Einstein Bros 2008 Annual Report Download - page 50

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312509042707/d10k.htm[9/11/2014 10:10:56 AM]
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Our mandatorily redeemable Series Z Preferred Stock has been reclassified to a current liability as the redemption date is now within one year. As
part of the amended First Lien Term Loan in June 2007, we obtained a commitment for an incremental term loan in the aggregate amount of up to
$57.0 million to be used by us, if needed, solely for the purpose of redeeming the mandatorily redeemable Series Z Preferred Stock due on June 30,
2009. Availability of the incremental term loan is subject to customary borrowing conditions, including absence of any default or material adverse
change, and to a requirement of successful syndication of such incremental term loan.
Debt issuance costs were capitalized as part of the First Lien Term Loan and Amended First Lien Term Loan and are being amortized over a period
of 5 years. For the revolving facility, the capitalized debt issuance costs are being amortized on a straight-line basis while the capitalized debt
issuance costs for the First Lien Term Loan are being amortized on the effective interest rate method. In the event that the debt is retired prior to the
maturity date, debt issuance costs will be expensed in the period that the debt is retired.
As of January 1, 2008 and December 30, 2008, debt issuance costs, net of amortization of approximately $2.6 million and $2.1 million,
respectively, have been capitalized in other assets for the Amended $90 Million First Lien Term Loan and the revolving facility. The amortization
of debt issuance costs is included in interest expense in the consolidated statements of operations. Amortization expense of approximately $0.8
million, $0.6 million and $0.5 million was recorded for the fiscal years ended 2006, 2007, and 2008, respectively.
In 2009, we will make a $7.2 million prepayment related to the excess cash flow provision in our debt agreement. For all subsequent years we
have included the minimum contractual amounts as these future pre-payments cannot be estimated. Our loan obligations for the five years
following December 30, 2008 are as follows:
Fiscal year (in thousands of dollars):
2009 $ 8,088
2010 $ 900
2011 $ 1,125
2012 $77,762
Thereafter —
$87,875
Through fiscal year 2011, payments of $225,000 are due on calendar quarter ends. However, due to the difference between our fiscal quarter ends
and calendar quarter ends, there were only three payments in fiscal year ending December 30, 2008, and there are five payments scheduled for
fiscal year ending 2011.
New Jersey Economic Development Authority Note Payable
In December 1998, Manhattan Bagel Company, Inc. entered into a note payable in the principal amount of $2.8 million with the New Jersey
Economic Development Authority (“NJEDA”) at an interest rate of 9% per annum. Principal is paid annually and interest is paid quarterly. The
note matured on December 1, 2008 and was fully paid.
10. INTEREST RATE SWAP AND OTHER COMPREHENSIVE INCOME
On May 7, 2008, we entered into an interest rate swap agreement relating to our First Lien Term Loan for the next two years, effective August
2008. We are required to make payments based on a fixed interest rate of 3.52%
64
Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
calculated on an initial notional amount of $60 million. In exchange we receive interest on $60 million of notional amount at a variable rate. The
variable rate interest we receive is based on the one-month London InterBank Offered Rate (“LIBOR”). The net effect of the swap is to fix the
interest rate on $60 million of our First Lien Term Loan at 3.52% plus an applicable margin. As of December 30, 2008 the weighted-average
interest rate under the First Lien Term Loan including this swap was 4.74%.
The interest rate swap agreement qualifies as a cash flow hedge, as defined by SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. The fair value of the interest rate swap agreement, which will be adjusted regularly, will be recorded in the Company’ s balance sheet as