Einstein Bros 2011 Annual Report Download - page 56

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
Fiscal year (in thousands)
2012 $ 7,500
2013 9,375
2014 8,438
2015 48,887
$74,200
Debt Issuance Costs
Debt issuance costs, which are reported as a component of other current assets and other assets, are summarized as follows:
December 28, January 3,
2010 2012
(in thousands)
Debt issuance costs - current $ 449 $ 447
Debt issuance costs - long-term 1,866 1,384
Total $ 2,315 $ 1,831
Amortization expense relating to debt issuance costs was $0.6 million, $0.5 million and $0.4 million for the fiscal years 2009, 2010 and 2011,
respectively, and is included in interest expense in the accompanying consolidated statements of operations. In the fourth quarter of fiscal year
2010, the Company recorded a charge of approximately $1.0 million in unamortized debt issuance costs related to its prior credit facility.
9. DERIVATIVES
On May 7, 2008, the Company entered into an interest rate swap agreement relating to its prior term loan, effective August 2008. The
Company made payments based on a fixed interest rate of 3.52% calculated on an initial notional amount of $60.0 million. In exchange, the
Company received interest on $60.0 million of notional amount at a variable rate. The variable rate interest the Company received was based on the
one-month LIBOR. The net effect of the swap was to fix the interest rate on $60.0 million of the Company’ s prior debt facility at 3.52% plus an
applicable margin. This agreement expired in August 2010.
On March 3, 2011, the Company entered into two interest rate cap agreements relating to the Senior Credit Facility. Each agreement has a
two year term. The Company entered into the interest rate caps for a cap rate of 3.0% calculated on an initial notional amount of $18.75 million on
each cap for a total notional amount of $37.5 million based on the 3-month LIBOR. The effect of the interest rate caps is to cap the LIBOR portion
of the interest rate at 3.0%.
The interest rate agreements described above qualify as cash flow hedges. Fair value measurements were performed using significant other
inputs (Level 2) to calculate an asset of approximately $3 thousand as of January 3, 2012, which was recorded in prepaid expenses on the
accompanying consolidated balance sheet. As of January 3, 2012, unrealized losses associated with the interest rate cap agreements, net of $31
thousand in income taxes, are recorded in accumulated other comprehensive loss within stockholders’ equity.
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
10. MANDATORILY REDEEMABLE SERIES Z PREFERRED STOCK
In September 2003, the Company completed an equity recapitalization with its preferred stockholders, who held a substantial portion of the
Company’ s common stock. Among other things, the Halpern Denny Fund III, L.P. (“Halpern Denny”) interest in the Company’ s Mandatorily
Redeemable Series F Preferred Stock (“Series F”) was converted into 57,000 shares of Series Z Mandatorily Redeemable Preferred Stock (“Series
Z”).
The Series Z was recorded in the accompanying consolidated balance sheets at its full face value of $32.2 million as of December 29, 2009
which represented the total cash payable upon redemption. In December of 2010, the final redemption payment was made reducing the balance to
$0.
On May 28, 2009, the Company and Halpern Denny agreed that the Company would redeem shares in accordance with a designated schedule
with the final payment occurring June 30, 2010. The first redemption payment was made on June 30, 2009. All subsequent redemption payments
included additional redemption price per share based on a rate that was 250 bps higher than the highest rate paid on the Company’ s funded