Einstein Bros 2009 Annual Report Download - page 33

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Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
dollars, there are no international risks of loss or foreign exchange currency issues.
Our debt as of December 29, 2009 was principally composed of the credit facility. For fixed rate debt, interest rate changes affect the fair
market value of such debt but do not impact earnings or cash flows. Conversely, for variable rate debt, including borrowings under our credit
facility, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming
other factors are held constant.
On May 7, 2008, we entered into an interest rate swap agreement, to fix our rate on $60 million of our debt to 3.52% plus an applicable
margin for the next two years, effective August 2008.
Assuming no change in the size or composition of debt as of December 29, 2009, and presuming the utilization of our accumulated net
operating losses would minimize the tax implications for the next several years, a 100 basis point increase in short-term effective interest rates
would increase our interest expense on our credit facility, including the interest rate swap, by approximately $0.2 million annually. Currently, the
interest rates on our credit facility are predominantly at LIBOR rates plus an applicable margin through short-term fixed rate financing, and the
interest rate swap has fixed our rate on $60 million of our outstanding debt. The estimated increase in interest expense incorporates the fixed
interest financing into its assumptions.
On an annual basis, we purchase a substantial amount of agricultural products that are subject to fluctuations in price based upon market
conditions. Our purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do
not use financial instruments to hedge commodity prices. We have utilized a third party advisor to manage our wheat purchases for our company-
owned production facility. In addition to wheat, we have established contracts and entered into commitments with our vendors for turkey, butter,
cheese and coffee.
This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon
general market conditions and changes in domestic and global financial markets, among other factors.
41
Table of Contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Audited Annual Financial Statements
Reports of Independent Registered Public Accounting Firm 43
Consolidated Balance Sheets as of December 30, 2008 and December 29, 2009 45
Consolidated Statements of Operations for the 52 Weeks Ended January 1, 2008, December 30, 2008 and December 29, 2009 46
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the 52 Weeks Ended January 1, 2008, December 30, 2008 and
December 29, 2009 47
Consolidated Statements of Cash Flows for the 52 Weeks Ended January 1, 2008, December 30, 2008 and December 29, 2009 48
Notes to Consolidated Financial Statements 49
42
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Einstein Noah Restaurant Group, Inc.
We have audited the accompanying consolidated balance sheets of Einstein Noah Restaurant Group, Inc. and subsidiaries (collectively,
“Einstein Noah”) (a Delaware corporation) as of December 29, 2009 and December 30, 2008, and the related consolidated statements of
operations, stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 29, 2009. Our audits of the basic
financial statements include the financial statement schedule listed in the index appearing under Item 15(2). These financial statements and
financial statement schedule are the responsibility of Einstein Noah’ s management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those