Einstein Bros 2005 Annual Report Download - page 23

http://www.sec.gov/Archives/edgar/data/949373/000110465906016136/a06-3178_110k.htm[9/11/2014 10:13:03 AM]
· reductions in cost of goods sold through purchasing efficiencies;
· a focus on labor costs and efficiencies; and
· refinement of programs that monitor theoretical food cost.
AmSouth Revolver and $160 Million Notes
Our AmSouth Revolver was a $15 million senior secured revolving credit facility, with a maturity date of July 8, 2006. On January 3, 2006,
our unused credit facility totaled approximately $7.9 million, net of outstanding letters of credit of $7.1 million. Our credit facility contained
financial covenants relating to the maintenance of leverage and coverage ratios. The credit facility also contained affirmative and negative
covenants including, among other things, limitations on certain additional indebtedness, capital expenditures and minimum EBITDA as defined in
the AmSouth agreement. We were in compliance with all covenants at January 3, 2006 and did not anticipate that the covenants would have
impacted our ability to borrow under our credit facility for its remaining term.
On July 8, 2003, we issued $160 million in aggregate principal amount of 13% senior secured notes due in 2008 ($160 Million Notes) to
replace our $140 million in aggregate principal amount of senior secured increasing rate notes due in 2003. The $160 Million Notes contained
certain covenants, which, among others, included certain financial covenants such as limitations on capital expenditures and minimum EBITDA as
defined in the agreement. The covenants also precluded the declaration and payment of dividends or other distributions to holders of our common
stock. We were in compliance with all covenants at January 3, 2006.
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On February 28, 2006, we completed the refinancing of the AmSouth Revolver and $160 Million Notes. Our new financing consists of a:
· $15 million revolving credit facility maturing on March 31, 2011;
· $80 million first lien term loan maturing on March 31, 2011;
· $65 million second lien term loan maturing on February 28, 2012; and,
· $25 million subordinated term loan maturing on February 28, 2013.
Each of the loans requires the payment of interest in arrears on a quarterly basis commencing on March 31, 2006. Additionally, the $80 million
First Lien Term Loan requires quarterly scheduled minimum principal reductions commencing June 30, 2006. 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. For an
additional discussion regarding our new debt facility, see Note 27 to our consolidated financial statements included in Item 8 of this report.
Based upon our projections for fiscal 2006 and beyond, we believe that the cash flow from operations coupled with the availability under our
new financing will be adequate to fund our operations, capital expenditures and required debt and interest repayments for the foreseeable future.
Working Capital
On January 3, 2006, we had unrestricted cash of $1.6 million and restricted cash of $3.2 million. On December 28, 2004, we had unrestricted
cash of $9.8 million, restricted cash of $3.8 million and nothing borrowed under our AmSouth Revolver. We reduced our working capital deficit to
$11.7 million in fiscal 2005 compared to a working capital deficit of $18.7 million in fiscal 2004. The timing of our January 1 semi-annual interest
payment of $10.4 million under our $160 Million Notes and the payment of monthly rent (reflected in prepaid expenses) negatively impacted our
cash balance at January 3, 2006.
Operating Activities
During fiscal 2005, operations generated $2.1 million of cash compared to $11.1 million in fiscal 2004. Generally, our cash from operations
has included two semi-annual interest payments of $10.4 million, or $20.8 million in the aggregate, related to our $160 Million Notes. Fiscal year
2005 includes $31.2 million representing three cash interest payments. We continue to see improvements in our cash flow from operations and
believe that such cash flow will be adequate to fund operating costs.
Due to the timing of interest payments under our $160 Million Notes, which were due January 1 and July 1 and approximated $10.4 million
on a semi-annual basis, we generally consumed cash from operations during the first and third fiscal quarters of each year. During the second and
fourth fiscal quarters of each year, we generally generated cash from operations. Historically, our fourth quarter is our strongest quarter for
generating cash due to seasonality and gift card promotions. 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.