Einstein Bros 2004 Annual Report Download - page 47

http://www.sec.gov/Archives/edgar/data/949373/000104746905006202/a2153240z10-k.htm[9/11/2014 10:13:29 AM]
2009 — 2,705
2010 and thereafter — 4,969
Total minimum lease payments 50 $ 69,568
Less imputed interest (average rate of 4.75%) 3
Present value of minimum lease payments 47
Less current installments 16
Future minimum rental payments, net $ 31
12. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following (in thousands of dollars):
December 28,
2004
December 30,
2003
Vendor contractual agreements(a) $ 7,804 $ 8,014
Guaranteed franchisee debt(b) 394 874
Deferred rent 1,480 1,509
$ 9,678 $ 10,397
(a) A strategic supplier of ours provided advance funding in the amount of $10,000 to us in 1996 as part of a contract to continue buying
products from the supplier. The contract terminates upon fulfillment of contractual purchase volumes. The accounting for this contract is to
recognize a reduction of cost of goods sold based on the volume of purchases of the vendor's product.
(b) In connection with our acquisition of Manhattan, we agreed to guarantee certain loans to franchisees made by two financial institutions.
We evaluate the fair value of such liability at each balance sheet date. As of December 28, 2004 and December 30, 2003, the fair value of
the liability reflected above is the probable and estimable loss related to such loans pursuant to agreements with the financial institutions
regarding the established caps on our obligation. This represents our best estimate of future pay-outs we will make under these guarantees.
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13. 2003 DEBT REFINANCING AND EQUITY RECAPITALIZATION
During 2000 and 2001, we engaged in several financing transactions to acquire the bonds of Einstein/Noah Bagel Corp. (ENBC), which
declared Chapter 11 bankruptcy on April 27, 2000. In 2001, we completed the acquisition of substantially all of the assets (the Einstein
Acquisition) of ENBC and its majority-owned subsidiary, Einstein/Noah Bagel Partners, L.P. which operated 2 brands: Einstein Bros. Bagels and
Noah's New York Bagels. The Einstein Acquisition in 2001 was accomplished by issuing a substantial amount of short-term debt and mandatorily
redeemable preferred equity. The maturity date on the debt and the redemption date of certain preferred stock issuances ranged from one to three
years. The debt and preferred stock agreements required the issuance of additional warrants and payment of dividends in the event that they were
not redeemed within a certain period. Such debt and preferred stock and warrant agreements were referred to as the Increasing Rate Notes or $140
Million Facility, the Standstill Agreement, the Bond Purchase Agreement, the Bridge Loan, and the Mandatorily Redeemable Series F Preferred
Stock (Series F) and Warrant Agreements.
In connection with the aforementioned debt and preferred stock issuances, we issued freestanding warrants and rights to receive additional
warrants based either on the passage of time or upon the occurrence (or non-occurrence) of certain contingent future events. The warrants were
classified as a liability in the consolidated balance sheets, subject to the provisions of SFAS No. 133, "Accounting for Derivative and Hedging
Activities," which required the warrants to be adjusted to fair value at each measurement date. Changes in the fair value of derivatives were
recognized in earnings. During the years 2003 and 2002, we recorded a cumulative change in the fair value of derivatives of $993 and $233,
respectively. As a result of the equity recapitalization as described below, we no longer have contingently issuable warrants and all warrants issued
have been classified as permanent equity.