Einstein Bros 2007 Annual Report Download - page 43

http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
Debt 955 2,925 85,950 — 89,830
Estimated interest expense on our debt facility(a) 6,793 20,232 3,780 — 30,805
Manditorily redeemable series Z — 57,000 — — 57,000
Minimum lease payments under capital leases 92 73 — — 165
Minimum lease payments under operating leases 25,969 58,380 9,821 9,552 103,722
Purchase obligations(b) 20,138 9,359 — — 29,497
Other long-term obligations(c) — 750 500 5,630 6,880
Total $ 78,298 $ 148,719 $ 100,051 $ 15,182 $ 342,250
(a) Calculated as of January 1, 2008, using the LIBOR and U.S. Prime rates, plus the applicable margin in effect. Because the interest rates on
the first lien term loan facility and the revolving credit facility are variable, actual payments could differ materially.
(b) Purchase obligations consist of non-cancelable minimum purchases of frozen dough 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.
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Insurance
We are insured for losses related to health, general liability and workers' compensation under large deductible policies. The insurance liability
represents an estimate of the ultimate cost of claims incurred and unpaid as of the balance sheet date. The estimated liability is established based on
actuarial estimates, is discounted at 10% based upon a discrete analysis of actual claims and historical data and is reviewed on a quarterly basis to
ensure that the liability is appropriate. If actual trends, including the severity or frequency of claims, differ from our estimates our financial results
could be favorably or unfavorably impacted. The estimated liability is included in accrued expenses in our consolidated balance sheets.
Off-Balance Sheet Arrangements
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 restaurants could be subleased to third parties minimizing 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. As of January 1, 2008, we have a liability of $36,000 for
our exposure under the guarantees in accordance with Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, following a probability related
approach. Minimum future rental payments for all remaining guaranteed leases that expire on various dates through July 2012 were approximately
$1.3 million as of January 1, 2008. We believe the ultimate disposition of these matters will not have a material adverse effect on our financial
position or results of operations.
Letters of Credit
We have $6.7 million in letters of credit outstanding under our Revolving Facility at January 1, 2008. The letters of credit expire on various
dates during 2008, are automatically renewable for one additional year and are payable upon demand in the event that we fail to pay the underlying
obligation related to certain workers compensation claims.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"), which defines fair value, establishes a
framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007. We do not believe such adoption will have a material impact on our consolidated financial