Burger King 2012 Annual Report Download - page 123

Table of Contents
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Gains and losses on closures and dispositions represent sales of Company properties and other costs related to restaurant closures and refranchisings,
and are recorded in other operating (income) expenses, net in the accompanying consolidated statements of operations. Gains and losses recognized in the
current period may reflect closures and refranchisings that occurred in previous periods.
Net (gains) losses on disposal of assets, restaurant closures and refranchisings consisted of net (gains) losses associated with refranchisings,
impairment losses associated with long-lived assets for Company restaurants and net losses associated with asset disposals and restaurant closures.
During 2012, non-cash investing activities included $98.6 million in equity method investments associated with refranchisings. Equity method
investments are classified as other assets, net in our consolidated balance sheets. Our interest in the loss from our equity method investments was not material
to our consolidated statements of operations during 2012 or 2011. Significant equity method investments in 2012 included the following:
On May 30, 2012, we completed the refranchising of 278 Company restaurants to Carrols Restaurant Group, Inc. (“Carrols”), including the
assignment to Carrols of our right of first refusal on franchise sales of  restaurants in 20 states. Total consideration included a 28.9% equity
interest in Carrols and total cash payments of approximately $16.2 million, of which approximately $4.0 million, associated with a right of first refusal, is
payable over five years. We recorded a net loss of $4.4 million associated with this refranchising.
In May 2012, we completed the acquisition of the equity interests we did not previously hold in two former equity method investments in China for total
consideration of $17.3 million. In June 2012, we contributed the equity interests in our 44 Company restaurants in China, including the 22 restaurants we
acquired in May 2012, to an entity established to develop the China market (the “China Venture”). Total consideration received by the Company in exchange
for these contributions included a significant minority equity interest in the China Venture and a cash payment of approximately $2.2 million. The aggregate
gain related to the acquisition of the majority interest in the former equity method investments in China and the contribution of the 44 restaurants to the China
Venture was $26.4 million during 2012 and is included in net (gains) losses on disposal of assets, restaurant closures and refranchisings.
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We guarantee certain lease payments of franchisees arising from leases assigned in connection with sales of Company restaurants to franchisees, by
remaining secondarily liable for base and contingent rents under the assigned leases of varying terms. The maximum contingent rent amount is not
determinable as the amount is based on future revenues. In the event of default by the franchisees, we have typically retained the right to acquire possession of
the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees, excluding contingent rents,
was $48.8 million as of December 31, 2012, expiring over an average period of six years.
From time to time, we enter into agreements under which we guarantee loans made to qualified franchisees. As of December 31, 2012, there were $81.9
million of loans outstanding to franchisees that we had guaranteed under three such programs, with additional franchisee borrowing capacity of approximately
$104.0 million remaining. Our maximum guarantee liability under these three programs is limited to an aggregate of
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Source: Burger King Worldwide, Inc., 10-K, February 22, 2013 Powered by Morningstar® Document Research℠
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