Einstein Bros 2008 Annual Report Download - page 32

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312509042707/d10k.htm[9/11/2014 10:10:56 AM]
or a combination of both.
Based upon our projections for 2009, including the partial redemption of our mandatorily redeemable Series Z Preferred Stock, we believe
our various sources of capital, including availability under existing debt facilities, and cash flow from operating activities of continuing operations,
are adequate to finance operations as well as the repayment of current debt obligations.
June 2007 Debt Redemption and Amended First Lien Term Loan
In June 2007, we amended our debt facility from $95.0 million to $110.0 million. Our amended financing consisted of a:
• $20.0 million revolving credit facility maturing on June 28, 2012; and
• $90.0 million first lien term loan maturing in June 28, 2012.
As part of this amendment we increased the amount of our existing revolving credit facility from $15.0 million to $20.0 million and modified
our term loan from a principal amount of $80.0 million to $90.0 million and repaid the remaining amount of the $25 Million Subordinated Note as
noted above. The revolving credit facility remains available, subject to certain conditions, to finance our ongoing working capital, capital
expenditure and general corporate needs. In addition, all of the revolving credit facility is available for letters of
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credit. We are required to pay an unused credit line fee of 0.5% per annum on the average daily unused amount. The unused line fee is payable
quarterly in arrears. Additionally, we are required to pay a letter of credit fee based on the ending daily undrawn face amount for each letter of
credit issued, being based on our consolidated leverage ratio with an applicable margin of 2.00% plus a 0.5% arranger fee payable quarterly.
Letters of credit reduce our availability under the revolving credit facility. As of December 30, 2008, we had $7.0 million in letters of credit
outstanding associated with this line. The letters of credit expire on various dates during 2009, are automatically renewable for one additional year
and are payable upon demand in the event that we fail to pay the underlying obligation. Our availability under the revolving credit facility was
$13.0 million as of December 30, 2008.
We may prepay amounts outstanding under the senior secured credit facility and may terminate commitments in whole at any time without
penalty or premium upon prior written notice.
Working Capital Deficit
On December 30, 2008, we had unrestricted cash of $24.2 million and restricted cash of $0.5 million. Under the revolving credit facility,
there were no outstanding borrowings, $7.0 million in letters of credit outstanding and borrowing availability of $13.0 million. On June 30, 2008
we reclassified the $57 million mandatorily redeemable Series Z Preferred Stock as a short-term liability which resulted in our working capital
shifting to a deficit, which was $51.4 million on December 30, 2008 compared to a surplus of $3.7 million on January 1, 2008. Adding to the
deficit was a decrease in our non-cash current assets and an increase in current liabilities for the following primary reasons:
• accounts receivable has decreased due to improved collection efforts;
• other assets decreased as we were able to recover several deposits that were held by our vendors;
• accrued expenses increased primarily due to the two California wage and hour settlements and the accrual for senior management
transition costs; and
• short-term debt and the current portion of long-term debt increased by $7.1 million related to an excess cash flow payment that is due
on our debt, as defined by our debt agreement.
These deficit increases were partially offset by the $14.8 million improvement in cash and cash equivalents that was primarily due to the improved
cash flow from our company-owned restaurant operations, and the reduction in interest expense paid on our debt.
On January 1, 2008, we had unrestricted cash of $9.4 million and restricted cash of $1.2 million. Under the revolving credit facility, there
were no outstanding borrowings, $6.7 million in letters of credit outstanding and borrowing availability of $13.3 million. Our working capital
deficit improved $11.6 million to a working capital surplus of $3.7 million in 2007 compared to a working capital deficit of $8.0 million in 2006,
primarily due to the increased cash flow stemming from an increase in profitability at our company-owned restaurants and lower interest expense
under our new debt structure, a decrease in accrued expenses related to lower accrued bonuses, a reduction in the gift card liability for estimated
breakage and lower accrual for property, plant and equipment that has been received but not paid, partially offset by the sale of equipment to our
frozen bagel dough supplier. Finally, short-term debt and the current portion of our long-term debt decreased by $2.6 million in fiscal 2007
compared to fiscal 2006.
Cash Provided by Operations