and no minimum purchase commitment. Accordingly, we have not included any
estimates of payments due in the contractual obligations table above.
The following schedule details the amounts of payments due under our new debt facility as of February 28, 2006 based on the original
maturity dates. In the event that we have not extended the maturity date of the Series Z to a date that is on or after July 26, 2012 (July 26, 2013 for
the Subordinated Term Loan) or redeemed the Series Z by various dates in 2008 and 2009, then each of the loans have various accelerated maturity
dates beginning in December 2008.
Payments Due by Period
2006
2007 to
2009
2010 to
2011
2012 and
thereafter Total
(in thousands of dollars)
Revolving Credit Facility $ — $ — $ — $ — $ —
First Lien Term Facility 1,425 20,525 58,050 — 80,000
Second Lien Term Facility — — — 65,000 65,000
Unsecured Subordinated Term Loan Facility — — — 25,000 25,000
Estimated interest expense on the term loans 13,116 41,988 27,082 20,540 102,726
Total
$ 14,541 $ 62,513 $ 85,132 $ 110,540 $ 272,726
Off-Balance Sheet Guarantees
Prior to 2001, we would occasionally guarantee leases for the benefit of certain of our franchisees. None of the guarantees have been modified
since their inception and we have since discontinued this practice. Current franchisees are the primary lessees under the vast majority of these
leases. Under the lease guarantees, we may be required by the lessor to make all of the remaining monthly rental payments or property tax and
common area maintenance payments if the franchisee does not make the required payments in a timely manner. However, we believe that most, if
not all, of the franchised locations could be
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subleased to third parties reducing our potential exposure. Additionally, we have indemnification agreements with our franchisees under which the
franchisees would be obligated to reimburse us for any amounts paid under such guarantees. Historically, we have not been required to make such
payments in significant amounts. We record a liability for our exposure under the guarantees in accordance with SFAS No. 5, Accounting for
Contingencies (SFAS No. 5), following a probability related approach. In the event that trends change in the future, our financial results could be
impacted. As of January 3, 2006, we had outstanding guarantees of indebtedness under certain leases of approximately $0.6 million.
Approximately $90,000 is reflected in accrued expenses in our consolidated balance sheet at January 3, 2006 for probable losses related to these
guarantees.
Non-GAAP Financial Measures
Adjusted EBITDA is a typical non-GAAP measurement for companies that issue debt and a measure used by our lenders. Adjusted EBITDA,
as defined in our Indenture Agreement relating to the $160 Million Notes and the revolving credit facility with AmSouth Bank (collectively