Einstein Bros 2010 Annual Report Download - page 41

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312511067286/d10k.htm[9/11/2014 10:09:09 AM]
E. Nelson Heumann is the chairman of the BOD and was an employee of Greenlight Capital, L.L.C. (“Greenlight”) as of December 28, 2010. Subsequent to December 28, 2010, Mr. Heumann retired
from Greenlight. Greenlight and its affiliates beneficially owned approximately 64 percent of the Company’ s common stock as of December 28, 2010. As a result, Greenlight has sufficient voting power without
the vote of any other stockholders to determine what matters will be submitted for approval by the Company’ s stockholders, to elect all of the BOD, and among other things, to determine whether a change in
control of the Company occurs.
17. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Line of Credit
As of December 28, 2010, the Company had $7.3 million in letters of credit outstanding on its New Credit Facility with Bank of America. The letters of credit expire on various dates during 2011, are
generally automatically renewable for one additional year and are payable upon demand in the event that the Company fails to pay the underlying obligation. Letters of credit reduce the Company’ s availability
under its revolver, which was $30.0 million as of December 28, 2010.
Capital Leases
The Company leases certain equipment under capital leases. Included in property, plant and equipment are the asset values of $98,000 and $112,000 and the related accumulated amortization of $66,000
and $85,000 as of December 29, 2009 and December 28, 2010, respectively. Amortization of assets under capital leases is included in depreciation and amortization expense.
Operating Leases
The Company leases office space, restaurant space and certain equipment under operating leases having terms that expire at various dates through the fiscal year ended 2021. The restaurant leases have
renewal clauses of 1 to 20 years at the Company’ s option and, in some cases, have provisions for contingent rent based upon a percentage of gross sales, as defined in the leases. Rent expense for fiscal years
ended 2008, 2009 and 2010 was $29.3 million, $31.0 million and $31.1 million, respectively. Contingent rent included in rent expense for fiscal years ended 2008, 2009 and 2010 was approximately $0.1
million, $0.2 million and $0.1 million, respectively. The Company subleases out a portion of its restaurant space on leases where it did not need the entire space for its operations. The Company’ s sublease
income was $0.5 million, $0.4 million and $0.4 million for fiscal years ended 2008, 2009 and 2010, respectively.
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Future Minimum Lease Payments
As of December 28, 2010, future minimum lease payments under capital and operating leases were as follows:
Fiscal year:
Capital
Leases
Operating
Leases
(in thousands of dollars)
2011 $ 19 $ 30,485
2012 8 24,214
2013 6 19,374
2014 — 16,526
2015 — 13,402
2016 and thereafter — 21,096
Total minimum lease payments 33 $ 125,097
Less imputed interest (average rate of 4.75%) 3
Present value of minimum lease payments 30
Less current portion of obligations under capital leases 17
Obligations under capital leases, long-term $ 13
In addition, the total of minimum sublease rentals to be received in the future under non-cancelable subleases as of December 28, 2010 was $1.1 million.
Purchase Commitments
The Company has obligations with certain of its major suppliers of raw materials (primarily frozen bagel dough) for minimum purchases both in terms of quantity and pricing on an annual basis.
Furthermore, from time to time, the Company will commit to the purchase price of certain commodities that are related to the ingredients used for the production of its bagels. On a periodic basis, the Company
reviews the relationship of these purchase commitments to its business plan, general market trends and its assumptions in its operating plans. If these commitments are deemed to be in excess of the market, the
Company will expense the excess purchase commitment to cost of sales in the period in which the shortfall is determined. The total of the Company’ s future purchase obligations as of December 28, 2010 was
approximately $11.4 million.
Litigation
The Company is subject to claims and legal actions in the ordinary course of business, including claims by or against franchisees, licensees and employees or former employees and/or contract disputes.
The Company does not believe any currently pending or threatened matter would have a material adverse effect on its business, results of operations or financial condition.
18. RESTRUCTURING EXPENSE
During the fourth quarter of fiscal 2010, Company management approved a plan to restructure the organization to align with its franchise growth model. This restructuring included eliminating certain
duplicate positions and reducing headcount. The Company recorded $0.5 million in 2010 in severance expense. Any amounts not paid out within 2010 have been accrued for and are included in accrued
expenses and other current liabilities in our consolidated balance sheets.
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EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
19. SEGMENTS
Financial results for fiscal years 2008, 2009 and 2010 are as follows:
Segments
Corporate
support
Consolidated Fiscal 2008:
Company-
owned
restaurants
Manufacturing
and commissary
Franchise
and license
(As Restated, See Note 3)
(in thousands of dollars)