Einstein Bros 2007 Annual Report Download - page 80

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http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
In addition, the total of minimum sublease rentals to be received in the future under non-cancelable subleases as of January 1, 2008 is
$1.3 million.
Purchase commitments
We have obligations with certain of our major suppliers of raw materials (primarily frozen bagel dough and cream cheese) for minimum
purchases both in terms of quantity and pricing on an annual basis. Furthermore, from time to time, we will commit to the purchase price of certain
commodities that are related to the ingredients used for the production of our bagels. On a periodic basis, we review the relationship of these
purchase commitments to our business plan, general market trends and our assumptions in our operating plans. If these commitments are deemed
to be in excess of the market, we will expense the excess purchase commitment to cost of sales, in the period in which the shortfall is determined.
The total of our future purchase obligations at January 1, 2008 was approximately $29.5 million.
Litigation
We are subject to claims and legal actions in the ordinary course of our business, including claims by or against our franchisees, licensees and
employees or former employees and/or contract disputes. We do not believe any currently pending or threatened matter, other than as described
below, would have a material adverse effect on our business, results of operations or financial condition.
On August 31, 2007, the Company was served in an action brought by Fiera Foods Company in the Superior Court of Justice of Ontario,
Canada. Fiera claims that the Company failed to negotiate in good faith for a frozen bagel dough supply agreement, which was not concluded, and
made misrepresentations in the negotiations. Fiera is seeking damages of $17.0 million (Canadian) as well as
95
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
20. COMMITMENTS AND CONTINGENCIES (Continued)
interest and costs. The Company believes that these claims are not valid and is defending this action and has not recorded an accrual.
On September 18, 2007, Eric Mathistad, a former store manager, filed a putative class action against the Company in the Superior Court of
California for the State of California, County of San Diego. The plaintiff alleges that defendants failed to pay overtime wages to "salaried
restaurant employees" of its California stores who were improperly designated as exempt employees, and that these employees were deprived of
mandated meal periods and rest breaks. Plaintiff alleges that these actions were in violation of the California Labor Code Sections 1194, et seq.,
500, et seq., California Business and Professions Code Section 17200, et seq., and applicable wage order(s) issued by the Industrial Welfare
Commission. Plaintiff seeks injunctive relief, declaratory relief, attorney's fees, restitution and an unspecified amount of damages for unpaid
overtime and for missed meal and/or rest periods. The Company filed a Demurrer on October 18, 2007 claiming that, inter alia, plaintiff fails to
state a claim against the Company; plaintiff does not state a claim for a joint venture, partnership, common enterprise, or aiding and abetting;
plaintiff's definition of the class is deficient and plaintiff's claims for declaratory judgment regarding Labor Code violations should be dismissed.
On November 14, 2007, Bernadette Mejia, another former store manager, filed a similar case. The Company filed a Demurrer on December 14,
2007 claiming that, inter alia, that another case, (the Mathistad case) was pending between the same putative parties on the same causes of action. It
is the Company's understanding that Ms. Mejia and Mr. Mathistad have agreed to consolidate their actions. Because limited discovery has been
conducted, no class certification proceeding has occurred and because the cases are in their infancy, we cannot predict the outcome of this matter.
96
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table summarizes the unaudited consolidated quarterly results of operations for fiscal 2005, 2006 and 2007: